CGTSI/(44)/74

April 20, 2006

All Member Lending Institutions of CGTSI

Circular No. 31 / 2006-07

Credit Guarantee Scheme - Changes in Guarantee fee structure

As you may be aware the Credit Guarantee Scheme of CGTSI is in operation since August 2000. In order to make the Scheme more attractive and convenient for its Member Lending Institutions (MLIs), it has been decided to change the guarantee fee structure under the Scheme as announced by the Hon'ble Finance Minister, Government of India, in the Parliament on February 28, 2006 while presenting Union Budget for FY2006-07.

The modifications in the Guarantee fee structure of CGS areas under:

Chapter III - Clause 8(i) on Guarantee Fee:

Existing Provision:

"A one time guarantee fee at specified rate (currently 2.5 per cent) of the credit facility sanctioned, (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the eligible institution availing of the guarantee within 30 days from the date of first disbursement of credit facility, with the proviso, however, that such Guarantee Fee will be at a rate of 1.5% instead with regard to the following category of borrowers in respect of credit facility sanctioned on or after October 01, 2005 and covered under the Scheme :

(a) All loans upto Rs. 2.00 lakh;

(b) All eligible women Entrepreneurs;

(c) All eligible borrowers located in the North Eastern Region (including Sikkim) and Jammu & Kashmir."

Modified Provision:

Clause 8(i) has been modified as follows:

"A one time guarantee fee at specified rate (currently 1.5 per cent) of the credit facility sanctioned, (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the eligible institution availing of the guarantee within 30 days from the date of first disbursement of credit facility."

The reduction in Guarantee fee (from 2.5% to 1.5%) would be applicable from April 01, 2006. All other provisions of Credit Guarantee Scheme will remain unchanged.

You are requested to advise your operating offices (Zonal / Branch Offices) about the modification made to the Scheme as above. We solicit your cooperation in covering maximum proposals under the Scheme.

Yours faithfully,

Sd/-

(S N Sadhwani )

Deputy General Manager