Credit Guarantee Scheme (CGS) of Credit Guarantee Fund Trust for

Micro and Small Enterprises (CGTMSE)

Credit Guarantee Fund Trust for Small Industries (CGTSI) was set up by the Government
of India and SIDBI on Auust !" #$$$ on the basis of re%ommendation of &'ih (evel
Committee on Credit to SSI) headed by S*(*+apur (otherwise ,nown as S*(*+apur
Committee) with the ob-e%t of strenthenin %redit delivery and fa%ilitatin flow of %redit
to small s%ale industries* The Trust introdu%ed a s%heme %alled &Credit Guarantee Fund
s%heme for small industries)* .nder the s%heme the eliible ban,s %an obtain uarantee
from CGTSI in respe%t of their %ollateral free %redit to Small S%ale Industries stri%tly as
per terms of the s%heme*
/ur Ban, parti%ipated in &Credit Guarantee Fund S%heme for Small Industries) and
issued uidelines of the s%heme vide %ir%ular 0o*SI1SB2CGTSI2SC34!$2C54#62/34
!!$2#$$# dated 7une #$" #$$#*
Subse8uent to the ena%tment of 3S39D A%t4#$$: the Trust was renamed as Credit
Guarantee Fund Trust for 3i%ro and Small 9nterprises and s%heme as Credit Guarantee
S%heme for 3i%ro and Small 9nterprises*
The s%heme has underone several %hanes to meet the %hanin re8uirements and
liberali;e the s%heme for a%%eleratin %ollateral free %redit to 3S9 se%tor* The %hanes
have been %ommuni%ated by issuin %ir%ulars from time to time from 'ead /ffi%e* The
operational uidelines of the s%heme have been updated by in%orporatin the %hanes and
are iven below*
In our Ban,<s (endin =oli%y #$!!" non4obtention of %ollateral se%urity and Coverae
under CGT3S9 has been dis%ussed" whi%h is as follows>
& 0o %ollateral or third party uarantee will be obtained for advan%es up to 5s*!$*$$ la%s
for 3S9 .nit* Collateral se%urity 2 third party uarantee may be dispensed with for loans
up to 5s*#? la,h to 3S9 .nit on the basis of ood tra%, re%ord and sound finan%ial
position of the 3S9 units*
In %ase of 3i%ro and Small 9nterprise borrower Collateral Se%urity and or third party
uarantee may be waived beyond 5s* !$*$$ la,h but up to 5s*!$$*$$ la%s where Credit
uarantee %over is available from CGT3S9 and the entrepreneur (S) is2are havin s,ill"
e@perien%e and interity" the s%heme is te%hni%ally feasible" e%onomi%ally and
%ommer%ially viable" all the Ben%h mar, parameters as per lendin poli%y are satisfied
and Ban,<s %redit ris, ratin of the enterprise is .BIC5A or better*
All eliible loan to 3S9 unit in%ludin Government sponsored s%heme up to 5s*!*$$
%rore san%tioned without %ollateral se%urity and 2or Third party Guarantee must be
%overed under %redit Guarantee Coverae of CGT3S9*)
Operational guidelines on Credit Guarantee Scheme (CGS) of Credit Guarantee
Fund Trust for Micro and Small Enterprises (CGTMSE)
The Board of Trustees of Credit Guarantee Fund Trust for Small Industries" havin
de%ided to frame a S%heme for the purpose of providin uarantees to a substantial e@tent
in respe%t of %redit fa%ilities to borrowers in 3i%ro and Small 9nterprises" hereby ma,e
the followin S%heme>
1. Title and date of commencement:
i* The S%heme shall be ,nown as the Credit Guarantee Fund S%heme for Small Industries
(CGFSI)
ii* It shall %ome into for%e from Auust !" #$$$*
iii* It shall %over eliible %redit fa%ility e@tended by the lendin institutions to eliible
borrowers effe%tive 7une !" #$$$*
Subse8uent to the ena%tment of 3S39D A%t4#$$: the Trust was renamed as Credit
Guarantee Fund Trust for 3i%ro and Small 9nterprises and s%heme as Credit Guarantee
S%heme for 3i%ro and Small 9nterprises*
. !efinitions:
For the purposes of this S%heme 4
(i) "#mount in !efault" means the prin%ipal and interest amount outstandin in the
a%%ount(s) of the borrower in respe%t of term loan and amount of outstandin wor,in
%apital fa%ilities (in%ludin interest)" as on the date of the a%%ount be%omin 0=A" or the
date of lodment of %laim appli%ation whi%hever is lower or su%h of the date as may be
spe%ified by CGT3S9 for preferrin any %laim aainst the uarantee %over sub-e%t to a
ma@imum of amount Guaranteed*
(ii) "Collateral securit$" means the se%urity provided in addition to the primary
se%urity" in %onne%tion with the %redit fa%ility e@tended by a lendin institution to a
borrower*
(iii) "Credit facilit$" means any finan%ial assistan%e by way of term loan and 2 or fund
based and non4fund based wor,in %apital (e** Ban, Guarantee" (etter of %redit et%)
fa%ilities e@tended by the lendin institution to the eliible borrower* (a) For the purpose
of %al%ulation of uarantee fee" the B%redit fa%ility e@tendedB shall mean the amount of
finan%ial assistan%e %ommitted by the lendin institution to the borrower" whether
disbursed or not and (b) For the purpose of the %al%ulation of annual servi%e fee" the
%redit fa%ility e@tended shall mean the %redit fa%ilities (both fund and non4fund based)
%overed under CGS and for whi%h uarantee fee has been paid" as at 3ar%h A!" of the
relevant year*
(iv) "Eligi%le %orro&er" means new or e@istin 3i%ro and Small 9nterprises to whi%h
%redit fa%ility has been provided by the lendin institution without any %ollateral se%urity
and2or third party uarantees*
(') (Guarantee Co'er( means ma@imum %over available per eliible borrower of the
amount in default in respe%t of the %redit fa%ility e@tended by the lendin institution*
(vi) ")ending institution(s)" means a %ommer%ial ban, for the time bein in%luded in
the se%ond S%hedule to the 5eserve Ban, of India A%t" !CA6 and 5eional 5ural Ban,s as
may be spe%ified by the Trust from time to time" or any other institution (s) as may be
dire%ted by the Govt* of India from time to time* The Trust may" on review of
performan%e" remove any of the lendin institution from the list of eliible institution*
(vii) 3aterial date" means the date on whi%h the uarantee fee on the amount %overed in
respe%t of eliible borrower be%omes payable by the eliible institution to the Trust*
(viii) "*on +erforming #ssets" means an asset %lassified as a non4performin based on
the instru%tions and uidelines issued by the 5eserve Ban, of India from time to time*
(i@) "+rimar$ securit$" in respe%t of a %redit fa%ility shall mean the assets %reated out of
the %redit fa%ility so e@tended and2or e,isting unencum%ered assets whi%h are dire%tly
asso%iated with the pro-e%t or business for whi%h the %redit fa%ility has been e@tended*
(@) "+rime )ending -ate" for a lendin institution means the rate so de%lared by that
lendin institution for the relevant time period 2 duration for whi%h the %redit fa%ility has
been e@tended*
(@i) "Scheme" means the Credit Guarantee Fund S%heme for 3i%ro and Small
9nterprises
(@ii) "S.!/." means the Small Industries Development Ban, of India" established under
Small Industries Development Ban, of India A%t" !CDC (AC of !CDC)*
(@iii) (Micro and Small Enterprises( As per the 3S39D A%t" #$$: an BenterpriseB
means an industrial underta,in or a business %on%ern or any other establishment" by
whatever name %alled" enaed in the manufa%ture or produ%tion of oods" in any
manner" pertainin to any industry spe%ified in the First S%hedule to the Industries
(Development and 5eulation) A%t" !C?! or enaed in providin or renderin of any
servi%e or servi%esE and B3i%ro and Small 9nterprisesB are defined in F*!*a*i) and ii) 1 in
F*!*b*i) and ii) of the said A%t
(@iv) "Tenure of guarantee co'er" means the ma@imum period of uarantee %over from
Guarantee start date whi%h shall run throuh the areed tenure of the term %redit and
for a period of ? years or blo%, of a ? years where wor,in %apital fa%ilities alone are
e@tended or loan termination date" whi%h ever is earlier or su%h period as may be
spe%ified by the Trust*
(@v) "Trust" means the Credit Guarantee Fund Trust for 3i%ro and Small 9nterprises set
up by Government of India and SIDBI with the purpose of uaranteein %redit fa%ility
(ies)" e@tended by the lendin institution(s) to the eliible borrowers*
A* Eligi%le /orro&ers:
0ew and e@istin 3i%ro and Small 9nterprises as defined in 3S39D A%t" #$$: ( Both
3anufa%turin and servi%e se%tor e@%ludin G5etail Trade and 9du%ational Institute) are
eliible under Credit Guarantee S%heme (CGS) of CGT3S9* The %redit fa%ility e@tended
to Self 'elp Group %annot be %overed under the s%heme*
0. Credit facilities eligi%le for the guarantee co'er:
Any finan%ial assistan%e by way of term loan and2or Fund based and 0on fund based
wor,in %apital e@tended by 3ember (endin Institution(s) to eliible borrowers %an be
%overed under the s%heme sub-e%t to followin %onditions>
Credit fa%ilities e@tended by way of term loan and or wor,in %apital to a sinle
eliible borrower not e@%eedin 5s* ?$ la,h by 5eional 5ural Ban,s2Finan%ial
Institutions and not e@%eedin 5s*!$$ la,h by S%heduled Commer%ial Ban,s and
sele%t Finan%ial Institutions*
Credit fa%ilities e@tended by more than one ban, and2or finan%ial institution
-ointly and2or separately to eliible borrower ma@imum upto 5s*!$$ la,h per
borrower sub-e%t to %eilin amount of individual 3(I or su%h amount as may be
spe%ified by the Trust*
(ender should e@tend %redit without obtainin %ollateral se%urity and2or third
party uarantee*
Interest rate levied should not be more than AH over the =rime (endin 5ate of
the lendin Ban,2institute*
The %redit fa%ility so e@tended should satisfy the followin %onditions as on the
material date>4
(i) The dues to the lendin institution have not be%ome bad or doubtful of
re%overyE and 2 or
(ii) The business or a%tivity of the borrower for whi%h the %redit fa%ility was
ranted has not %easedE and 2 or
(iii) The %redit fa%ility has not wholly or partly been utili;ed for ad-ustment of
any debts deemed bad or doubtful of re%overy" without obtainin a prior
%onsent in this reard from the Trust*
1. Credit facilities not eligi%le under the Scheme:
(i) Any %redit fa%ility in respe%t of whi%h ris,s are additionally %overed under a s%heme
operated 2 administered by Deposit Insuran%e and Credit Guarantee Corporation or the
5eserve Ban, of India" to the e@tent they are so %overed*
(ii) Any %redit fa%ility in respe%t of whi%h ris,s are additionally %overed by Government
or by any eneral insurer or any other person or asso%iation of persons %arryin on the
business of insuran%e" uarantee or indemnity" to the e@tent they are so %overed*
(iii) Any %redit fa%ility" whi%h does not %onform to" or is in any way in%onsistent with" the
provisions of any law" or with any dire%tives or instru%tions issued by the Central
Government or the 5eserve Ban, of India" whi%h may" for the time bein" be in for%e*
(iv) Any %redit fa%ility ranted to any borrower" who has availed himself of any other
%redit fa%ility %overed under this s%heme or under the s%hemes mentioned in %lause (i)"
(ii) and (iii) above" and where the lendin institution has invo,ed the uarantee provided
by the Trust or under the s%hemes mentioned in %lause (i)" (ii) and (iii) above" but has not
repaid any portion of the amount due to the Trust or under the s%hemes mentioned in
%lause (i)" (ii) and (iii) above" as the %ase may be" by reason of any default on the part of
the borrower in respe%t of that %redit fa%ility*
2. )odging of application for guarantee co'erage:
3ember lendin institution %an apply for uarantee %over in respe%t of %redit proposals
san%tioned in the 8uarter April47une" 7uly4September" /%tober4De%ember and 7anuary4
3ar%h prior to e,pir$ of the followin 8uarter vi;* 7uly4September" /%tober4De%ember"
7anuary43ar%h and April47une respe%tively* For e@ample" appli%ation for %redit fa%ility
san%tioned between $!*$6*#$!$ to A$*$:*#$!$ may be loded latest by A$*$C*#$!$* In
%ase of wor,in %apital fa%ility" the date of renewal %an be ta,en as date of san%tion* The
operations of the s%heme are fully %omputeri;ed and are re8uired to be done by the
3ember (endin Institutions (3(Is) loin CGT3S9 website (www*%tmse*in)* /ur
all 5eional offi%es are desinated as 3ember (endin Institute (3(I) under the s%heme
to underta,e operations of the s%heme independently* 3ember4ID" .ser ID and =assword
have been allotted by the CGT3S9 to our all 5eional offi%es whi%h shall be used for
lodin of appli%ation" lodin of %laims" eneration of 3IS" updatin 0=A details and
all other related operations*
The appli%ation for uarantee %over of the eliible 3S9 loan a%%ount is to be done on
line by the 5eional offi%es of our Ban,* /ur bran%hes should send the detailed
parti%ulars of the a%%ount as per format iven in Anne@ure II to the %ir%ular to the
%on%erned 5eional offi%e immediately after san%tion of loan* The 5eional offi%e should
apply online for uarantee %overae on re%eipt of the appli%ation from the bran%h* The
DA0 and CG=A0 and the amount of Guarantee Fee (GF) is to be paid are enerated
from the system after approval of the appli%ation by the CGT3S9* The 5eional offi%e
should inform the DA0 and CG=A0 and GF payable amount to the %on%erned Bran%hes
by the fastest mode of %ommuni%ation*
.n C/S s$stem the accounts co'ered under Credit Guarantee Scheme of CGTMSE
should %e mar3ed as 4CGTS.5 under Guarantee Co'er Code in M.S !etails.
6. Guarantee Fee:
Guarantee fee is an one time fee for the %redit fa%ility san%tioned (%omprisin term loan
and2 or wor,in fa%ility) should be paid at a spe%ified rate upfront to the trust by the
Ban,2institution availin of the uarantee within A$ days from the date of first
disbursement of %redit fa%ility (not applica%le for 7or3ing capital) or A$ days from the
date of Demand Advi%e (CGDA0) of uarantee fee whi%hever is later or such date as
specified %$ the Trust.
At present the rates of Guarantee fee are as follows>
In %ase of %redit fa%ility (%omprisin term loan and 2 or wor,in %apital fa%ility)
upto 5s*? la,h san%tioned to eliible unit4!*$$H of the %redit fa%ility san%tioned*
In %ase of %redit fa%ility (%omprisin term loan and 2 or wor,in %apital fa%ility)
above 5s*? la,h san%tioned to eliible unit4!*?$H of the %redit fa%ility san%tioned*
In %ase of %redit fa%ility (%omprisin term loan and 2 or wor,in %apital fa%ility)
upto 5s*?$ la,h san%tioned to units in 0orth 9astern 5eion in%ludin State of
Si,,im4$*F? H of the %redit fa%ility san%tioned*
The guarantee co'er &ill commence from the date on &hich guarantee fee proceeds
are credited to %an3 account of the Trust.
The Bran%hes should re%over the Guarantee Fee from the borrower preferably on the day
of disbursement of first instalment of loan and should send the same to the %on%erned
5eional offi%e on the same day by way of Demand Draft drawn on 3umbai favorin
CGT3S9* The loan a%%ounts under the s%hemes where Ban, will bear the GF as mention
in =ara !$(ii) 1 !$(iii) of the %ir%ular " the same should be paid by debitin =2( a%%ount
of the Ban,* The 5eional offi%es" on re%eipt of the DD from bran%hes should send the
same alon with system enerated forwardin letter to CGT3S9 immediately on re%eipt
of the draft so that it must rea%h to CGT3S9 within the spe%ified %ut off date*
8. #nnual ser'ice Fee:
i* The annual servi%e fee (ASF) shall be paid annually at the spe%ified rate ( $*?$H in the
%ase of %redit fa%ility upto 5s* ? (a,h and $*F?H in the %ase of %redit fa%ility above 5s* ?
(a,h) on the %redit fa%ility san%tioned (%omprisin term loan and 2 or wor,in %apital
fa%ility)
ii* Annual Servi%e Fee is paid on pro9rata %asis for the first and last $ear and in full
for the inter'ening $ears
iii. Annual Servi%e Fee shall be paid by the lendin institution within :$ days from the
end of finan%ial year ie* on or before 3ay A!" of every year*
i'. In the event of non4payment of annual servi%e fee by 3ay A! of that year or any other
spe%ified date" the uarantee %over under the s%heme shall not be available to the lendin
institution unless the Trust arees for %ontinuan%e of uarantee and the lendin institution
pays penal interest on the servi%e fee due and unpaid" with effe%t from the subse8uent
7une $!" at four per %ent over Ban, 5ate" per annum" or at su%h rates spe%ified by the
Trust from time to time" for the period of delay*
I =rovided further that in the event of non4payment of annual servi%e fee within the
stipulated time or su%h e@tended time that may be areed to by the Trust on su%h
terms" liability of the Trust to uarantee su%h %redit fa%ility would lapse in respe%t of
those %redit fa%ility aainst whi%h the servi%e %hares are due and not paid"
I =rovided further that" the Trust may %onsider renewal of uarantee %over for su%h of
the %redit fa%ility upon su%h terms and %onditions as the Trust may de%ide*
I In the event of any error or dis%repan%y or shortfall bein found in the %omputation of
the amounts or in the %al%ulation of the uarantee fee 2 annual servi%e fee" su%h
defi%ien%y 2 shortfall shall be paid by the eliible lendin institution to the Trust
toether with interest on su%h amount at a rate of four per %ent over and above the
Ban, 5ate" or as may be pres%ribed by the Trust from time to time* Any amount found
to have been paid in e@%ess would be refunded by the Trust*
I In the event of any representation made by the lendin institution in this reard" the
Trust shall ta,e a de%ision based on the available information with it and the
%larifi%ations re%eived from the lendin institution" and its de%ision shall be final and
bindin on the lendin institution*
CGT3S9 has informed vide its %ir%ular no* ?C2#$$C4!$ dated 3ar%h !!" #$!$ that it is
mandatory for the 3(Is to ma,e Annual Servi%e fee (ASF) payments throuh a sinle
payment from 'ead offi%e of the 3(I %on%erned* The demand for ASF will be raised by
CGT3S9 within the first wee, of April in ea%h year and the 3(Is will be re8uired to
ma,e ASF payments throuh a sinle payment from head offi%e within 3ay A! of the
same year*
The 5eional offi%es should enerate from the system the demand list for ASF raised by
CGT3S9 every year in the month of April and should send the same to the %on%erned
bran%hes* The Bran%hes should re%over the ASF from the Borrower and send the
%onsolidated ASF as per list to the 5eional offi%e* The loan a%%ounts under the s%hemes
where Ban, will bear the ASF as mentioned in =ara !$(ii) 1 !$(iii) of the %ir%ular " the
same should be paid by debitin =2( a%%ount of the Ban,* In respe%t of 0=A a%%ounts "
ASF should be paid by debitin =2( a%%ount of the Ban, and ne%essary re%ord should be
,ept in the 3emorandum 5eister* The 5eional offi%es should send the ASF of all the
bran%hes of the 5eion to the 'ead offi%e " S39 department within 3ay !? of the same
year* The 'ead /ffi%e " S39 department will ma,e ASF payment to CGT3S9 throuh a
sinle payment within 3ay A! of the same year*
:. -efund of Guarantee Fee; #nnual ser'ice fee:
The uarantee fee and 2 or annual servi%e fee on%e paid by the lendin institution to the
Trust is nonrefundable" e@%ept under %ertain %ir%umstan%es li,e J
9@%ess remittan%e"
5emittan%e made more than on%e aainst the same %redit appli%ation"
Guarantee fee 1 2 or annual servi%e fee not due"
Guarantee fee paid in advan%e but appli%ation not approved for uarantee %over
under the s%heme" et%*
1<. -eco'er$ of Guarantee Fee (GF);#nnual Ser'ice Fee (#SF):
The amount e8uivalent to the uarantee fee and 2 or the servi%e fee payable by the eliible
lendin institution may be re%overed by it" at its dis%retion from the eliible borrower* As
per our Ban,<s lendin =oli%y" the Guarantee Fee and Annual Servi%e fee should be fully
re%overed from the borrower" e@%ept for the followin %ases>
i* (oan san%tioned under Artisan Credit Card
ii* (oan to Komen 9nterprise under .nited 3ahila .dyami Lo-ana
iii* (oan to 3S9 se%tor .nder .nited Grameen Lo-ana for 3G059GA benefi%iaries
In %ase of Artisan Credit Card" the Development Commissioner ('andi%raft) provides the
GF and ASF dire%tly to CGT3S9 on behalf of the borrower* Ban, bears the GF and ASF
for the borrowers under .nited 3ahila .dyami Lo-ana and .nited Grameen Lo-ana for
3G059GA benefi%iaries*
11. Tenure of Guarantee Co'er:
The uarantee %over will %ommen%e from the date on whi%h uarantee fee pro%eeds are
%redited to ban, a%%ount of the Trust* The tenure of uarantee %over means ma@imum
period of uarantee %over from Guarantee start date whi%h shall run throuh the areed
tenure of the term %redit and for a period of ? years or blo%, of a ? years where wor,in
%apital fa%ilities alone are e@tended or loan termination date" whi%hever is earlier or
su%h period as may be spe%ified by the Trust*
1. The E,tent of Guarantee:
The Trust shall provide uarantee as under>
Categor$ Ma,imum e,tent of Guarantee &here credit facilit$ is
.pto 5s*? la,h Above 5s*? la,h
upto 5s*?$ la,h
Above 5s*?$ la,h upto
5s*!$$ la,h
3i%ro 9nterprises D?H of the
amount in
default sub-e%t
to a ma@imum
of 5s*6*#? la,h
F?H sub-e%t to a
ma@imum of
5s*AF*?$ la,h
5s*AF*?$ la,h plus ?$H of
amount in default above
5s*?$ la,h sub-e%t to
overall %eilin of
5s*:#*?$ la,h
Komen
entrepreneurs2
.nits lo%ated in
0orth 9ast 5eion
(in%l* Si,,im) for
credit facilit$
a%o'e -s.1 la3h to
micro enterprises
D$H of the amount in default sub-e%t
to a ma@imum of 5s*6$ la,h
5s*6$ la,h plus ?$H of
amount in default above
5s*?$ la,h sub-e%t to
overall %eilin of 5s*:?
la,h*
All other %ateory
of borrowers
F?H sub-e%t to a ma@imum of
5s*AF*?$ la,h
5s*AF*?$ la,h plus ?$H of
amount in default above
5s*?$ la,h sub-e%t to
overall %eilin of
5s*:#*?$ la,h
!A* .n'ocation of claim:
i* The lendin institution may invo,e the uarantee in respe%t of %redit fa%ility within a
ma@imum period of one year from date of 0=A" if 0=A is after lo%,4in period or within
one year of lo%,4in period" if 0=A is within lo%,4in period" if the followin %onditions are
satisfied> 4
a) The uarantee in respe%t of that %redit fa%ility was in for%e at the time of account
turning *+#*
b) The lo%,4in period of !D months from either the date of last disbursement of the loan to
the borrower or the date of payment of the uarantee fee in respe%t of %redit fa%ility to the
borrower" whi%hever is later" has elapsedE
%) The amount due and payable to the lendin institution in respe%t of the %redit fa%ility
has not been paid and the dues have been %lassified by the lendin institution as *on
+erforming #ssets* =rovided that the lendin institution shall not ma,e or be entitled to
ma,e any %laim on the Trust in respe%t of the said %redit fa%ility if the loss in respe%t of
the said %redit fa%ility had o%%urred owin to a%tions 2 de%isions ta,en %ontrary to or in
%ontravention of the uidelines issued by the Trust
d) The %redit fa%ility has been re%alled and the re%overy pro%eedins have been initiated
under due pro%ess of law* 3ere issuan%e of re%all noti%e under SA5FA9SI A%t #$$#
%annot be %onstrued as initiation of leal pro%eedins for purpose of preferment of %laim
under CGS* 3(Is should ta,e further a%tion as %ontained in Se%tion !A (6) of the above
A%t wherein a se%ured %reditor %an ta,e re%ourse to any one or more of the re%overy
measures out of the four measures indi%ated therein before submittin %laims for first
installment of uaranteed amount* In %ase the 3(I is not in a position to ta,e any of the
a%tion indi%ated in Se%tion !A(6) of the aforesaid A%t" they may initiate fresh re%overy
pro%eedin under any other appli%able law and see, the %laim for first installment from
the Trust*
ii* The %laim should be preferred by the lendin institution in su%h manner and within
su%h time as may be spe%ified by the Trust in this behalf*
iii* The Trust shall pay F? per %ent of the uaranteed amount on preferrin of eliible
%laim by the lendin institution" within A$ days" sub-e%t to the %laim bein otherwise
found in order and %omplete in all respe%ts* The Trust shall pay to the lendin institution
interest on the eliible %laim amount at the prevailin Ban, 5ate for the period of delay
beyond A$ days* The balan%e #? per %ent of the uaranteed amount will be paid on
%on%lusion of re%overy pro%eedins by the lendin institution* Bran%hes should pursue
the re%overy pro%eedins and inform the CGT3S9 throuh the %on%erned 5eional
offi%es of the Ban, the updated status of the leal pro%eedins on a halfyearly basis" as on
3ar%h A!st and September A$th till the final settlement of uarantee %laim by CGT3S9*
/n a %laim bein paid" the Trust shall be deemed to have been dis%hared from all its
liabilities on a%%ount of the uarantee in for%e in respe%t of the borrower %on%erned*
iv* In the event of default" the lendin institution shall e@er%ise its rihts" if any" to ta,e
over the assets of the borrowers and the amount realised" if any" from the sale of su%h
assets or otherwise shall first be %redited in full by the lendin institutions to the Trust
before it %laims the remainin #? per %ent of the uaranteed amount*
v* The lendin institution shall be liable to refund the %laim released by the Trust toether
with penal interest at the rate of 6H above the prevailin Ban, 5ate" if su%h a re%all is
made by the Trust in the event of serious defi%ien%ies havin e@isted in the matter of
appraisal 2 renewal 2 follow4up 2 %ondu%t of the %redit fa%ility or where lodement of the
%laim was more than on%e or where there e@isted suppression of any material information
on part of the lendin institutions for the settlement of %laims* The lendin institution
shall pay su%h penal interest" when demanded by the Trust" from the date of the initial
release of the %laim by the Trust to the date of refund of the %laim*
The Guarantee Claim re%eived dire%tly from the bran%hes or offi%es of the Ban, other
than respe%tive operatin offi%es (5eional /ffi%es) of 3(Is will not be entertained by
the CGT3S9* The invo%ation of %laim will be done online by the 5eional offi%es of the
Ban,* For invo%ation of an a%%ount" the bran%hes should send the detailed parti%ulars of
the a%%ount as per format iven in Anne@ure JIII to the %ir%ular to the %on%erned
5eional offi%e*
10. =pdation of *+# details in online S$stem:
To improve the %laim settlement pro%ess" it has been instru%ted by CGT3S9 vide its
%ir%ular 0o*?F 2 #$$C4 !$ dated 0ovember ? " #$$C that the 3(Is may indi%ate the date
of %lassifi%ation of the a%%ount as 0=A in a parti%ular %alendar 8uarter" by end of
subse8uent 8uarter usin the followin option in the online system*
(Mem%er )ogin area Guarantee Maintenance +eriodic .nformation *+#
!etails)
11. Closure of a Guaranteed accounts:
It is observed by CGT3S9 that 3ember lendin Institutions (3(Is) do not immediately
inform the date of %losure of uaranteed a%%ounts to CGT3S9 as a result of whi%h
Annual Servi%e Fee (ASF) for the a%%ount is enerated for the full year instead of on a
pro4rata basis upto date of %losure* To avoid su%h situations" CGT3S9 has informed vide
its %ir%ular no*?A 2#$$C4!$ dated 7uly !$"#$$C that all re8uests for %losure of a%%ounts
should be made only throuh the &Closure 3odule) in the system* 0o re8uest by
fa@2letter et%* for %losure of a%%ount will be %onsidered by CGT3S9* The 3(Is %an enter
the re8uest for %losure usin the followin option*
>Mem%er )ogin area Guarantee Maintenance -e?uest for closure@
MM !$ MM
For re8uestin the %losure" users (3ember (endin Institution) should enter the CG=A0"
Closure Date and 5eason for %losure of the individual a%%ount and save the same in the
system* /n%e the re8uest for %losure is entered in the system" the %losure DA0 will be
enerated after approval by the Trust* /n line %losure re8uests of the 3(Is are now bein
approved on a daily basis and demand for ASF is enerated simultaneously on pro4rata
basis from April ! of the finan%ial year till the date of %losure of the a%%ounts*
The pro4rata ASF is to be re%overed from the %ustomer" e@%ept where it will be borne by
the ban, as per =ara4!$ (i) 1 (ii) above " and to be sent to CGT3S9 throuh the
%on%erned 5eional offi%e of the Ban, by way of Demand Draft* After re%eipt of the
Annual Servi%e Fee (ASF)" the a%%ounts are bein mar,ed as GC(/S9DG in the system by
the CGT3S9*
12. Su%rogation of rights and reco'eries on account of claims paid:
The lendin institution shall furnish to the Trust" the details of its efforts for re%overy"
reali;ations and su%h other information as may be demanded or re8uired from time to
time* The lendin institution will hold lien on assets %reated out of the %redit fa%ility
e@tended to the borrower" on its own behalf and on behalf of the Trust* The Trust shall not
e@er%ise any subroation rihts and that the responsibility of the re%overy of dues
in%ludin ta,eover of assets" sale of assets" et%*" shall rest with the lendin institutionE In
the event of a borrower owin several distin%t and separate debts to the lendin institution
and ma,in payments towards any one or more of the same" whether the a%%ount towards
whi%h the payment is made is %overed by the uarantee of the Trust or not" su%h
payments shall" for the purpose of this %lause" be deemed to have been appropriated by
the lendin institution to the debt %overed by the uarantee and in respe%t of whi%h a
%laim has been preferred and paid" irrespe%tive of the manner of appropriation indi%ated
by su%h borrower or the manner in whi%h su%h payments are a%tually appropriated* 9very
amount re%overed and due to be paid to the Trust shall be paid without delay" and if any
amountdue to the Trust remains unpaid beyond a period of A$ days from the date on
whi%h it was first re%overed" interest shall be payable to the Trust by the lendin
institution at the rate whi%h is 6H above Ban, 5ate for the period for whi%h payment
remains outstandin after the e@piry of the said period of A$ days*
16. #ppropriation of amount %$ CGTMSE recei'ed from the lending institutions:
The amount re%eived from the lendin institutions shall be appropriated by CGT3S9 in
the order in whi%h the servi%e fee" penal interest and other %hares have fallen due* If the
servi%e fee and the penal interest have fallen due on the same date" then the appropriation
shall be made first towards servi%e fee and then towards the penal interest and finally
towards any other %hares payable in respe%t of the eliible %redit fa%ility*
18. #ppropriation of amount realised %$ the lending institution in respect of a credit
facilit$ after the guarantee has %een in'o3ed:
If lendin institution re%eived a sum from CGT3S9 towards the amount in default after
invo%ation of %laim in a%%ordan%e with provision as %ontained in para !A of this %ir%ular
and afterwards re%overs money subse8uent to the re%overy pro%eedins initiated by it" the
said re%overed money shall be deposited by the lendin institute with the Trust
(CGT3S9)" after ad-ustin towards the %ost in%urred by it for re%overy of the amount*
The Trust shall appropriate the same first towards the pendin servi%e fee" penal interest"
and other %hares due to the Trust" if any" in respe%t of the %redit fa%ility towards whi%h
the amount has been re%overed by the lendin institution" and the balan%e" if any" shall be
appropriated in su%h a manner so that losses on a%%ount of defi%it in re%overy of the %redit
fa%ility between the Trust and the lendin institution are in the proportion of F?H 2 D$H 2
D?H and #?H 2 #$H 2 !?H " respe%tively*
1:. -esponsi%ilities of lending institution under the scheme:
i* The lendin institution shall evaluate %redit appli%ations by usin prudent ban,in
-udment and shall use their business dis%retion 2 due dilien%e in sele%tin %ommer%ially
viable proposals and %ondu%t the a%%ount(s) of the borrowers with normal ban,in
pruden%e*
ii* The lendin institution shall %losely monitor the borrower<s a%%ount*
iii* The lendin institution shall safeuard the primary se%urities ta,en from the borrower
in respe%t of the %redit fa%ility in ood and enfor%eable %ondition*
iv* The lendin institution shall ensure that the uarantee %laim in respe%t of the %redit
fa%ility and borrower is loded with the Trust in the form and in the manner and within
su%h time as may be spe%ified by the Trust in this behalf and that there shall not be any
delay on its part to notify the default in the borrowers a%%ount whi%h shall result in the
Trust fa%in hiher uarantee %laims*
vi* The payment of uarantee %laim by the Trust to the lendin institution does not in any
way ta,e away the responsibility of the lendin institution to re%over the entire
outstandin amount of the %redit from the borrower* The lendin institution shall e@er%ise
all the ne%essary pre%autions and maintain its re%ourse to the borrower for entire amount
of %redit fa%ility owed by it and initiate su%h ne%essary a%tions for re%overy of the
outstandin amount" in%ludin su%h a%tion as may be advised by the Trust*
vii* The lendin institution shall %omply with su%h dire%tions as may be issued by the
Trust" from time to time" for fa%ilitatin re%overies in the uaranteed a%%ount" or
safeuardin its interest as a uarantor" as the Trust may deem fit and the lendin
institution shall be bound to %omply with su%h dire%tions*
viii* The lendin institution shall" in respe%t of any uaranteed a%%ount" e@er%ise the same
dilien%e in re%overin the dues" and safeuardin the interest of the Trust in all the ways
open to it as it miht have e@er%ised in the normal %ourse if no uarantee had been
furnished by the Trust* The lendin institution shall" in parti%ular" refrain from any a%t of
omission or %ommission" either before or subse8uent to invo%ation of uarantee" whi%h
may adversely affe%t the interest of the Trust as the uarantor* In parti%ular" the lendin
institution should intimate the Trust while enterin into any %ompromise or arranement"
whi%h may have effe%t of dis%hare or waiver of personal uarantee(s) or se%urity* The
lendin institution shall also ensure either throuh a stipulation in an areement with the
borrower or otherwise" that it shall not %reate any %hare on the se%urity held in the
a%%ount %overed by the uarantee for the benefit of any a%%ount not %overed by the
uarantee" with itself or in favour of any other %reditor(s) without intimatin the Trust*
Further the lendin institution shall se%ure for the Trust or its appointed aen%y" throuh a
stipulation in an areement with the borrower or otherwise" the riht to list the defaulted
borrowersG names and parti%ulars on the Kebsite of the Trust*
<. =pdation of contact details of operating offices of Mem%er )ending .nstitutions:
It is observed by CGT3S9 that %onta%t details of the operatin offi%es of 3ember
(endin Institutions (In our Ban, all 5eional /ffi%es a%t as operatin offi%es ) available
in their online system are not bein updated by the 3(Is periodi%ally due to whi%h
%ommuni%ation to these offi%es are not delivered* To fa%ilitate updation of %onta%t details"
CGT3S9 has informed vide its %ir%ular no*CGT3S9 2(66) dated 7une $!"#$!$ that they
have %reated a separate module in the online system to enable operatin offi%e to update
details vi;* /peratin /ffi%esG address" Telephone 0o*" Fa@ 0o* alon with STD Code"
9mail ID" et%* The %onta%t details may be updated by usin the followin option in the
online system>
S$s#dmin #udit =pdate Mem%er #ddress
1. Trust(s lia%ilit$ to %e terminated in certain cases:
i* If the liabilities of a borrower to the lendin institution on a%%ount of any eliible %redit
fa%ility uaranteed under this S%heme are transferred or assined to any other borrower
and if the %onditions as to the eliibility of the borrower and the amount of the fa%ility
and any other terms and %onditions" if any" sub-e%t to whi%h the %redit fa%ility %an be
uaranteed under the S%heme are not satisfied after the said transfer or assinment" the
uarantee in respe%t of the %redit fa%ility shall be deemed to be terminated as from the
date of the said transfer or assinment*
ii* If a borrower be%omes ineliible for bein ranted any %redit fa%ilities under the
S%heme" by reason of %essation of his a%tivity or his a%tivity or his underta,in %easin to
%ome within the definition of a 3S9 unit" the liability of the Trust in respe%t of any %redit
fa%ilities ranted to him by a lendin institution under the S%heme shall be limited to the
liability of the borrower to the lendin institution as on the date on whi%h the borrower
be%omes so ineliible" sub-e%t" however" to the limits on the liability of the Trust fi@ed
under this S%heme* 'owever" notwithstandin the death or retirement of a partner where
the borrower is a partnership firm or the death of one of the -oint borrowers" if the lendin
institution is entitled to %ontinue the %redit fa%ilities to the survivin partner or partners or
the survivin borrower or borrowers" as the %ase may be and if the %redit fa%ilities have
not already be%ome non performin asset" the uarantee in respe%t of su%h %redit fa%ilities
shall not to be deemed to be terminated as provided in this pararaph*
. -eturns and .nspections:
i* The lendin institution shall submit su%h statements and furnish su%h information as the
Trust may re8uire in %onne%tion with any %redit fa%ility under this S%heme*
ii* The lendin institution shall also furnish to the Trust all su%h do%uments" re%eipts"
%ertifi%ates and other writins as the latter may re8uire and shall be deemed to have
affirmed that the %ontents of su%h do%uments" re%eipts" %ertifi%ates and other writins are
true" provided that no %laim shall be re-e%ted and no liability shall atta%h to the lendin
institution or any offi%er thereof for anythin done in ood faith*
iii* The Trust shall" insofar as it may be ne%essary for the purposes of the S%heme" have
the riht to inspe%t or %all for %opies of the boo,s of a%%ount and other re%ords (in%ludin
any boo, of instru%tions or manual or %ir%ulars %overin eneral instru%tions reardin
%ondu%t of advan%es) of the lendin institution" and of any borrower from the lendin
institution* Su%h inspe%tion may be %arried out either throuh the offi%ers of the Trust or
of SIDBI (e@%ept in %ase of Institutions other than SIDBI) or any other person appointed
by the Trust for the purpose of inspe%tion* 9very offi%er or other employee of the lendin
institution or the borrower" who is in a position to do so" shall ma,e available to the
offi%ers of the Trust or SIDBI or the person appointed for the inspe%tion as the %ase may
be" the boo,s of a%%ount and other re%ords and information whi%h are in his possession*
A. Conditions imposed under the Scheme to %e %inding on the lending institution:
i* Any uarantee iven by the Trust shall be overned by the provisions of the S%heme as
if the same had been written in the do%uments eviden%in su%h uarantee*
ii* The lendin institution shall as far as possible ensure that the %onditions of any
%ontra%t relatin to an a%%ount uaranteed under the S%heme are not in %onfli%t with the
provisions of the S%heme but notwithstandin any provision in any other do%ument or
%ontra%t" the lendin institution shall in relation to the Trust be bound by the %onditions
imposed under the S%heme*
0. Modifications and e,emptions:
i* The Trust reserves to itself the riht to modify" %an%el or repla%e the s%heme so"
however" that the rihts or obliations arisin out of" or a%%ruin under a uarantee issued
under the S%heme up to the date on whi%h su%h modifi%ation" %an%ellation or repla%ement
%omes into effe%t" shall not be affe%ted*
ii* 0otwithstandin anythin herein %ontained" the Trust shall have a riht to alter the
terms and %onditions of the S%heme in reard to an a%%ount in respe%t of whi%h uarantee
has not been invo,ed as on the date of su%h alteration*
iii* In the event of the S%heme bein %an%elled" no %laim shall lie aainst the Trust in
respe%t of fa%ilities %overed by the S%heme" unless the provisions %ontained in Clause (i)
and (ii) of Se%tion !$ of the S%heme are %omplied with by the lendin institution prior to
the date on whi%h the %an%ellation %omes into for%e*
MMMMMMMMMMM