Cgs Cgtmse

8/11/2019 Cgs Cgtmse

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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 evelCommittee 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 Funds%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 GuaranteeS%heme for 3i%ro and Small 9nterprises*

The s%heme has underone several %hanes to meet the %hanin re8uirements andliberali;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 andare iven below*

In our Ban,

& 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 loansup 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 beyond5s* !$*$$ la,h but up to5s*!$$*$$ 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,


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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@tentin 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 CreditGuarantee 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 bespe%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 primaryse%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 fundbased 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 %redit fa%ility e@tended shall mean the amount of

finan%ial assistan%e %ommitted by the lendin institution to the borrower" whetherdisbursed 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 !" of therelevant 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%urityand2or 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*


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(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" !6 and 5eional 5ural Ban,s asmay 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 onthe 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 Small9nterprises

(@ii) "S!/" means the Small Industries Development Ban, of India" established underSmall Industries Development Ban, of India A%t" ! ( of !)*

(@iii) Micro and Small Enterprises As per the 3S39D A%t" #$$: an enterprise

means an industrial underta,in or a business %on%ern or any other establishment" bywhatever 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" !?! or enaed in providin or renderin of any

servi%e or servi%esE and 3i%ro and Small 9nterprises are defined in *!*a*i) and ii) 1 in*!*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 andfor 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*

* 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 5etail Trade and 9du%ational Institute) areeliible 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>


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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%ialInstitutions 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 perborrower sub-e%t to %eilin amount of individual 3I 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 H 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 ofre%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 ofany debts deemed bad or doubtful of re%overy" without obtainin a prior

%onsent in this reard from the Trust*

. 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 providedby 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 proposalssan%tioned in the 8uarter April47une" 7uly4September" /%tober4De%ember and 7anuary4

3ar%h prior to e,pir$ of the followin 8uarter vi;* 7uly4September" /%tober4De%ember"


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7anuary43ar%h and April47une respe%tively* For e@ample" appli%ation for %redit fa%ility

san%tioned between $!*$6*#$!$ to $*$:*#$!$ may be loded latest by $*$*#$!$* 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 (3Is) loin CGT3S9 website (www*%tmse*in)* /urall 5eional offi%es are desinated as 3ember endin Institute (3I) 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 forlodin 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 online 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* TheDA0 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%eshould 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 4CGTS5 under Guarantee Co'er Code in MS !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 $ days from the date of firstdisbursement of %redit fa%ility (not applica%le for 7or3ing capital) or $ days from the

date of Demand Advi%e (CGDA0) of uarantee fee whi%hever is later or such date asspecified %$ 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 ofSi,,im4$*? 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.


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The Bran%hes should re%over the Guarantee Fee from the borrower preferably on the dayof 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 mentionin =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%eiptof 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 $*?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 fullfor the inter'ening $earsiii. Annual Servi%e Fee shall be paid by the lendin institution within :$ days from theend of finan%ial year ie* on or before 3ay !" of every year*

i'. In the event of non4payment of annual servi%e fee by 3ay ! of that year or any other

spe%ified date" the uarantee %over under the s%heme shall not be available to the lendininstitution 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* =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 ofthose %redit fa%ility aainst whi%h the servi%e %hares are due and not paid"

=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* 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 theBan, 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*

In the event of any representation made by the lendin institution in this reard" theTrust 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* ?2#$$4!$ dated 3ar%h !!" #$!$ that it is

mandatory for the 3Is to ma,e Annual Servi%e fee (ASF) payments throuh a sinle

payment from 'ead offi%e of the 3I %on%erned* The demand for ASF will be raised by


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CGT3S9 within the first wee, of April in ea%h year and the 3Is will be re8uired to

ma,e ASF payments throuh a sinle payment from head offi%e within 3ay ! of thesame year*

The 5eional offi%es should enerate from the system the demand list for ASF raised byCGT3S9 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%hemeswhere 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 thebran%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 ! 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 theTrust 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


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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,h3i%ro 9nterprises ?H of the

amount in

default sub-e%tto a ma@imum

of 5s*6*#? la,h

?H sub-e%t to a

ma@imum of

5s**?$ la,h

5s**?$ la,h plus ?$H of

amount in default above

5s*?$ la,h sub-e%t tooverall %eilin of

5s*:#*?$ la,h

Komenentrepreneurs2

.nits lo%ated in

0orth 9ast 5eion(in%l* Si,,im) for

credit facilit$a%o'e -s. la3h to

micro enterprises

$H of the amount in default sub-e%tto a ma@imum of 5s*6$ la,h

5s*6$ la,h plus ?$H ofamount in default above

5s*?$ la,h sub-e%t to

overall %eilin of 5s*:?la,h*

All other %ateory

of borrowers

?H sub-e%t to a ma@imum of

5s**?$ la,h

5s**?$ la,h plus ?$H of

amount in default above5s*?$ la,h sub-e%t to

overall %eilin of

5s*:#*?$ la,h

!* 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 withinone year of lo%,4in period" if 0=A is within lo%,4in period" if the followin %onditions aresatisfied> 4

a) The uarantee in respe%t of that %redit fa%ility was in for%e at the time of accountturning *+#*

b) The lo%,4in period of ! months from either the date of last disbursement of the loan tothe 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%ilityhas 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 ofthe 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* 3Is should ta,e further a%tion as %ontained in Se%tion ! (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


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measures out of the four measures indi%ated therein before submittin %laims for first

installment of uaranteed amount* In %ase the 3I is not in a position to ta,e any of thea%tion indi%ated in Se%tion !(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 ? per %ent of the uaranteed amount on preferrin of eliible%laim by the lendin institution" within $ 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 $ 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 !st and September $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 Trustbefore 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 ofappraisal 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 institutionshall 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 3Is 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 ofthe 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*? 2 #$$4 !$ dated 0ovember ? " #$$ that the 3Is may indi%ate the dateof %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)


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16. #ppropriation of amount %$ CGTMSE recei'ed from the lending institutions:

The amount re%eived from the lendin institutions shall be appropriated by CGT3S9 inthe 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 finallytowards 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 ! of this %ir%ular

and afterwards re%overs money subse8uent to the re%overy pro%eedins initiated by it" thesaid 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%hthe 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 %reditfa%ility between the Trust and the lendin institution are in the proportion of ?H 2 $H 2

?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,inpruden%e*

ii* The lendin institution shall %losely monitor the borrower


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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 waysopen 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%hmay 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* Thelendin 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

borrowers names and parti%ulars on the Kebsite of the Trust*

S$s#dmin #udit=pdate Mem%er #ddress

1. Trusts 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 borrowerand 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" theuarantee 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 borrowerbe%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 lendininstitution is entitled to %ontinue the %redit fa%ilities to the survivin partner or partners or


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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%ilitiesshall 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 lendininstitution* 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 appointedby 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 maybe" 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 asif 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 theprovisions 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 issuedunder 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 theterms 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 inrespe%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

Cgs Cgtmse

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