Cgtmse M

Circular No.
1
As you are aware, based on the suggestions received from banks, the scheme was
modified in September 2000. One of the suggestions was that there should not be
any minimum loan amount for guarantee cover. Though maximum loan eligibility
under the guarantee scheme is Rs.25 lakh, we observe that 95 per cent of the
projects covered by MLIs, so far, are for loans up to Rs.1 lakh. We are sure that MLIs
would view the guarantee scheme as a financial instrument to hedge their credit
risk; and start supporting projects requiring higher quantum of loans, as well, under
the guarantee scheme.
Circular No. 2 / 2001-02
Existing Provision:
"Provided that the lending institution applies for a guarantee cover within a period of 90 days from the
date of sanction".
Modified Provision: "Provided that the lending institution applies for guarantee cover in respect of credit
proposals sanctioned in the quarter April-June, July-September, October-December and January-March
prior to expiry of the following quarter viz. July-September, October-December, January-March and
April-June respectively"
Reasons for modification:
Modification has been carried out to address the problems of MLIs having large branch network. Lead
time of one calendar quarter will help in ensuring that all the eligible applications sanctioned by various
branches, in the previous quarter, could be scrutinized and submitted by the respective Regional / Zonal
Offices to the Trust in the subsequent quarter.
With this modification, MLIs have the facility of submitting applications in respect of sanctions effected
in the quarter July - September, 2001, in the next quarter ending December, 2001. Nevertheless, MLIs can
continue to file applications to the Trust for guarantee cover as soon as eligible credit facilities are sanctioned
by them.
guarantee cover in respect of individual accounts approved by CGTSI starts from the date the guarantee
fee in respect of such accounts gets credited to the respective Current Account of CGTSI with our
collecting banks. However, in some instances, we have observed that due to lack of appropriate
communication between the collecting bank's branch and their office at Mumbai, the amounts get remitted
to CGTSI's account after a considerable delay. Although such incidents have been very few, our
endeavour is to provide guarantee cover to your bank at the earliest after the payment of
guarantee fee. Accordingly, we propose that you may send us advice of payment of guarantee
fee either by e-mail to payments@creditguarantee.org.in or send by ordinary post or by fax
Circular No. 4/2001-02

Credit facilities extended jointly by two or more banks to a single borrower or credit facilities extended
jointly by two or more institutions to a single borrower, shall not be eligible for guarantee cover."
Reasons for modification:
Under the Credit Guarantee Scheme, we encourage composite credit being extended to a single
borrower by a Member Lending Institution of the Trust. However, the Trust has received requests for
consideration of credit facilities extended by a bank for a SSI unit already assisted by State Level
Institution(s) (SLIs). Modification has, therefore, been carried out to help the SSI borrowers already
assisted by Institutions [State Level Institutions (SLIs) / NSIC / NEDFi] in seeking credit facilities from a
bank under the Credit Guarantee Scheme. However, joint financing by two commercial banks to a single
borrower shall not be eligible for guarantee cover. Similarly, joint financing by two institutions to a single
borrower, would not be eligible for guarantee cover.
"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."
the MLI is required to pay the guarantee fee within 30 days from the date of first disbursement of credit
facility. However, wherever the MLI had already disbursed / released, either partly or fully, the credit
facility to the borrower before applying for guarantee cover to the Trust, the MLI will have to pay the
guarantee fee within 30 days from the date of Demand Advice (CGDAN) of guarantee fee in respect of
the approved proposal. A MLI would be said to have complied with the due date requirement provided the
payment is remitted to the collecting banker of the Trust within 30 days.
The discretion to indicate the details of IT PAN of the Chief Promoter of the borrower, in the Application
Form, has been left to the MLI in respect of proposals involving credit facility upto Rs. 10 lakh. However,
in case of proposals involving credit facility of Rs. 10 lakh and above, the MLI shall furnish the details of IT
PAN, in the Application Form, while lodging the applications for guarantee cover.
We clarify that in terms of our Circular No.4 dated February 15, 2002 (circular is available on our website),
it has been made mandatory to furnish ITPAN of the Chief Promoter of the unit in case of proposals with
credit assistance exceeding Rs 10 lakh, while in case of proposals involving credit facility up to Rs.10
lakh, the discretion to indicate the details of IT PAN has been left to the MLI. However, in such cases
where credit assistance to be granted exceeds Rs 10 lakh and the prospective borrowers don't possess
ITPAN, guarantee cover may be sought from the Trust while simultaneously advising the prospective
borrowers to apply for ITPAN. You may mention "APPLIED FOR" in the ITPAN field in guarantee cover
Application Form in all such cases. Further, you are requested to ensure that guarantee cover is sought
strictly for SSI units engaged in the manufacturing activity / software and IT sector.
In case of accounts covered under CGFSI where rephasement/ reschedulement is

required, the MLI concerned may approve the proposal and intimate to the Trust the
detailed terms and conditions of rephasement. Further, if as a part of rephasement/
reschedulement sanction of additional credit facility to the borrower is granted
(within the overall eligible credit limit of Rs. 25 lakh under CGFSI), the MLI is
required to pay to CGTSI the guarantee fee on the additional credit facility
sanctioned at the stipulated rate (presently 2.5%). However, if the account is
already guaranteed for a maximum credit limit of Rs. 25 lakh, while considering
rephasement / reschedulement it may be noted that no additional credit facility can
be covered under CGFSI.
Circular No. 7/2002-03 ( not included in other)
Queries raised by MLIs
CGTSI's Clarifications
Whether debits of Term Loan interest to

Working Capital (OCC/OD) / Current A/c
should be excluded at the time of settlement
of guarantee claim,
Since interest on term loan is not covered under

the Credit Guarantee Scheme and no annual
service fee is payable by the MLIs, under both the
situations indicated against Points (i) and (ii), the
interest on term loan debited to WC (OCC / OD)
(i). Even though payment of such interest has a/c has to be excluded from the outstanding
been duly paid by the party through balances in the WC (OCC/OD) a/c while invoking
the guarantee and lodging the guarantee claim
subsequent credits / remittances.
with the Trust.
(ii). If such interest debits are not recovered
from the party but the liability under
WC(OCC/OD) a/c is well within the sanctioned
limit.
Whether such debits of Term Loan interest Yes

should be excluded from the total WC
(OCC/OD) liability while paying annual service
fee, if the guarantee cover is not available on
this interest component.
MLIs have suggested that the interest on TL Proposed suggestion, being not in line with the
debited to WC (OCC/OD) a/c s (covered present provisions of the Credit Guarantee
under the Guarantee scheme) should also be Scheme, is not acceptable.
extended guarantee cover irrespective of
recovery / non-recovery of such interest debits
subject to the liability being within the
sanctioned limit of WC (OD/OCC) accounts.

"The Trust shall cover credit facilities extended by eligible lending institution(s) in respect of a single
eligible borrower for credit above Rs. 5 lakh and not exceeding Rs. 25lakh, by way of term loan and / or
working capital facilities on or after entering into an agreement with the Trust, to the small scale industrial
units including information technology and software industries, without any collateral security and / or third
party guarantees."
The above Scheme is being operated by the MLIs of Trust since January 2001. As you are aware,
the entire operations under the guarantee scheme are in electronic mode (Online). For the
purpose, each Operating Office of our Member Lending Institutions (MLIs) is allotted a
Member-id, User-id and Password. The operating office concerned can log on to the website of
CGTSI by using this information and submit the applications online. In order to facilitate the
operating office to send applications in batch mode, ThinClient software has been provided to
these offices by CGTSI. Using the ThinClient software, the operating office can first fill in the
required information, as per the format provided, for each of the loan proposal and then upload
all the applications, irrespective of number of such applications, at a time to CGTSI website.
CGTSI picks the data uploaded by the MLIs, periodically from its website and process the
applications. The decision on the application is normally taken within a day's time and Operating
Office of MLI is informed through mail about the status of the applications lodged with CGTSI
online or uploaded using thinclient software. The Operating Office concerned is required to login
to CGTSI website and open the mail to see the status of the applications lodged by it. As soon as
the guarantee cover is approved, a Demand Advice (CGDAN) is sent by CGTSI by mail to the
Operating Office concerned. On receipt of the Demand Advice, the requisite guarantee fee as
indicated in the Demand Advice, is required to be remitted by the Operating Office to the
Collecting Bank of CGTSI. Guarantee fee is payable within 30 days from the date of first
disbursement effected by the Operating Office of MLI to its borrower. However, where loan has
already been disbursed, the guarantee fee is payable within 30 days from the date of Demand
Advice. While making the payment of guarantee fee, the Operating Office of MLI should also
indicate the relevant application identification number (CGPAN) allotted by CGTSI and
mentioned in Demand Advice.
In the above backdrop, since the entire operations under the guarantee scheme were to be in
electronic mode (Online), we had requested the Head Offices / Central Offices of the MLIs to
identify the ZOs/ROs, etc wherefrom they proposed to lodge the applications for seeking
guarantee cover. After receiving the names and addresses of such offices, Member Id, User Id
and Passwords were allotted to them. Since the operating offices (ZOs / ROs) of MLIs are
normally located in big cities /towns, it was expected that they will be having Internet
connectivity for submitting the applications to CGTSI in electronic mode. CGTSI, however, at
the request of some of the MLIs, allowed lodging the applications through ' floppy' using
"ThinClient" software and send by post. It was then expected that such operating offices would
soon be having the Internet connectivity in their offices and would be submitting the applications
'Online' by uploading the data through Internet. It is, however, observed that even after passage
of almost 2 years, some of the operating offices of a few MLIs continue to submit the
applications to CGTSI by post through floppies and ask us to post the decision on the
applications lodged, by fax / courier. Incidentally, it may be mentioned that many a time, the
floppy sent by MLIs gets corrupted and the applications data could not be uploaded at CGTSI
end. Many a time, the officials of operating offices do not follow the instructions while exporting
the data on floppy, resulting in unverified / unchecked applications being forwarded through
floppy. Under these circumstances, we had to request the operating office concerned to re-lodge
the applications.
The issue was discussed at the IBA Review Forum at its meeting held on December 14, 2002.
The consensus was that all banks have computerized their operations and that all MLIs operating
offices should effectively make use of the technology in place for cost effective communication
and for availing of expeditious services.
In order to effectively utilize the benefits of the systems / technology in place and also to give
real time service to the MLIs, it has been decided that the Trust will accept the applications
lodged by operating offices through electronic mode (Online) effective April 01, 2003. In other
words, applications received by post through floppies will not be entertained after April 01, 2003
.
Circular No. 10/ 2003-04
As you are aware, the guarantee cover in respect of your borrower accounts stands issued on the
date of receipt of Guarantee Fee by CGTSI. In order to keep the guarantee cover issued by
CGTSI in force, you are required to pay the Annual Service Fee @ 1% p.a on the outstanding
amount to the debit of the borrower's accounts as on March 31 each year, latest by May 31 of
every year. It may be noted that the annual service fee is payable by MLIs in respect of all
borrower accounts guaranteed by CGTSI till settlement of claim. In respect of all those borrower
accounts against which CGTSI guarantee cover stands issued and alive , you may please pay the
service fee @ 1% p.a. on the outstanding credit extended by you to each of the borrower account
as on March 31, 2003, latest by May 31, 2003 .
In the event of non-payment of annual service fee by May 31, 2003, the MLIs are required to pay
penal interest on the service fee due and unpaid, w.e.f. June 01, 2003 at 4% over Bank Rate
(currently 6.25% p.a.) for the period of delay. The last date for payment of service fee with
stipulated penal interest is July 31, 2003, thereafter CGTSI would not accept the service fee
(even with penalty) and the guarantee cover issued against such borrower accounts would stand
cancelled.
In order to facilitate calculation of annual service fee payable by you, CGTSI has developed a
software programme. The Service fee Software Programme is available on the Trust's website at
www.cgtsi.org.in and the same can be accessed by using Member Id, User Id and Password of
Nodal officer or Operating officer. The detailed procedure for use of "Service Fee Software
Programme" is as indicated in the Annexure. The software is user-friendly. The service fee
payable would automatically get calculated on filling in the outstanding credit in respect of each
of the borrower account.
Please remit the service fee to us directly by way of Demand Draft drawn in favour of " Credit
Guarantee Fund Trust for Small Industries " or " CGTSI " payable at Mumbai giving
particulars of Member ID of the Operating Office, CGPANs against which the service fee has
been paid.
specifying a minimum credit limit of above Rs 5 lakh for providing guarantee cover under
CGFSI. The decision has since been reviewed and it has been decided to withdraw the minimum
ceiling on credit limit for coverage under CGFSI.
Further, we inform that the scope of CGFSI has since been widened as under "Presently new and existing SSI units engaged in manufacturing activity or in information
technology or in software industry are eligible under CGFSI. Effective September 01, 2003, the
credit facilities upto Rs. 25 lakh sanctioned without collateral security and / or third party
guarantee by the MLIs to the new and existing Small Scale Service & Business (Industry
Related) Enterprises ( SSSBEs ) have also been made eligible for coverage under the scheme."
The decision to release the collateral security and / or third party guarantee in
respect of the existing credit facilities extended to the eligible SSI units have been
left to the discretion of the respective bank / lending institution (MLI). The additional
credit facilities sanctioned upto Rs. 25 lakh per borrower, subsequently, without
collateral security and / or third party guarantee to such SSI units, can be covered
under the Guarantee Scheme.
Circular No. 21 /2004-05
Existing Provision:
Under Clause 4, Chapter II of the Scheme, there is a ceiling of Rs. 25 lakh for providing
guarantee against the credit facilities extended by the eligible lending institutions to a single
eligible borrower. The maximum guarantee cover available per eligible borrower shall not
exceed 75% of the amount in default in respect of the credit facility extended by the lending
institution, subject to maximum of Rs. 18.75 lakh. In keeping with the spirit of the Scheme,
CGTSI has been advising its MLIs not to seek any collateral security and / or Third Party
Guarantee (TPG) while extending additional credit facility to those borrowers in respect of
whom the credit facility of Rs. 25 lakh has already been covered under CGS. CGTSI expects the
MLIs to offer additional need-based credit to such borrowers based on their track record and the
risk perception, without insisting on collateral security and / or TPG.
Modified provision:
In respect of eligible borrowers already covered under the Scheme to the maximum extent of
Rs.25 lakh, MLIs may now extend additional term loans / enhanced working capital facilities to
such borrowing units by taking collateral security and / or TPG, if considered necessary, keeping
in view the risk perception. The collateral security / TPG would, however, be restricted to the
additional loan / credit facility only. In such eventuality, the guarantee cover already extended by
CGTSI to the MLIs against such borrowing units would continue to remain in force through its
normal tenor.
It is further clarified that in case of eligible borrowers already covered under the Scheme upto the
maximum credit ceiling of Rs. 25 lakh and to whom additional credit facilities are extended by
the MLIs, by taking collateral security and / or TPG, the Clause 11(ii) of the Scheme as
reproduced below will continue to be applicable in case any payments are made by the borrower
to the MLI.
Clause 11(ii) of CGS "In the event of a borrower owing several distinct and separate debts to the lending institution
and making payments towards any one or more of the same, whether the account towards which
the payment is made is covered by the guarantee of the Trust or not, such payments shall, for the
purpose of this clause, be deemed to have been appropriated by the lending institution to the debt
covered by the guarantee and in respect of which a claim has been preferred and paid,
irrespective of the manner of appropriation indicated by such borrower or the manner in which
such payments are actually appropriated."
Date of effect of modification: Effective February 01, 2005.
Rationale for the change:
Since, the ceiling of credit (Rs.25 lakh) eligible to be covered under the Scheme may not be
sufficient to cover the requirements of units which are growing fast, MLIs have been suggesting
that they may be allowed to extend additional credit beyond this ceiling against collateral
security and / or TPG. In some instances, MLIs have been reluctant to extend such additional
credit facility without collateral security and / or TPG. Also, it has been provided in the Scheme
that the individual borrowing units should deal with a single lending institution for all their credit
requirements (exception has been made where the borrowing units have been extended term
credit assistance by state level institutions / other financial institutions). Hence, the proposed
change will help the eligible SSI units in accessing additional funds without hindrance. The
above modification would ensure that the additional credit requirements above Rs. 25 lakh of the
borrowers already covered in the Scheme would also be met by the MLIs, in future.
2) Inclusion of Non-fund based working capital facilities under CGS within the overall
limit of Rs. 25 lakh
Existing Provision:
In terms of Clause 2 (iii), Chapter I of CGS " Credit facility " means any financial assistance by way of term loan and / or fund based
working capital facilities (cash credit, overdraft, bills purchased or discounted, etc.) extended by
the lending institution to the eligible borrower. For the purpose of calculation of guarantee fee,
the "credit facility extended" shall mean the amount of financial assistance committed by the
lending institution to the borrower, whether disbursed or not. For the purpose of the calculation
of annual service fee, the credit extended shall mean the amount outstanding as at March 31, of
the relevant year.
Modified provision:
" Credit facility " means any financial assistance by way of term loan and / or fund based and
non-fund based working capital facilities (cash credit, overdraft, bills purchased or discounted,
bank guarantee, Letter of credit, etc.) extended by the lending institution to the eligible borrower.
For the purpose of calculation of guarantee fee, the "credit facility extended" shall mean the
amount of financial assistance committed by the lending institution to the borrower, whether
disbursed or not. For the purpose of the calculation of service fee, the credit facility extended
shall mean the credit facilities (both fund and non-fund based) covered under CGS and for which
guarantee fee has been paid, as at March 31, of the relevant year.
Date of effect of modification : Effective February 01, 2
Rationale for the Change
The change is being proposed in view of the persistent demand from the banks and the industry
associations to cover non-fund based facilities also. Presently, it is not permissible under the
scheme to obtain any collateral security in respect of accounts covered under the Scheme, even
for the additional non-fund based credit facilities which are not eligible for coverage under the
scheme. Thus, in some instances the banks have been hesitant in extending non-fund based credit
facilities to the borrowers already covered under the Scheme. Accordingly, the non-fund based
credit facilities, as mentioned above, extended by the MLIs to the eligible borrowers can also be
covered under CGS, within the overall ceiling of Rs. 25 lakh per borrowing unit.
3) Inclusion of outstanding interest on term loan under CGS
Existing Provision:
In terms of Clause 2 (i), Chapter I of CGS:
" Amount in Default " means the principal amount outstanding in the account(s) of the
borrower in respect of term loan and amount of outstanding working capital facilities (including
interest), subject to a maximum of fund based working capital limits sanctioned as on the date of
the account becoming NPA or such of the date as may be specified by the Trust, for preferring
any claim on the Trust against the guarantee cover.
Modified Provision:
" Amount in Default " means the principal and interest amount outstanding in the account(s) of
the borrower in respect of term loan and amount of outstanding working capital facilities
(including interest), subject to a maximum of fund based & non-fund based working capital
limits sanctioned and guaranteed as on the date of the account becoming NPA, or such of the
date as may be specified by CGTSI, for preferring any claim against the guarantee cover.
Date of effect of modification : Applicable in respect of term loan proposals, which are
approved under the Scheme effective February 01, 2005.
Rationale for the Change:
As per the extant provisions, only principal outstanding is eligible to be covered under the
Scheme in respect of the term loans, as it was assumed that the risk of default in interest (being
income for the MLIs) might be borne by the MLIs. This was also provided to leverage the corpus
of CGTSI to extend guarantee cover among larger number of SSI borrowers. Many MLIs have
sought inclusion of interest outstanding in term loan account under amount in default, in line
with the way it is allowed for working capital limit. As long as the overall outstanding in the
term loan / working capital account (both principal & interest) remains within the guaranteed
loan limit, it has been decided to agree for inclusion of interest in the amount in default for
preferment of claim. Accordingly, the accumulated unpaid interest upto the date of borrower
account becoming NPA can be included in the amount in default in respect of term loan for
preferring any claim on the Trust against the guarantee cover
4) Levying of pro-rata guarantee fee for enhancement in working capital in case of

borrower accounts already covered under the scheme
Existing Provision:
In terms of Clause 8(i), Chapter III of CGS :
"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".
Further, Clause 9, Chapter IV of CGS inter-alia states " . The guarantee cover will commence from the date of payment of guarantee fee and shall run
through the agreed tenure of the term credit in respect of term credit / composite credit. Where
working capital alone is extended to the eligible borrower, the guarantee cover shall be for a
period of 5 years or a block of 5 years, or for such period as may be specified by the Trust in this
behalf."
Modified 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
In case of borrowers already covered under the Scheme for working capital facilities, the
guarantee fee for additional working capital facilities extended shall be levied on pro-rata basis
for the remaining number of years in the block of 5 year period, considering the any part period
in the year, as full year.
Date of effect of modification: Applicable in respect of working capital enhancement proposals,
which are approved under the Scheme effective February 01, 2005.
The tenure of the guarantee cover is for a period of 5 years or a block of 5 years, or such period
as may be specified by CGTSI, where working capital facility alone is extended by the MLI.
During this period of 5 years, if the MLI is extending additional working capital to the borrower
already covered under the Scheme, it has to pay guarantee fee of 2.5% on the enhanced portion
of credit facility for coverage under CGS. However, the guarantee cover on the additional
sanction is available for a period of 5 years from the date of first limit sanctioned / renewed,
irrespective of the date of further enhancement during the said block of 5 years. This effectively
raises the cost of guarantee for subsequent loans covered under the Scheme, as the guarantee fee
on enhanced amount is payable for shorter duration of coverage. Hence, to correct this anomaly,
it is proposed to levy guarantee fee for the enhanced limit on pro-rata basis only for the
remaining period of original guarantee cover (in complete years by treating the remaining period
in the year of enhancement, as full year).
5) Linking levy of annual service fee to the credit facility sanctioned & covered under the
scheme
Existing Provision:
In terms of Clause 8 (ii), Chapter III of CGS "The Annual Service Fee at specified rate (currently 1% p.a.) on the outstanding amount to the
debit of the borrower's accounts covered under the scheme as on March 31 of each year shall be
paid by the lending institution within 60 days i.e. May 31 of every year."
Modified provision:
The Annual Service Fee at specified rate (currently at 0.75% p.a.) on the amount of credit facility
extended by the MLI, which is covered under the scheme and in respect of which guarantee fee
has been paid as on March 31 shall be paid by the lending institution within 60 days i.e. May 31
of every year.
Date of effect of modification: Applicable in respect of all guarantees extended by the Trust
since inception that are in force. The annual service fee with revised rate is payable in respect of
guaranteed accounts as on March 31, 2005 and would remain applicable in respect of all credit
facilities covered under CGS, in future also.
For the purpose of remittance of Annual Service Fee (ASF), the operating offices of MLIs have
to obtain the details of outstanding loans in respect of all borrowers covered under the scheme
from their branches. In view of the efforts and time for the purpose, sometimes the remittance of
service fee gets delayed and on some occasions, the Trust had to cancel the guarantee cover in
respect of accounts where the service fee had not been received from the MLIs even after
repeated reminders. As the number of accounts covered under the scheme increase, it would
become increasingly difficult to obtain / monitor the data of outstanding of each account. In
order to streamline the procedure, linking of ASF to the loan / credit facility extended and
covered under the scheme (instead of the outstanding balance) has been discussed during the
workshops and training programmes of some of the MLIs. The rationalization of this procedure
would reduce avoidable paper work for both MLIs and CGTSI. As hitherto, in the first year in
which the guarantee cover is issued to the MLIs, ASF will be charged on pro-rata basis for the
period during which the guarantee cover remains extended. Since, in the proposed arrangement,
levying of ASF will be linked to the credit sanctioned and covered under CGS by the MLIs,
levying of ASF will not depend either on disbursement of credit facility or the outstanding
amount in the borrowal account as of March 31 of the relevant year.
6) Refund of guarantee fee and annual service fee paid by MLIs
Existing Provision:\
There is no provision in the Scheme relating to refund of guarantee fee and annual service fee
paid by the lending institution to the Trust. A specific clause in the Scheme is being inserted to
cater to this requirement in certain genuine cases.
Modifications/Additions:
Clause 8 (iv), Chapter III : (New clause being inserted under CGS)
The guarantee fee and / or annual service fee once paid by the lending institution to the Trust is
non-refundable.
Comments:
Guarantee fee / Annual Service Fee, shall not be refunded, except under certain circumstances
like (i)
excess remittance,
(ii)
remittance made more than once against the same credit application,
(iii)
guarantee fee & / or annual service fee not due,
(iv)
guarantee fee paid in advance but application not approved for guarantee cover
under the scheme, etc.
The above modifications / changes in the Scheme will also affect the relevant clauses, related
provisions of the scheme and the circulars issued by the Trust from time to time.
Chapter III - Clause 8(i) on Guarantee Fee:
Existing Provision:
institution availing of the guarantee within 30 days from the date of first disbursement of credit facility."
Modified Provision:
Clause 8(i) has been modified as follows:
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."
Further, in terms of the above mentioned Policy Package, Public Sector Banks will be encouraged to
absorb the Annual Service Fee in excess of 0.25% p.a. for all the borrowers mentioned in category (a), (b)
and (c) above.
Eligibility of credit facilities extended to Handicrafts artisans under Credit Guarantee

Scheme (CGS) of CGTSI
The Development Commissioner (Handicrafts), Ministry of Textiles, GoI [DC(HC)] has
advised that the Credit Guarantee Scheme for handicrafts artisans, which was hitherto being
implemented through his Office only in the State of Jammu & Kashmir as a part of special
package for that State, has now been extended to the rest of India to facilitate credit flow to
handicrafts sector all across the country. In view of this development, the credit facilities
extended to the handicrafts artisans by the eligible banks [who have registered with CGTSI as its
Member Lending Institutions (MLIs)] and covered it under Credit Guarantee Scheme shall be
reimbursed by the office of DC(HC) guarantee fee and annual service fee paid by them to
CGTSI. For the procedural aspects relating to reimbursement of guarantee / service fees the
member-banks have to approach the O/o of DC (HC) directly.
The member-banks are requested to undertake prompt and speedy processing of the eligible
credit proposals / applications of handicrafts artisans and also to facilitate credit through Artisan
Credit Cards (ACC) issued to artisans and there coverage under CGS. It may be reiterated that
the member - banks should ensure that all terms and conditions stipulated under the CGS of
CGTSI are fully satisfied, prior to lodging the applications for seeking guarantee cover.
, the credit facilities extended by the MLIs to these nine activities under Agri-Clinics and AgriBusiness Centres (ACABCs) can be covered under the CGS provided the finance is extended as
per the terms and conditions of the Credit Guarantee Scheme.
List of activities/Enterprises Identified under Agri-clinic and Agri Business Centres

(ACABCs)
Eligible for coverage under the Credit Guarantee Fund Scheme for Small Industries (CGS)
No. Code
Area
Type
of
Activity
Project Maintenance and Repairs of Agricultural Implements & SSSBE*

03
Machinery including Micro Irrigation Systems
Project Agri Service Centres

04
SSSBE*
Project Seed Processing Units

05
SSI**
Project Tissue Culture

06
SSI**
Project Production of Bio-fertilizers, Bio-pesticides, Bio-control SSI**

07
agents
Project Honey and Bee product Processing Units

08
SSI**
Project Feed Processing and Testing Units

14
SSI**
Project Setting up of Information Technology Kiosks in rural areas SSI**

13
for access to various agricultural related portals
Project Setting up of Cool chain from the farm level onwards

16
SSI**
* Providing that the total investment in fixed assets (other than that of land and building)
does not exceed Rs.10 lakh.
* Provided that the total investment in plant and machinery does not exceed Rs.100 lakh and
the process involves use of machinery and equipment.
Existing Provision:
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:
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.

Life Insurance cover for Chief Promoter of units with guarantee cover under CGS
Pursuant to the announcement made by the Hon'ble Finance Minister, Govt. of India, in the
Parliament on February 28, 2006 while presenting Union Budget for FY2006-07, it has been
decided to provide life insurance cover of Rs. 2,00,000/- (Rs. two lakh only) for every Chief
Promoter of the units provided guarantee cover under the Credit Guarantee Scheme(CGS) of
CGTSI, as per the terms and conditions mentioned below:
1. The Assurance shall be effective on the life of each member (i.e. Chief Promoter) under the
group term insurance scheme of Life Insurance Corporation of India (LIC), for a sum assured of
Rs. 2,00,000, irrespective of the amount of credit facility actually covered under CGS. This
measure is extended by CGTSI as a purely welfare measure without entailing any contractual
liability vis--vis the member. In case of non-coverage of a member's life, inadvertently or
otherwise or due to any technical/reconciliation issues, or non-settlement of claims, CGTSI will
not be liable in any manner whatsoever.
2. The Assurances shall be held by CGTSI UPON TRUST for the benefit of the persons entitled
to the benefit.
3. CGTSI shall pay to the LIC in respect of each member on the Entry Date and relevant Annual
Renewal Dates, or intervening convenient date, in a consolidated manner, such contribution
(premium) as are required to secure and continue the Assurance on his life. The 'Entry Date' for
the present policy is August 01,2006.
4.The LIC has issued a Single Master Policy to CGTSI under the Scheme after due payment of
the premium on August 7, 2006 covering the list of Chief promoters as on July 31, 2006 and the
risk cover will accordingly commence from August 7, 2006. Kindly note that Chief Promoters of
borrowing units covered under CGS, after that date, will not be covered under this Insurance
Policy (Scheme), until CGTSI remits the premium at the next 'Annual Renewal Date' or any
intervening date between the 'Entry Date' and the 'Annual Renewal Date'
5. CGTSI will act for and on behalf of the Members through the MLIs in all matters relating to
the Scheme and every act done by, agreement made with and notice given to the LIC by the
CGTSI shall be binding on the Members.
6. Chief Promoter of units which have been covered under the Credit Guarantee Scheme of
CGTSI and who are aged not less than 18 years and not more than 59 years i.e. less than 60 years
completed, are being covered under the Scheme.
7. The life cover of a member (Chief Promoter) shall continue upto the date of the next Annual
Renewal date, in case the loan stands fully repaid in between two Annual Renewal Dates of the
policy, and the member/Chief Promoter has not attained 60 years of age.
8. Every member (Chief Promoter) shall nominate any person/s to whom, in the event of the
death of the member, the amount released by LIC may be paid. In case the nominee being minor,
member may appoint any person (not being a minor) to receive the amount. Any payment to
nominee shall be a full discharge of CGTSI/LIC liability in respect of such policy. This payment
will be subject to para 9 given below. Provided further that nothing contained herein shall affect
any claim which any representative/ heir of the deceased member may have against the nominee
in respect of any amount payable under the policy.
9.Upon the death of the Member prior to Terminal Date, the Sum assured under the Assurance
then in force shall be payable to CGTSI for the benefit of the Beneficiary. CGTSI shall deduct
the amount payable towards meeting its liability (Guaranteed amount in default) and balance if
any shall be paid to the nominee of the deceased.
10. The benefits assured under the Scheme are strictly personal and cannot be assigned, charged
or alienated in any way.
11. CGTSI reserves the right to discontinue the Scheme at any time or amend the Rules thereof.
Responsibilities of the MLI
1. The MLI should ensure that the date of birth is accurately stated in the application form at the
time of lodging the application. This will be made a mandatory data field in the application form
w.e.f. 01/04/2007. MLIs are requested to take advance steps for sensitizing their branch offices
well in time about this aspect. For the existing cases and cases for which application for
guarantee cover is lodged upto 31/03/2007, the MLIs are required to provide a list of Chief
promoters of the covered units along with their dates of birth and nominees as per the format
provided in Annexure I at the earliest.
2. At the stage of Death Claim, the MLI shall submit, along with the Death Claim Form
(Annexure II) and the Death Certificate, a duly verified and authenticated copy of the Age Proof
on the basis of which the date of birth of the member was recorded at the time of the entry of the
member into the scheme, as also any other document that may be required by LIC. The claim
must be lodged by the MLI with CGTSI within 30 days of the death of the member (Chief
Promoter).
3. CGTSI will lodge the claims with LIC on the basis of signed/authenticated documents
presented by the controlling offices of the MLIs.
THE ABOVE IS NOT INCLUDED**

Differential Pricing based on slab of Coverage
Based on representations received from various quarters, it has been decided to give the MLIs a
greater extent of freedom in determining the extent of coverage actually required by them. A
schedule of differential pricing mechanism has been drawn to allow the MLIs the freedom to go
in for lower guarantee coverage as per their risk perception. The coverage structure based prorata on the extent of coverage/fee structure of CGTSI is given below:
Extent
of
Guarantee One time Guarantee Fee
Coverage (%) of Credit
(%) of Credit Facility
Facility Sanctioned
Sanctioned
Annual Service Fee
75
1.50
0.75
60
1.20
0.60
50
1.00
0.50
40
0.80
0.40
30
0.60
0.30
(%) of Credit
Sanctioned
Facility
Applications under the above scheme may be lodged by the MLI in hard copy only , until a
separate module for the same is incorporated in CGTSI's enterprise wide software. The
application form that is being filled up for lodging all other cases may be used for the purpose.
The MLIs should clearly indicate the extent of Guarantee cover required to enable us to arrive at
the guarantee fee and annual service fee. The fees should be sent to CGTSI only upon the receipt
of Demand Advice Number from CGTSI.
The relevant sections of the original scheme stand modified as per the details given below:
Section 2(V)
'Guarantee Cover' means maximum cover available per eligible borrower which shall not exceed
75 per cent of the amount in default in respect of credit facility extended by the lending
institution, subject to maximum of Rs. 18.75 lakh (Rupees eighteen lakh seventy five thousand
only); provided further that the 'Guarantee Cover' would be on proportionate basis in respect of
the product for 'Differential Pricing based on slab of coverage' as specified by the Trust.
Section 8(i)
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; provided further that the guarantee fee would be paid on a pro-rata basis in respect
of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust.
Section 8(ii)(Part)
The Annual Service Fee at specified rate (currently at 0.75% p.a.) on the amount of credit facility
extended by the MLI, which is covered under the scheme and in respect of which guarantee fee
has been paid as on March 31 shall be paid by the lending institution within 60 days i.e. May 31
of every year; provided further that the Annual Service Fee would be paid on a pro-rata basis in
respect of the product for 'Differential Pricing based on slab of coverage' as specified by the
Trust.
Section 9 (Part)
The Trust shall provide guarantee cover of up to 75% of the amount in default of the credit
facility extended by the lending institution to an eligible borrower, subject to a maximum
guarantee cover of Rs. 18.75 lakh (Rupees eighteen lakh seventy five thousand only) per
borrower; provided further that the 'Guarantee Cover' would be on proportionate basis in respect
of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust"
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.
Modifications in the Credit Guarantee Scheme
Based on the modifications suggested in the "Package for promotion of Micro and Small
Enterprises" as approved by Cabinet Committee on Economic Affairs on October 16, 2006
and announced in the Parliament on February 27, 2007 by the Minister of Micro, Small and
Medium Enterprises and further approvals as obtained from the Settlors of the Trust, it has
been decided to effect the following changes in the scheme:
1. The Trust has been renamed as the Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE).
2. The Scheme will be known as the 'Credit Guarantee Fund Scheme for Micro and Small
Enterprises' instead of 'Credit Guarantee Fund Scheme for Small Industries'.
3. The coverage of the Scheme will now be extended to all new and existing Micro and
Small Enterprises (both in the Manufacturing Sector as well as in the Service Sector) instead
of SSI /SSSBE(IR) units.

4. The eligible loan limit under the Scheme will now be Rs.50 lakh instead of Rs.25 lakh as
obtaining earlier.
5. The credit guarantee cover will be raised from 75% to 80% for the following category of
loans:
a. Loans to Micro enterprises upto Rs. 5 lakh; and
b. Loans to Micro and Small enterprises operated and/ or owned by women.
The consequential changes in the Scheme are given in the Annexure. While, we are
confident that the MLIs, by and large, have put in place proper appraisal mechanism for
credit proposals being covered under the Scheme ; we request that while covering credit
proposals under the enhanced ceiling of Rs. 50 lakhs the MLIs should go in for rigorous
appraisal of such credit proposals to ensure the quality of such loans. 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/(P.M.Radhakrishnan)
Deputy General Manager
Annexure
Ch.
No.
Original Provision
Modified Provision
1. (i) The Scheme shall be known as The Scheme shall be known as the Credit
the Credit Guarantee Fund Guarantee Fund Scheme for Micro and
Scheme for Small Industries Small Enterprises (CGMSE)
(CGFSI)
2 (iv) "Eligible borrower" means new "Eligible borrower" means new or existing
or existing small scale industrial

units, including information
technology (IT) and software
industries to which credit facility
has been provided by the lending
institution without any collateral
security and/or third party
guarantees.
Micro and Small Enterprises to which credit

facility has been provided by the lending
institution without any collateral security
and/or third party guarantees.
2 (v) 'Guarantee
Cover'
means
maximum cover available per
eligible borrower which shall not
exceed 75 per cent of the amount
in default in respect of credit
facility extended by the lending
institution, subject to maximum
of Rs. 18.75 lakh (Rupees
eighteen lakh seventy five
thousand only).
'Guarantee Cover' means maximum cover

available per eligible borrower which shall
not exceed 75 per cent of the amount in
default in respect of credit facility extended
by the lending institution, subject to
maximum of Rs. 37.50 lakh (Rupees thirty
seven lakh fifty thousand only).
2(xi) "Scheme" means the Credit "Scheme" means the Credit Guarantee Fund
Guarantee Fund (Scheme) for (Scheme) for Micro and Small Enterprises
Small Industries.
2
" Small Scale Industrial Unit"
(xiii). means an industrial undertaking
in respect of which an affidavit
has been furnished by the owners
or other parties entitled to act for
that undertaking or the lending
institution seeking guarantee has
satisfied itself that the investment
in plant and machinery is not in
excess of such amounts as may
be specified by the Central
Government in regard thereto and
subject to such other terms and
conditions as may be prescribed
by the Government or the Trust in
this behalf.
As per the MSMED Act, 2006 an

"enterprise" means an industrial undertaking
or a business concern or any other
establishment, by whatever name called,
engaged in the manufacture or production of
goods, in any manner, pertaining to any
industry specified in the First Schedule to the
Industries (Development and Regulation)
Act, 1951 or engaged in providing or
rendering of any service or services; and
"Micro and Small Enterprises" are defined in
7.1.a.i) and ii) & in 7.1.b.i) and ii) of the said
Act .
2
"Trust" means the Credit
(xv). Guarantee Fund Trust for Small
Industries set up by Government
of India and SIDBI with the
purpose of guaranteeing credit
facility(ies), extended by the
lending institution(s) to the
eligible borrowers.
"Trust" means the Credit Guarantee Fund

Trust for Micro and Small Enterprises set up
by Government of India and SIDBI with the
purpose of guaranteeing credit facility(ies),
extended by the lending institution(s) to the
eligible borrowers.
4.
Credit facilities eligible under the Credit facilities eligible under the Scheme :
Scheme :
The Trust shall cover credit facilities
The Trust shall cover credit extended, by eligible lending institution(s) in
facilities extended, by eligible respect of a single eligible borrower not
lending institution(s) in respect of exceeding Rs.50 lakh by way of term loan
a single eligible borrower not and/or working capital facilities on or after
exceeding Rs.25 lakh by way of entering into an agreement with the Trust, to
term loan and/ or working capital the Micro and Small enterprises, without any
facilities on or after entering into collateral security and\or third party
an agreement with the Trust, to guarantees.
the small scale industrial units
including IT and software
industries, without any collateral
security and\or third party
guarantees.
9.
Extent of the guarantee :
Extent of the guarantee :
The Trust shall provide guarantee

cover of up to 75% of the amount
in default of the credit facility
extended
by
the
lending
institution
to
an
eligible
borrower, subject to a maximum
guarantee cover of Rs.18.75 lakh
(Rupees eighteen lakh seventy
five thousand only) per borrower.
The guarantee cover will
commence from the date of
payment of guarantee fee and
shall run through the agreed
tenure of the term credit in
The Trust shall provide up to 75% of the

amount in default of the credit facility
extended by the lending institution to an
eligible borrower, subject to a maximum
guarantee cover of Rs.37.50 lakh (Rupees
thirty seven lakh fifty thousand only). The
extent of guarantee cover will be raised up to
80% for specific categories of borrowers viz.
micro enterprises for loans upto Rs.5 lakh
and for micro and small enterprises operated
and/ or owned by women irrespective of
amount. The guarantee cover will commence
from the date of payment of guarantee fee
and shall run through the agreed tenure of
respect of term credit/ composite

credit. Where working capital
alone is extended to the eligible
borrower, the guarantee cover
shall be for a period of 5 years or
a block of 5 years, or for such
period as may be specified by the
trust in this behalf.
the term credit in respect of term credit /

composite credit. Where working capital
alone is extended to the eligible borrower,
the guarantee cover shall be for a period of 5
years or a block of 5 years, or for such period
as may be specified by the trust in this
behalf.

Financial Sector Plan for the North Eastern Region- Modifications in the Credit Guarantee
Scheme
Based on the recommendations of the Committee on Financial Sector Plan for North Eastern
Region, it has been decided as under:
i) The up front Guarantee Fee will be reduced by 50% from 1.5% to 0.75% for all loans in the
North Eastern Region.
ii) The extent of guarantee cover will be raised from 75% to 80% for all loans in the North
Eastern Region.
The consequential changes in the Scheme are given in the Annexure. 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 in the
North Eastern Region.
Yours faithfully,
Sd/(P.M.Radhakrishnan)
Deputy General Manager
Annexure
Ch.
Original Provision
Modified Provision
No.
8. i ) Guarantee Fee and Annual Service Guarantee Fee and Annual Service Fee
Fee
A one time guarantee fee at specified rate
A one time guarantee fee at (currently 1.5 per cent) of the credit facility
specified rate (currently 1.5 per sanctioned, (comprising term loan and / or
cent) of the credit facility working capital facility) shall be paid upfront
sanctioned, (comprising term loan to the Trust by the eligible institution availing
and / or working capital facility) of the guarantee, with the proviso that the
shall be paid upfront to the Trust by applicable rate for loans to borrowers in the
the eligible institution availing of North Eastern region shall be 0.75%. (This will
the guarantee.
be incorporated along with the amendments
obtaining as per the circular No.36 dated July
2, 2007).
9.
Extent of the guarantee
Extent of the guarantee
The Trust shall provide guarantee

cover of up to 75% of the amount
in default of the credit facility
extended by the lending institution
to an eligible borrower, subject to a
maximum guarantee cover of Rs.
18.75 lakh (Rupees eighteen lakh
seventy five thousand only) per
borrower
The Trust shall provide up to 75% of the

amount in default of the credit facility extended
by the lending institution to an eligible
borrower, subject to a maximum guarantee
cover of Rs. 37.50 lakh (Rupees thirty seven
lakh fifty thousand only) with the proviso that
the extent of guarantee cover will be raised to
80% for loans in the North Eastern region
irrespective of amount. (This will be
incorporated along with the amendments
obtaining as per the circular No.36 dated July2,
2007).

Dear Sir/Madam,
Closure of Collecting Bank Accounts
To facilitate quick collection and provide convenience, CGTMSE had advised its MLIs to remit
the GF / ASF through the branches of designated collecting banks. At present, CGTMSE is
having banking arrangement with the following banks 1) IDBI Bank Ltd.
2) HDFC Bank Ltd.
3) State Bank of India
4) Punjab National Bank
The MLIs are required to advise the details of such remittances indicating the demand advice no.
(CGDAN), CGPAN NO. etc. to enable the Trust to appropriate the guarantee fee and issue
guarantee cover expeditiously. Instructions to this effect have been given to MLIs through
circulars and other communication, from time to time.
On several occasions the details of remittances towards guarantee fee / service fee are not
furnished to CGTMSE by the Operating Offices of MLIs or to the branches of collecting banks.
This comes to the notice of CGTMSE after considerable delay on receipt of bank statements and
at the time of appropriation of guarantee fee. At times some of branches of collecting banks
bunch all the credits received from different MLIs pertaining to CGTMSE in a day and advise a
consolidated credit amount to its branch at Mumbai, where CGTMSE is operating its current
account, which appears in the bank statement. The collecting banks do not provide the
instrument number, name of the remitting MLI or the place of remittance in the bank statements.
All this causes problems at CGTMSE's end in reconciliation of amounts credited in the accounts
and appropriation of guarantee fees against the remitting MLI and the specific borrower account.
It has been decided that, the existing arrangement with collecting banks will be discontinued
with effect from October 01, 2007 . MLIs are requested to remit GF / ASF by demand draft
only in favour of CGTMSE, payable at Mumbai, with details of the payment and after
allocation of the payment in the system.

Dear Sir/Madam,
Financial Sector Plan for the State of Sikkim - Modifications in the Credit Guarantee
Scheme
Based on the recommendations of the Task Force on the Financial Sector Plan for Sikkim , it has
been decided as under:
i) The up front Guarantee Fee will be reduced by 50% from 1.5% to 0.75% for all loans in the
North Eastern Region including the state of Sikkim .
ii) The extent of guarantee cover will be raised from 75% to 80% for all loans in the North
Eastern Region including the state of Sikkim .
The consequential changes in the Scheme are given in the Annexure. 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 in the the state of
Sikkim .
Dear Sir/Madam,
One time extension of time period for lodgement of application for guarantee cover under
Credit Guarantee Scheme (CGS)
As you are aware, in July 02, 2007 the loan limit under the CGS was increased from Rs.25 lakh to Rs.50
lakh. CGTMSE has been receiving representations from some of the operating offices of Member
Lending Institutions (MLIs) for providing one-time exemption in the time limit for lodging the online
applications for guarantee cover as the proposals between Rs. 25 lakh and Rs. 50 lakh were earlier not
eligible for coverage. Some of the MLIs have also expressed the desire to cover smaller loans,
particularly in North Eastern States, in view of delays in obtaining requisite information from far flung
branches. Keeping in view the same, it has been decided to provide another opportunity to the MLIs to
lodge the otherwise time barred applications and to give them a one time exemption to facilitate the
lodgement of all applications across the country subject to the following:

i)
The one-time exemption would be applicable for credit facilities sanctioned between
January 01, 2007 and June 30, 2007.
ii)
The applications should be lodged/ re-lodged on or before March 31, 2008.
The MLI to confirm in the remark column at the bottom of the application form as
under:
' that the credit facility sanctioned is a standard asset and is not a stressed
asset, it is regular with no defaults as on the date of lodgement of the
application, under the extended period upto June 30, 2007 and no
reschedulements have been granted in the account.'
MLIs are further advised that the above extension is a one time measure and no further
exemption would be available to them. Henceforth, the application(s) would have to be lodged
with CGTMSE within the stipulated time. We request you to kindly bring this to the notice of the
operating offices (Zonal / Branch Offices) of your Bank/ Institution and solicit your cooperation
in covering maximum proposals under the Scheme.

Dear Sir/Madam,
Micro and Small Enterprises Fund for North Eastern Region (NER)
- Guarantee cover for co-financing
Please refer to our Circular No. 04 / 2001-02 dated February 15, 2002 wherein the credit facility
extended jointly by two or more banks to a single borrower or credit facilities extended jointly by
two or more institutions to a single borrower, shall not be eligible for guarantee cover. On the
recommendation of the Committee on Financial Sector Plan for North Eastern Region, SIDBI
has created a fund viz. Micro and Small Enterprises (MSEs) Fund for North Eastern Region
(NER) with an initial corpus of Rs. 10 crore. The corpus would be used by SIDBI to co-finance
the project of MSEs in NER. It has been decided to extend coverage by CGTMSE in respect of
the credit facility extended by SIDBI out of the MSE Fund for NER and the co-financing bank
subject to the following conditions:
i) The modification of CGS would be applicable to units covered under SIDBI's proposed "Micro
and Small Enterprises Fund for North East Region (NER)" of Rs. 10 crore under co-financing
arrangement with banks for a maximum term credit facility of Rs.50 lakh.
ii) The co-financed cases shall be lodged for guarantee cover by the co-financing bank for the
entire credit facility extended by both the co-financing bank and SIDBI.
iii) The co-financing bank shall ensure that all other norms of CGS have been complied with by
SIDBI and the co-financing bank before lodging the application for guarantee cover with
CGTMSE.
iV) The maintenance of guarantee cover i.e, payment of guarantee fee / service fee / lodgement
of claim application, etc. shall be the responsibility of the co-financing bank.
V) The eligible claim amount shall be paid to the co-financing bank and it shall be the
responsibility of the co-financing bank to share the claim proceeds with SIDBI.
2. All other terms and conditions of the Credit Guarantee Scheme shall remain unchanged. You
are requested to advise your operating offices (Zonal / Branch offices) about the modification
made to the Credit Guarantee Scheme in respect of the credit facility co-financed with SIDBI out
of the MSE Fund for NE Region. Applications for the guarantee cover under the co-financing
arrangement may be separately indicated by ticking the relevant check box in the online
application form in CGTMSE's website.

Dear Sir/Madam,
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Invocation of guarantee and preferment of claim.
Please refer to our Circular No. 11 / 2003-04 dated July 03, 2003 regarding procedure for
invocation of guarantee and preferment of claim. It will be observed there from that the loan
facility has to be recalled and recovery proceedings have to be initiated under due process of law
by the Member Lending Institutions (MLI) before filing of invocation of guarantee and
preferment of claim under the Credit Guarantee Scheme (CGS).
Of late it is observed that some of the MLIs have been recalling the loan amount and issuing
notices to the defaulted units under SARFAESI Act 2002 and lodging application towards
preferment of claim for first installment from the Trust. In this connection, we wish to clarify that
mere issuance of recall notice under SARFAESI Act cannot be construed as initiation of legal
proceedings for purpose of preferment of claim under CGS. MLIs are advised to take further
action as contained in Section 13 (4) of the above Act wherein a secured creditor can take
recourse to any one or more of the recovery measures out of the four measures indicated therein
before submitting claims for first installment of guaranteed amount.
In case the MLI is not in a position to take any of the action indicated in Section 13(4) of the
aforesaid Act, they may initiate fresh recovery proceeding under any other applicable law and
seek the claim for first installment from the Trust.
Please bring the contents of the circular to the notice of the operating offices (Zonal / Branch
Offices) of your Bank/ Institution.
Dear Sir/Madam,
Life Insurance cover for Chief Promoters of units with

Guarantee cover under Credit Guarantee Scheme(CGS)
Please refer to paragraph 9 of our Circular No. 33/2006-07 dated November 01, 2006 regarding procedure
for payment of sum assured to the nominee of the deceased. On a review it has been decided that the life
insurance claim received from LIC would be passed on to the MLI concerned without insisting on adjustment of
claim amount for passing onward to the nominee of the expired Chief Promoter. The revised provedure would be
effective retrospectively from August 16, 2007.
Circular No. 45 / 2007- 08
Dear Sir/Madam,

- Modification in Guarantee Fee(GF) and Annual service Fee (ASF) structure
Please refer to our Circulars No. 21 /2004-05 dated January 20, 2005 regarding modifications in
CGS and 31 / 2006-07 dated April 20, 2006 on changes in Guarantee Fee Structure. Consequent upon
the announcement of reduction in GF/ASF made by the Hon'ble Union Finance Minister, Government of
India, in the Parliament on February 29, 2008 while presenting the Union Budget for FY 2008-09, it has
been decided to modify the GF/ASF structure in respect of credit facility upto Rs. 5 Lakh sanctioned by
MLIs. Though the budget proposals are made effective from April 01st of the subsequent year, it has been
decided to extend the benefit of reduced GF/ASF to the Micro and Small Enterprises (MSEs) sector
during the current FY itself. Accordingly, the reduction in GF will be effective from March 01, 2008 and the
ASF for FY 2008 will be charged at the reduced rate. Consequently, the Chapter III - Clause 8 (i) and (ii)
relating to GF/ASF of CGS has been partly modified as under:
Chapter III - Clause 8 (i) and (ii)
8 (i) A one time guarantee fee at specified rate (currently 1.00% in the case of credit facility upto Rs.
5 Lakh and 1.5% in the case of credit facility above Rs. 5 Lakh) of the credit facility sanctioned
(comprising term loan and / or working capital facility ) shall be paid upfront to the Trust by the institution
availing of the guarantee within 30 days from the date of first disbursement of credit facility.
8 (ii) The annual service fee at specified rate (currently 0.50% in the case of credit facility upto Rs. 5
Lakh and 0.75% in the case of credit facility above Rs. 5 Lakh) of the credit facility sanctioned (comprising
term loan and / or working capital facility) shall be paid by the lending institution within 60 days ie. on or
before May 31, of every year.
2. All other terms and conditions of the scheme remain unchanged. Please bring the contents of the
circular to the notice of the operating offices (Zonal / Branch Offices) of your Bank/ Institution.
Circular No. 47 / 2008- 09

Withdrawal of LIC Coverage for Chief Promoters of
Credit Guarantee Scheme guaranteed units
Please refer to our Circular No.33 / 2006-07 dated November 01, 2006 on the captioned subject.
We advise that the LIC coverage for Chief Promoters of units with guarantee cover under Credit
Guarantee Scheme has been discontinued with immediate effect.
Circular No. 48 / 2008- 09
Dear Sir/Madam,
Credit Guarantee Scheme (CGS) - Modification in the

procedure for Invocation of Guarantee and Preferment of Claim.
We are happy to inform that in terms of the Economic Stimulus Package announced by Government of India on
December 07, 2008, it has been decided, with immediate effect, to reduce the lock-in period from 24 months to 18
months for settlement of claim.
Accordingly, Member Lending Institutions (MLIs) are permitted to lodge claims for invocation of guarantee in respect
of accounts which have turned NPA after a lock-in period of 18 months in place of the present 24 months for settlement of
claim. Consequently clause No. 2 (b) of Circular No. 11 / 2003-04 has been modified as under:
"The lock-in period of 18 months from either the date of last disbursement of the loan to the borrower or the date of
payment of guarantee fee in respect of the credit facility to the borrower, whichever is later, has been elapsed."
2. All other terms and conditions of the Credit Guarantee Scheme remain unchanged. Please bring the contents of the
circular to the notice of the operating offices (Zonal / Branch Offices) of your Bank/ Institution.
Circular No. 49 / 2008 09

Payment of Guarantee Fee (GF) /Annual Service Fee (ASF) - Clarification
Please refer to our Circular No.38/2007-08 dated September 10, 2007 wherein, inter alia Member
Lending Institutions (MLIs) were requested to first allocate payment of Guarantee Fee and Annual Service
Fee in the online system before forwarding the requisite amount through Demand Draft to CGTMSE. It is,
however, observed that many MLIs continue to send the DDs without allocation in the system as a result
there are avoidable delays in commencement of guarantees as well as risk of guarantees being
invalidated due to non-submission of ASF in time. MLIs are, therefore, requested to observe the following
instructions in this regard to avoid any inconvenience:
1.
Demand Draft (DD) for exact amount as indicated in Demand Advice (DAN) should be made
in favour of CGTMSE and payable at Mumbai only.
2.
No DD should be sent without copy of DAN generated from the online system.
3.
DDs should be routed only through the Coordinating Office of the MLI. No direct remittance
will be accepted from the Branch Office or assisted units.
4.
Late receipt of DD for Guarantee Fee (GF) / Annual Service Fee (ASF) after the stipulated
period will not be accepted.
5.
Allocation of GF / ASF should be made against individual units in Receipts and Payments
module [Maximum 50 allocations in each RP]. Procedure for allocation of GF / ASF is given
in Annexure.
6.
Separate DDs may be sent for GF and ASF.
7.
DDs received without proper allocation in the online system will not be accepted from January
19, 2009.
Circular No. 50 / 2008 - 09

Dear Sir,
Modification in the Credit Guarantee Scheme (CGS) Increase in ceiling of coverage
We are happy to inform that in terms of the Economic Stimulus Package announced by Government of
India on December 07, 2008, it has been decided to increase the coverage of the eligible credit limit per
borrower under the CGS from Rs.50 lakh to Rs.100 lakh extended by Scheduled Commercial Banks and
select Financial Institutions to units in the MSE sector.
The consequential changes in the CGS are given below:
Chapter I - Clause 2 (v)
'Guarantee Cover' means maximum cover available per eligible borrower of the amount in default in
respect of the credit facility extended by the lending institution.
Chapter II - Clause 4 (Para. 1)

Credit facility eligible under the Scheme:
The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by Member Lending
Institution(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility (i) not
exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and (ii) not exceeding Rs.100 lakh
(Scheduled Commercial Banks and select Financial Institutions) by way of term loan and/or working
capital facilities on or after entering into an agreement with the Trust, without any collateral security and\or
third party guarantees.
-2Chapter IV - Clause 9( Para. 1)

Extent of the guarantee:
The Trust shall provide guarantee as under :
Category
Maximum extent of Guarantee where credit

facility is
Upto
lakh
Rs.5
80% /
Micro Enterprises
Rs.4 lakh
Women
entrepreneurs/ Units
located in North East
Region (incl. Sikkim)
All other category of

borrowers
80% /
Rs.40 lakh
75% /
Above Rs.5
lakh
upto
Rs.50 lakh
75% /
Rs.37.50
lakh
Above Rs.50 lakh

upto Rs.100 lakh
Rs.37.50 lakh plus

50% of amount in
default above Rs.50
lakh
subject
to
overall ceiling of
Rs.62.50 lakh
Rs.40 lakh plus 50%

of amount in default
above Rs.50 lakh
subject to overall
ceiling of Rs.65 lakh
Rs.37.50 lakh plus

50% of amount in
default above Rs.50
Rs.37.50 lakh
lakh
subject
overall ceiling
Rs.62.50 lakh
to
of
2. All proposals for sanction of guarantee approvals for credit facilities above Rs.
50 lakh and upto Rs.100 lakh will have to be rated internally by the MLI and
should be of investment grade. Proposals approved by the MLIs on or after
December 8, 2008 will be eligible for the coverage upto Rs.100 lakh.
3. One time Guarantee Fee of 1.5% and Annual Service Fee of 0.75% will be
applicable. All other terms and conditions of the CGS 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.
Circular No. 51 / 2008 - 09

Dear Sir,
Modification in extent of guarantee cover
under the Credit Guarantee Scheme (CGS)
We are happy to inform that in terms of Additional Economic Stimulus Package
announced by Government of India on January 02, 2009,
it has been decided to
increase the guarantee cover to 85% of credit facility upto Rs.5 lakh sanctioned to
micro enterprises with effect from January 02, 2009. The consequential changes in
the CGS are given below :Chapter IV - Clause 9( Para. 1)
Extent of the guarantee:
The Trust shall provide guarantee as under :
Category
Maximum extent of Guarantee where credit facility is
Upto Rs.5 lakh Above Rs.5 lakh Above Rs.50 lakh
upto Rs.50 lakh
upto Rs.100 lakh
Micro Enterprises
85% of the 75%
of
the Rs.37.50 lakh plus
amount
in amount in default 50% of amount in
default subject subject
to
a default
above
to a maximum maximum of
Rs.50 lakh subject
of Rs.4.25 lakh Rs.37.50 lakh
to overall ceiling of
Rs.62.50 lakh
Women
entrepreneurs/ Units
located in North East
Region (incl. Sikkim)
(other than credit
facility upto Rs.5
lakh
to
micro
enterprises)
All other category of
borrowers
Rs.40 lakh plus

50% of amount in
80% of the amount in default default
above
subject to a maximum of Rs.40 Rs.50 lakh subject
lakh
Rs.65 lakh
75% of the amount in default Rs.37.50 lakh plus
subject to a maximum of Rs.37.50 50% of amount in
lakh
default
above
Rs.50 lakh subject
Rs.62.50 lakh
-22. All other terms and conditions of the CGS shall remain unchanged.
3. You are requested to advise your operating offices (Zonal / Branch Offices)
about the modification made to the Scheme as a
Circular No. 52 / 2009 - 10
Dear Sir,
Development Commissioner (Handicrafts) [DC(Handicrafts)] Placement of Funds with CGTMSE

Please refer to our Circular No.28/2005-06 dated October 21, 2005 regarding
reimbursement of Guarantee Fee (GF) / Annual Service Fee (ASF) by the Office of DC
(Handicrafts) in respect of the eligible credit facility extended to artisans in handicrafts
sector by Member Lending Institutions (MLIs) and guaranteed under Credit Guarantee
Scheme (CGS). In order to facilitate increased flow of credit to the artisans in
handicrafts sector and to obviate the need for seeking reimbursement of GF / ASF paid
by MLIs for guaranteed accounts, the Office of DC (Handicrafts) has proposed to place
advance funds every year with CGTMSE for 4 year period so that MLIs need not pay
GF / ASF for credit facility extended by them to artisans in handicrafts sector. The GF /
ASF amount would be debited to this corpus by CGTMSE and guarantees issued /
validated.
2.
CGTMSE has received Rs.2.80 crore from the Office of DC (Handicrafts) in April
2009 for this purpose. Necessary modifications have been made in the online GF / ASF
module to enable MLIs to indicate that the GF / ASF has to be debited to this account.
However, if at any time during the year the amount in the corpus is exhausted, then GF /
ASF will have to be paid by the MLI pending receipt of funds from the Office of DC
(Handicrafts).
3.
All GF received for eligible cases from April 01, 2009 will be reimbursed from the
DC (Handicrafts) corpus. MLIs may please forward the details in this regard at the
earliest. As payment of GF is linked to date of disbursement of the credit facility by the
MLI, you may indicate the date while entering the details in the online application for
seeking guarantee cover.
4.
In respect of payment of ASF 2009, MLIs may indicate the details of units against
which ASF 2009 payments have to be debited to the DC (Handicrafts) corpus for doing
the needful. In cases where payments for these accounts have already been received,
the amount would be refunded in due course. For eligible accounts which have been
closed during FY 2009, the dates of closure may please be indicated to debit the prorata amount.
Circular No. 53 / 2009 - 10
Closure of Guaranteed Accounts under
It is observed that Member Lending Institutions (MLIs) do not immediately inform
the date of closure of guaranteed accounts to CGTMSE as a result of which the Annual
Service Fee (ASF) for the account is generated for the full year instead of on a pro-rata
basis upto date of closure. To avoid such situations, it has been decided that all
requests for closure of accounts may be made only through the new "Closure Module"
in our system. No request by fax / letter etc. for closure of account will be considered
henceforth. Using the following option, MLIs can enter the request for closure (for
closure dates on or after April 01, 2009).
[Member Login area Guarantee Maintenance Request for Closure]
For requesting the closure, users should enter the CGPAN, Closure Date and Reason
for closure of the individual account and save the same in the system. Once the
request for closure is entered in the system, the closure DAN will be generated after
approval by the Trust. After receipt of DAN amount, the case will be marked as
'CLOSED' in the system.
Circular No. 54 / 2009 - 10
The Credit Guarantee Scheme cover will be available for all ACC as well as artisans,
entrepreneurs, exporters engaged in handicrafts activity.
Circular No. 57 / 2009 10
Credit Guarantee Scheme (CGS) - procedure for
Invocation of guarantee and preferment of claim

Please refer to our Circular No.11/2003-04 dated July 03, 2003 on the above subject. As per
the guidelines for preferment of claim under CGS, the Member Lending Institutions (MLIs)
are required to inform the date on which the account was classified as NPA. It is observed
that in many of the cases MLIs are not informing the Trust about the date of classification of
the asset as NPA. The Trust is, therefore, not in a position to make provision in its books for
these likely claims. It has also been observed that in many instances the date of NPA as per
Reserve Bank of India (RBI) guidelines and that indicated in the application for claim are
different. To avoid delays in settlement of claims, MLIs are requested to adhere to the
norms prescribed by RBI for classification of the account as NPA.
2. To enable us to improve the claim settlement process further, it has been decided that the
MLIs may henceforth indicate the date of classification of the account as NPA in a particular
calendar quarter, by end of subsequent quarter using the following option in the online
system.
(Member Login area Guarantee Maintenance Periodic Information NPA
Details )
3.In terms of modified provisions of CGS at point No. 9 of Circular No.56/2009-10 dated
October 20, 2009 the MLIs are requested to lodge the applications for claim within a
maximum period of one year from the date of NPA, if NPA is after the lock-in period or
within one year of lock-in period, if the NPA is within lock-in period. However, for those
cases which have become NPA before the date of above circular and MLIs have exceeded
the permissible time period for lodging the claims, it has been decided to provide 3 months
time to file the claim i.e., upto January 31, 2010 after which the claims will not be
considered.
4.Please bring the contents of this Circular to the notice of all the operating offices of your
Bank / Institution.
Circular No.61/2012-13
Dear Sir,
Office of Development Commissioner (Handlooms), Ministry of Textiles,
Government of India - Placement of Funds with CGTMSE for meeting the

Guarantee Fee (GF) / Annual Service Fee (ASF) requirements in respect
of loans sanctioned by Member Lending Institutions (MLIs) of CGTMSE
to Handloom Weavers and covered under Credit Guarantee Scheme
In order to facilitate increased flow of credit to the weavers in the handloom sector,
Office of DC (Handlooms) {DC(HL)}, Ministry of Textiles, Government of India has decided to
place funds with CGTMSE for meeting the Guarantee Fee (GF) / Annual Service Fee (ASF)
requirements in respect of credit facilities sanctioned to Handloom Weavers by Member Lending
Institutions (MLIs) of CGTMSE and eligible to be guaranteed under Credit Guarantee Scheme
(CGS). The arrangement would be applicable for credit facilities sanctioned by MLIs to eligible
weavers under the following two schemes operated by Office of Development Commissioner
(Handlooms) :-
(i)
Comprehensive Handloom Cluster Development Scheme (Mega Cluster) - CHCDS (MC)

; and
(ii)
Comprehensive Package / Integrated Handlooms Development Scheme - CP (IHDS)
2.
Credit facilities upto Rs.2 lakh sanctioned to handloom weavers in their individual
capacity for "handloom weaving" activity are eligible for reimbursement of GF / ASF under the
arrangement. Under (i) CHCDS (MC) Scheme, credit facilities sanctioned to handloom weavers
in Varanasi and Murshidabad Mega Clusters are eligible for reimbursement of GF / ASF, while
(ii) CP (IHDS) is applicable on all India basis. The detailed guidelines for sanction of credit
facilities under the above two schemes have been issued by Office of DC (Handlooms) to all
concerned and are also available on their website www.handlooms.nic.in.
3.Necessary modifications have been made in the application module of the software of
CGTMSE to enable MLIs to apply for guarantee cover in respect of eligible cases under the
arrangement. While lodging applications, the operating officials of respective MLIs would be
required to clearly indicate in the application module the following :-
(i)
that industry sector / activity of the borrower is "handloom weaving" ;
(ii)
that the credit facility is to be guaranteed under one of the above two schemes ;
(iii)
that the GF / ASF in respect of the accounts proposed to be guaranteed qualifies for reimbursement by Office of DC (HL) under the arrangement
(iv)
certify that all other applicable terms and conditions prescribed by Office of DC (HL) for
sanction of credit under the respective scheme have been adhered to by the MLI
4.
MLIs may please note that all extant guidelines of the Credit Guarantee Scheme, as may
be amended from time to time, shall be applicable to all accounts to be guaranteed under the
arrangement. The funds received from Office of DC (HL) will be kept by CGTMSE in a special
account created for the purpose and the GF / ASF in respect of guaranteed accounts covered
under the arrangement will be debited to the above special account. If there is no balance in the
special account, no GF / ASF will be appropriated pending receipt of funds from DC (HL) /
respective MLIs.
Madam / Dear Sir,
Modifications to the Credit Guarantee Scheme (CGS)
Based on the recommendations of the RBI Working Group to Review the Credit
Guarantee Scheme (CGS) of CGTMSE as also suggestions received from other stakeholders, it
has been decided to modify the CGS to bring greater clarity to certain provisions of the Scheme.
The existing and modified provisions of the Scheme are given at Annexure. The modifications
shall be applicable to credit facilities sanctioned by Member Lending Institutions (MLIs) on or
after January 01, 2013.
2.
We request you to kindly bring the contents of this Circular to the notice of all the
operating offices / branches of your Bank / Institution.
Yours faithfully,
Sd/(S.S. Bakshee)
General Manager
Annexure
SNo
Existing Provision
Modified Provision
2 (xvi)
New provision being inserted under

Chapter-I, SNo.2 (xvi)
Guarantee Fee
Service Fee
and
"Third Party Guarantee" means any

guarantee obtained by a Member Lending
Institution in connection with the credit
facility extended by it to a borrower except
from Sole-Proprietor in case of Sole
Proprietory concern, Partners in case of
partnership / limited liability partnership,
Trustees in case of Trust, Karta &
Coparceners in case of HUF and promoter
directors in case of private/ public limited
companies.
Annual Composite
(i)
One-time guarantee fee
at specified rate ((a)currently
1.00% in the case of credit facility
uptoRs. 5 Lakh and 1.5% in the
case of credit facility above Rs. 5
Lakh (b) 0.75%, in case of credit
facilities
upto
Rs.50
lakh
sanctioned to units in North
Eastern Region including State of
Sikkim) of the credit facility
sanctioned (comprising term loan
and / or working capital facility)
shall be paid upfront to the Trust
by the institution availing of the
guarantee within 30 days from the
date of first disbursement of credit
facility (not applicable for Working
capital) or 30 days from the date
of Demand Advice (CGDAN) of
all-in
Guarantee
Fee
as
under :-
Credit Facility
Upto
Rs.5
lakh
Above Rs.5
lakh and upto
Rs.100 lakh
Annual Guarantee Fee

(AGF) [% p.a.]
Women,
Micro
Enterprises and
Other
units in North
s
East Region (incl.
Sikkim)
0.75
1.00
0.85
1.00
of sanctioned credit facility shall be paid

upfront to the Trust by the institution
availing of the guarantee cover within such
period as may be specified by the Trust.
In the event of non-payment fee by the
MLI within such period or any other
specified date, the guarantee under the
guarantee fee whichever is later scheme shall not be available to the

or such date as specified by the lending institution unless the Trust agrees
Trust.
for continuance of guarantee and the
(ii)
The annual service
fee at specified rate (currently
0.50% in the case of credit facility
uptoRs. 5 Lakh and 0.75% in the
case of credit facility above Rs. 5
Lakh) on pro-rata basis for the first
and last year and in full for the
intervening years on the credit
facility sanctioned (comprising
term loan and / or working capital
facility) shall be paid by the
lending institution within 60 days
ie. on or before May 31, of every
year. In the event of non-payment
of annual service fee by May 31 of
that year or any other specified
date, the guarantee under the
scheme shall not be available to
the lending institution unless the
Trust agrees for continuance of
guarantee
and
the
lending
institution pays penal interest on
the service fee due and unpaid,
with effect from the subsequent
June 01, at four per cent over
Bank Rate, per annum, or at such
rates specified by the Trust from
time to time, for the period of
delay.
lending institution pays penal interest on

the fee due and unpaid, with effect from
the due date, at four per cent over Bank
Rate, per annum, or at such rates
specified by the Trust from time to time, for
the period of delay.
10 (i)
The lending institution may invoke

the guarantee in respect of credit
facility within a maximum period of
one year from date of NPA, if NPA is
after lock-in period or within one year
of lock-in period, if NPA is within
lock-in period, if the following
conditions are satisfied: -
The lending institution may invoke the

guarantee in respect of credit facility within
a maximum period of two years from date
of NPA, if NPA is after lock-in period or
within two years of expiry of lock-in period,
if NPA is within lock-in period, if the
following conditions are satisfied: -
10(i)(e)
New provision being inserted under

Chapter-V, SNo.10(i)(e)
However, initiation of legal proceedings as

a pre-condition for invoking of guarantees
shall be waived for credit facilities upto
Rs.50,000/-, subject to the condition that
for all such cases, where the filing of legal
proceedings is waived, an Executive
Committee of the Member Lending
Institution (MLI) headed by an Officer not
below the rank of General Manager should
examine all such accounts and take a
decision for not initiating legal action and
filing claim under the Scheme.
10 (iii)
The Trust shall pay 75 per cent of the

guaranteed amount on preferring of
eligible claim by the lending
institution, within 30 days, subject to
the claim being otherwise found in
order and complete in all respects.
The Trust shall pay to the lending
institution interest on the eligible
claim amount at the prevailing Bank
Rate for the period of delay beyond
30 days. The balance 25 per cent of
the guaranteed amount will be paid
on
conclusion
of
recovery
proceedings
by
the
lending
institution. On a claim being paid,
the Trust shall be deemed to have
been discharged from all its liabilities
The Trust shall pay 75 per cent of the

guaranteed amount on preferring of
eligible claim by the lending institution,
within 30 days, subject to the claim being
otherwise found in order and complete in
all respects. The Trust shall pay to the
lending institution interest on the eligible
claim amount at the prevailing Bank Rate
for the period of delay beyond 30 days.
The balance 25 per cent of the guaranteed
amount will be paid on conclusion of
recovery proceedings by the lending
institution or after three years of obtention
of decree of recovery, whichever is earlier.
On a claim being paid, the Trust shall be
deemed to have been discharged from all
its liabilities on account of the guarantee in
on account of the guarantee in force

in
respect
of
the
borrower
concerned.
force in respect of the borrower

concerned.
MLIs,
however,
should
undertake to refund any amount received
from the unit after payment of full
guaranteed amount by CGTMSE.
Annual Guarantee Fee (AGF)

The demand on MLIs for AGF in respect of fresh guarantees would be raised
upon approval of guarantee cover. The guarantee start date (i.e. material date in terms
of CGS) would be the date on which proceeds of AGF are credited to Trust's Bank
account. The AGF / guarantee cover would be valid for one year from the material date
i.e. Guarantee start date. In the subsequent financial year in the month of April,
nd
demand for AGF (i.e. for 2 AGF) would be raised for the guarantees approved in the
st
previous financial year (till March 31 ) for which the AGF has been received till March
31. Such demand would be w.e.f. the date on which previous AGF is expiring till March
31 of that year. The AGF demands for subsequent years would be on "Full Financial
Year basis" excepting for the terminal year of guarantee where AGF demand would be
till validity of guarantee cover. Illustrative examples are given in the Annexure for better
understanding of proposed procedure.
Annual Service Fee (ASF)
For the guarantees issued upto March 31, 2013 against the credit facilities
sanctioned / approved / renewed by MLIs upto December 31, 2012, the demand for
ASF for the financial year FY2012-13 would be made in the first week of April 2013. As
regards ASF for FY2013-14 and subsequent years, it would be demanded and collected
"in advance" from the MLIs as against "on arrears" basis till FY2012-13. Accordingly,
ASF demand for FY2013-14 for the ASF due for the period April 01, 2013 to March 31,
2014 would also be simultaneously made in April 2013 itself along with the demand for
ASF for FY 2012-13.
2.
The extant guidelines with regard to period for remittance of ASF, penalties for
delay in remittance of ASF beyond the stipulated due date etc. would remain
unchanged. These guidelines would also be applicable for payment of AGF (excepting
for the first AGF payable at the time of taking guarantee cover where existing guidelines
as applicable for payment of Guarantee Fee would continue).
The commitment by the office of DC (Handicraft) for providing corpus fund to the Trust
for four years since FY2009 had ended by FY2013. Pending replenishment of the Corpus Fund by
the Office of DC(Handicraft), MLIs are advised to remit / pay the applicable fees towards GF / ASF /
AGF as and when demanded by CGTMSE, within a stipulated time period, in respect of borrower
accounts covered under CGS (Handicraft) including Annual Service Fee (ASF) for FY2013, FY2014
and Annual Guarantee Fee (AGF) for FY2014 which would be demanded by CGTMSE by the 2 nd
week of May 2013 to enable the Trust to keep the guarantees live.
Cir No: 67
Circular No.68/2013-14
CGTMSE - CLAIMS SETTLEMENT - SUBMISSION OF INFORMATION
As you are aware, CGTMSE has been settling the credit guarantee claims lodged by
Member Lending Institutions (MLIs) on furnishing the full information. However, majority
of the claims do not contain full information and we need to request for additional
information from MLIs which results in delay in settling the claims. The following are the
common observations found while processing the claims:
1.Non furnishing of declaration and undertaking duly stamped and signed
authorised officer (not below the rank of AGM) of MLI.
by an
2. Date of NPA mentioned incorrectly when checked in the context of moratorium period
as fed in the guarantee application, 1st date of disbursement, amount indicated as
repayment received prior to account turning NPA.
3. Reasons for the account turning as NPA not elaborately indicated.
4. Whether the account has been classified as (i) wilful defaulter or (ii) fraud
5. Reason for initiating legal action before NPA date are not indicated
6. No suit number and date is mentioned for the legal action initiated. In case, Suit No.
not allotted, legal copy is not being sent.
7. Legal action initiated under SARFAESI - date of possession of assets not given.
Further, the MLIs need to submit copies of appraisal / sanction memorandum, sanction
letter evincing acceptance by borrower, recall notice, legal documents ( copies of
petition filed in DRT / Civil Court) in case of credit guarantee claims of more than Rs.20
lakh for detailed verification.
In order to curtail the delay in settling the claims and improve the claim settlement
mechanism, CGTMSE has designed two formats ( enclosed as Annexure - I & II )
covering all the points on which information is normally needed from MLIs whenever
the initial information submitted is incomplete. MLIs are requested to furnish information
as per Annexure I (duly signed by the authorised officials of MLI not below the rank of
AGM) at the time of lodgement of claims together with Declaration & Undertaking in
respect of guarantee claims of upto Rs.20 lakh and submit Annexure I & II for claims
above Rs.20 lakh. The scanned copy of Annexure I may also be sent to specially
created mail box viz. claiminfo@cgtmse.in. Please note that the claim will not be
processed in case there is any deficient information submitted either in claim application
form or in Annexure I and II.
It may be indicated that the submission of information as per Annexure I for processing
the claims upto Rs.20 lakh and information as per Annexure I & II for claims above
Rs.20 lakh to be submitted along with Declaration and Undertaking is mandatory
without which the claim shall not be treated as received. Please note that all the
columns of Annexure I would need to be compulsorily filled although the relevant
information might have already been given in the claim application form. The
information submitted in Annexure I would be treated as correct in case of any
discrepancy in online claim application form. The proposed revision in guidelines with
regard to claim submission comes into force with immediate effect. The General
information sheet has also been attached for the information of MLIs.
General Information for the benefit of MLI:

1. Send us the D & U duly stamped and signed by an officer not below the rank
of AGM or equivalent rank / higher rank.
2. Fill details for every S No of Annxure I, wherever applicable to the a/c. In case
the S No. is not applicable, indicate NA or NIL as your reply.
3. The reply will not be considered as complete if any S No is left unanswered.
4. For each credit facility (TC/WC), separate Annexure I is to be filled up.
5. Annexure I is to be duly signed by an officer above the rank of AGM / or
equivalent rank with bank seal.
6. Please refer to our circular No. 61A and send us the Bank Mandate Form duly
signed by AGM with bank seal. Claim Payment could not be done without the
receipt of RTGS Mandate form. Please ignore, if already sent by you.
7. Documents are to be sent as per Annexure II where Guaranteed amount and
outstanding amount is more than `20 lakh.
Annexure I (Click here to view the contents)
Annexure II
1. Statement of account of borrower unit since beginning (from date of disbursement)
till date.
2. SSI Regn.certificate of unit
3. Suit filed: Details indicating parties, amount claimed in the suit.
4. Copy of the final verdict, if any
5. Any other documents that can have bearing on the authenticity of the claim (i.e the
projected balance sheet, P&L A/c, the income tax returns of the previous years)
6. IT PAN, Voter ID copy of promoter / Proprietor (or any other KYC details)
7. Insurance copy of primary assets, if available. If not, the reasons for the same.
8. All pre and post disbursement visit / inspection reports
9. The agreements pertaining to the loan sanctioned (Agreement of guarantee, Loan
against hypothecation, etc)
10. Recovery efforts made by bank after NPA - brief note
11. Status of security (whether it is in the custody of bank. If assets are sold, provide the
date of credit of sales proceeds)
12. Due diligence report signed by the authorised signatory at the time of appraisal
explaining antecedents of the borrower.
13. Copy of appraisal report duly signed by the delegated authority prior to sanction.
14. Copies of all sanction letters & all the amendments to the sanction letter duly
acknowledged by the borrower.
15. Compliance report on all sanction terms & conditions.
16. Staff Accountability Report, in case of quick mortality/fraud cases.
17. Specify internal rating assigned (if any) to the case (mandatory for cases above 50
lakh)
Madam / Dear Sir,
Modifications to the Credit Guarantee Scheme (CGS) of CGTMSE

In terms of CGTMSE Circular No. 50/ 2008-09 dated January 07, 2009, the
ceiling for coverage under Credit Guarantee Scheme was increased from Rs. 50 lakh
to Rs. 100 lakh in respect of eligible credit facilities extended by Scheduled
Commercial Banks and select Financial Institutions to eligible borrowers under MSE
sector. It has now been decided to scale down the extent of guarantee cover from
62.50% / 65% (depending on the category of borrower/location of the unit/credit facility)
to 50% for loans between Rs. 50 lakh to Rs. 100 lakh irrespective of the category of
borrower/location of the unit/credit facility. The Clause 9 (Para 1), Chapter IV of CGS
pertaining to the extent of guarantee cover for loans above Rs. 50 lakh to Rs. 100 lakh
would stand modified accordingly with the maximum guarantee cover being upto to Rs.
50 lakh. Care may be exercised by MLIs while sanctioning additional loans which bring
the overall credit exposure within the above mentioned category. The above
modifications will come into effect for the guarantees approved by CGTMSE on or after
the date of this circular.
Modifications in the Interest Rate Cap under
Credit Guarantee Scheme (CGS) of CGTMSE
As you are aware, as per Clause 5 (vi), Chapter I of CGS, any credit facility
sanctioned by the Member Lending Institution to any eligible borrower with interest rate
more than 3% over the Prime Lending Rate (PLR) of the lending institution, is not
eligible to be covered under CGS. However, the said provision needed a relook
consequent upon introduction of "Base Rate" linked lending by the Banks. It has,
therefore, been decided to modify the aforesaid Clause of the CGS.
As per the revised Clause, any credit facility which has been sanctioned by MLI,
under CGS, to an eligible borrower with interest rate more than 4% over its Base Rate
(BR) will not be eligible for coverage under the CGS. However, in case of those MLIs
for whom Reserve Bank of India has not enjoined Base Rate concept, the existing
provision of CGS will continue. The above modifications will come into effect for the
guarantees approved by CGTMSE on or after the date of this circular.
Madam / Dear Sir,
Review of registration criteria as Member Lending Institution (MLI) under Credit
Guarantee Scheme (CGS) of CGTMSE
As you are aware, as per the extant guidelines, Regional Rural Banks (RRBs)
who were categorized as "Sustainably Viable" or "Currently Viable" as per NABARD
classification were being registered as MLIs of CGTMSE. However, in the light of
amalgamation of number of RRBs during FY 2012-13 and FY 2013-14 at the instance of
Ministry of Finance, Govt. of India, needing re-registration of newly formed entities with
CGTMSE as its MLI, the existing registration criteria of RRBs as MLIs of CGTMSE was
reviewed. It has now been decided that in addition to the eligibility under above
mentioned "Sustainably Viable" or "Currently Viable" categorization, the RRBs would
need to satisfy the following additional criteria to enable CGTMSE to register/re-register
it as its MLI :
CRAR of not less than 12%
Net Profit for at least previous three financial years for all the RRBs getting
merged.
Net NPAs below 5% of advances
No regulatory defaults.
More than 80 marks awarded by NABARD under Composite Rating (as per the
latest available review) under its Supervisory Rating Scale for RRBs.
Please note that all the RRBs, whether subjected to amalgamation or otherwise,
who are satisfying revised eligibility criteria as indicated above, will be required to
register/re-register with CGTMSE as its MLI. In the meanwhile, those RRBs, who are
satisfying the revised eligibility criteria, may forward a copy of its audited annual
accounts for last three years ended March 2013 along with schedules to enable us to
initiate the process of re-registration. The duly authenticated copy of Composite Rating
received from NABARD (for the latest review conducted) under its Supervisory Rating
Scale for RRBs may also be submitted.
As regards pending on line applications for fresh guarantees submitted by the
existing MLI - RRBs of CGTMSE till the date of this circular, a separate view is being
taken with regard to its approval. Needless to mention, Guarantees already issued by
CGTMSE will be honored by the Trust for all existing registered MLI - RRBs, non
merged as well as merged entities (under new name) provided Annual Service Fee/
Annual Guarantee Fee is paid upto date and all other settlement criteria is complied
with.
CGTMSE Circular No. 73/2013-14
Credit Guarantee Scheme (CGS) - Claim lodgement

Change in procedure for submission of Declaration & Undertaking by MLIs
As you are aware, Nodal / operating offices of Member Lending Institutions

(MLIs) of CGTMSE submits system generated Declaration & Undertaking (D&U) duly
stamped and signed by its official not below the rank of Assistant General Manager
along with each claim lodged on line for settlement in CGTMSE portal. While the
claim form is submitted on line, duly signed and stamped D & U for each claim is
separately sent by courier.
In partial modification of existing procedure, it has now been decided that the
nodal / operating offices of MLIs will submit only a single D & U, duly signed and
stamped as hitherto, for the single / multiple claims lodged by it on a particular day
with due certification at the end of D & U that D & U covers all the claims lodged by
it on particular claim date. The MLI shall generate the D & U, as per the revised
procedure, on the following day of the lodgement of claim / claims with a
view to ensure that all the claims lodged on a particular day are duly captured. For
the purpose of generation of D & U, MLIs will login to CGTMSE portal and then select
"Report & MIS module > claims Declaration and Undertaking" option and
incorporate the date on which the claims have been lodged on line for which D & U
is required to be generated. A scanned copy of the said duly stamped and
signed D & U must be invariably sent immediately to CGTMSE by email at
"claimdeclaration@cgtmse.in", to enable CGTMSE to initiate processing of claim,
followed by hard copy to be sent by courier as hitherto. An indicative format of
revised D & U is enclosed for your perusal. Please ensure that all the pages of D & U
are duly stamped and signed by the authorised signatory in case the D & U runs
into more than one page. The claim lodgement date and member id number may be
invariably indicated in the subject matter of email for easy reference at CGTMSE.
Please note that the revised guidelines come into force with immediate effect.
Receipt of Guarantee Fee (GF) through RTGS/NEFT Modification in existing procedure

As you are aware, the payment of Guarantee Fee (GF) based on the demands raised by
CGTMSE upon approval of Guarantee is made by MLIs by means of demand drafts. In the light
of the problems associated with dealing in physical instrument and with a view to further
improve the guarantee issue process, it has now been decided that all the payments towards
guarantee fee would now be made by respective nodal offices of MLIs by means of RTGS only.
While remitting the GF through RTGS, MLIs must indicate Receipt/Payment (RP) No. as
generated by the CGTMSE system, once the allocation is made by MLIs against the respective
demands made by CGTMSE for payment of GF, in the remark column of RTGS transmission
message. The RP No., being a unique no., would enable CGTMSE to appropriate the receipts
against the respective guarantee fees as per the allocation done by MLIs. With a view to avoid
human error, RP No., as generated by the CGTMSE system, may be copy pasted in the remark
column of RTGS message. Further UTR No. generated after remitting the proceeds through
RTGS to CGTMSE, must be mentioned by respective nodal offices of MLIs at appropriate place
in CGTMSE portal in place of instrument number. Please note that the guarantees in respect of
those RTGS payments would not be issued by CGTMSE where RP No. and UTR No. is either
not mentioned or incorrectly mentioned at the respective places indicated above and the
proceeds, so received, would be remitted back to originating nodal office of MLI. You may
please ensure that the bank account used for remitting the proceeds through RTGS should
necessarily be enabled for inward remittances also to enable CGTMSE to return the proceeds to
the same bank account in the light of the circumstances explained above. The path to be followed
is as follows :
o Receipts Payments > Allocate payment through NEFT (to create RP No. to remit
Guarantee Fee)
o Map RP No. with NEFT payment (to update UTR/NEFT reference no. on
remittance of Guarantee Fee)
The revised procedure shall come into effect from April 21, 2014 onwards. Any payments
made by respective nodal offices of MLIs in respect of guarantee fee payment allocated on or
after April 21, 2014 by means of Demand Drafts would not be accepted by CGTMSE and shall
be returned in case received. The details of CGTMSE account for the purpose of RTGS are as
given below :
Name of the Bank
IDBI Bank Limited
Name of the Branch
Chembur, Mumbai
Account Name
Credit Guarantee Fund Trust for Micro and

Small Enterprises
Account Number
018102000014951
IFSC Code
IBKL0000018
The existing procedure with regard to payment of Annual Fees i.e. Annual Service Fee and
Annual Guarantee Fee remain unchanged.

Credit Guarantee Scheme (CGS)Modification in procedure of allocation of Annual Service Fee (ASF)/
Annual Guarantee Fee (AGF)
As you are aware, while the payments in respect of ASF/AGF demanded annually by
CGTMSE is presently received through a single payment from the Head Office of the respective MLI,
the allocation and appropriation for the payments so received is made by CGTMSE based on the
information received from the MLIs. It has been noticed that the work of allocation and appropriation
of payments is inordinately delayed on account of non-receipt/incomplete receipt of information from
MLIs with regard to the payments made by them towards ASF/AGF. As a sequel, refunds, if any, to
MLIs for the excess payments made gets delayed resulting in avoidable correspondence from MLIs.
The present levy of Service Tax with cess on ASF/AGF has made the matter of refund even more
complicated.
It has, therefore, been decided that the allocation for payments towards ASF/AGF proposed
to be made by the MLIs in response to the demand received from CGTMSE should henceforth be
made by respective controlling offices of MLIs as is done in case of Guarantee Fees.The
consolidated demand shall be forwarded by CGTMSE to respective Head Offices as per the present
practice. The respective controlling offices can view the demands for ASF/AGF on the CGTMSE
portal and allocations can be made by them accordingly. Additional menu option is being made
available to enable controlling offices to allocate the proposed payments in respective category. After
the allocation, RP No. wise statement duly indicating amount allocated against each RP No. may be
forwarded by the respective controlling office to its Head Office. The statement can be generated by
using the following path: Reports and MIS > RP related reports > ASF allocated reports.
The Head Office, on its part, shall consolidate the statements received from all of its
controlling offices and pass on a single payment to CGTMSE by RTGS. Please note that the
payments directly received from the controlling offices will not be accepted and shall be returned, if
received. The Head Offices shall invariably forward a copy of statements indicating RP.No. and
amount, as received from its controlling offices, immediately upon remitting the fee amount to
CGTMSE by RTGS. The payment received will not be appropriated by CGTMSE unless the
statements referred above are received by it. It may please be ensured, while making a single
payment to CGTMSE, that the payment so made exactly matches with the sum total of all the
statements received by the Head Offices from all its controlling offices. Any payment, where
allocation has not been made by the controlling offices shall not be accepted by CGTMSE. Further,
since the appropriation of the payments made can be done by CGTMSE only in case the correct RP.
No. and amount is indicated in the statement, the controlling offices may be advised to take due care
in feeding the RP. No. and amount. The revised procedure is applicable for payment of ASF/AGF for
FY 14-15, the demands for which shall be raised by CGTMSE by May 10, 2014. Please note that the
supplementary demands for additional ASF/AGF, wherever applicable, may follow in the light of
differential pricing structure being introduced by CGTMSE.
As regards closure of guaranteed accounts under CGS, we invite your attention to our
Circular No. 53/2009-10 dated July 10, 2009, Circular No. 55/2009-10 dated October 20, 2009 and
Circular No. 59/2009-10 dated March 11, 2010. We hope all the MLIs and their controlling offices
would have made the requests for closure of accounts for the FY 2014 through the "Closure Module"
in CGTMSE portal by March 31, 2014 at Member Login Area -> Guarantee Maintenance -> Request for Closure.
It may be mentioned that no request for closure of guarantees for FY 2014 or previous period
will be considered by us in the current FY 2015 and subsequent years henceforth.
Restructured accounts - Relaxations in guidelines

for lodgment of claims by MLIs under CGS
As per RBI's revised guidelines on rehabilitation of sick MSE units issued to Banks on November
01, 2012, an account can be treated as sick if it remains NPA for more than 3 months. On finding it viable,
banks have to rehabilitate such units. Since the entire process of identification of such MSE units /
assessing the viability for consideration of rehabilitation as per RBI's revised guidelines is going to take
time and the unit may not get "Standard status" within the claim period stipulated under Credit Guarantee
Scheme by CGTMSE; the Indian Banks' Association (IBA) has requested for exclusion of the period a unit
is under rehabilitation from the time for invocation of guarantee by MLI under CGS.
IBA has suggested exclusion of the time period from the identification of the MSE unit as sick
through rehabilitation process and till the unit is subsequently found non-viable for invocation of guarantee
by Member banks under CGS.
The issue has been discussed by the Board of CGTMSE, and it has been decided to exclude the
time period from the identification of the MSE unit as sick through rehabilitation process and till the unit is
subsequently found non-viable for invocation of guarantee and the assumed NPA date for claim purposes
would now be taken as the date when the unit is subsequently found non-viable; all other guidelines
remaining unchanged. The assumed NPA date may be marked in the CGTMSE Software System by the
MLI-SCB and while lodging the claim, the Declaration-Cum-Undertaking must clearly indicate that the
proposal was covered under the "RBI Rehabilitation Guidelines for Sick Micro and Small Enterprises"
dated November 01, 2012 and indicate the actual NPA date.
Charging of Annual Service Fee (ASF) / Annual Guarantee Fee (AGF) at

differential rates depending upon NPA levels of MLIs
As you are aware, the Trust presently adopts non-discretionary approach in levying Guarantee
Fee (GF)/Annual Service Fee (ASF)/Annual Guarantee Fee (AGF) without reference to the level of NPAs
reported by the Member Lending Institutions (MLIs) on the CGTMSE portal vis--vis the guarantees
issued to them.
Considering the high level of NPAs reported by some of the MLIs vis-a-vis the
guarantees issued to them, it has now been decided to charge differential rates of ASF/AGF, depending
upon the NPA levels reported by the MLIs. The existing provision of the Scheme and the revised rate
structure is as follows :
Existing Provision as per Clause 8 (i) and (ii) of
Proposed rate structure
Chapter III of Credit Guarantee Scheme (read with

subsequent amendment vide CGTMSE circular No.
62/2012-13 dated October 10, 2012)
Composite all-in Guarantee Fee as under :

Credit
Annual Guarantee Fee [% p.a.]
Guarantee
Women,
Micro
Enterprises
units
East
in
Others
The differential rates of ASF/AGF depending upon

NPA levels of MLIs of the Trust are as follows :
Sr.
Annual
No.
Guarantee Fee (AGF)

NPA level of the ASF/AGF (%)
and
North
1
2
3
4
5
Region
(including Sikkim)
Up to ` 5
0.75
1.00
lakh
Above
0.85
1.00
lakh up to `
100 lakh
of sanctioned credit facility shall be paid upfront to
MLI (%)
Above 20%
15% - 20%
12% - 15%
12% and below
Below 6%
SR = Standard Rate
Fee
(ASF)/Annual
SR + 100 bps
SR + 50 bps
SR + 25 bps
SR
SR - 25 bps @
(Existing ASF/AGF
prescribed rate).
Service
Changed rates are not applicable for credit

facility up to ` 5 lakh.
NPA level of the MLI shall be computed

as a % of guarantees issued on and up to
March 31 every year.
the Trust by the institution availing of the guarantee
@ Provided MLI has been obtaining guarantee
cover within such period as may be specified by the
cover from the Trust for at least 5 complete
Trust.
In the event of non-payment of fee by the MLI within
years.
In the event of non-payment of fee by the MLI
such period or any other specified date, the
within such period or any other specified date, the
guarantee under the scheme shall not be available
guarantee under the scheme shall not be available
to the lending institution unless the Trust agrees for
to the lending institution unless the Trust agrees
continuance of guarantee and the lending institution
for continuance of guarantee and the lending
pays penal interest on the fee due and unpaid, with
institution pays penal interest on the fee due and
effect from the due date, at four per cent over Bank
unpaid, with effect from the due date, at four per
Rate, per annum, or at such rates specified by the
cent over Bank Rate, per annum, or at such rates
Trust from time to time, for the period of delay.
specified by the Trust from time to time, for the

period of delay.
The proposed revision shall be w.e.f. Guarantees approved by the Trust on or after July 01, 2015.
It is our objective to gradually move towards a risk based premia. Further, it may please be noted that the
Trust shall levy ASF/AGF as per the rate structure obtaining on all Guarantees live as on March 31, 2016
while issuing Demand Notices for ASF/AGF for FY 2016-17.
Suspension of Guarantee Approvals under Credit Guarantee Scheme

The position of NPAs marked by the Member Lending Institutions (MLIs) in the CGTMSE
portal/claims settled as on December 31, 2014 was reviewed vis--vis the cumulative guarantees issued
by the Trust to its MLIs upto that date.
In the light of very high level of NPAs reported by some of the MLIs going upto more than 40% for
certain MLIs, coupled with our highly leveraged Corpus, the Trust has decided to take certain remedial
action. Towards this direction, it has been decided that no guarantees (includes fresh, renewals and
enhancements) will be issued to MLIs which have marked cumulative NPAs (in terms of amount) of 10%
or more vis--vis the cumulative amount of guarantees issued by the Trust to it. Such MLIs would be
advised by the Trust separately giving them reasonable time to submit its eligible pending sanctions for
guarantee approval. Further, if this NPA level crosses/has crossed the 12% mark, the claims of such MLIs
will be settled after giving notice and after thorough scrutiny of each claim.
Incidentally, we reiterate that:
The MLIs should select good projects for coverage under the Credit Guarantee Scheme,
No collateral security and/or third party guarantee to be taken under any guise and
Proper appraisal and due diligence to be done of the credit proposals which are being submitted
to the Trust for guarantee approval.
The revised guidelines shall be applicable with immediate effect.

Toll free number of CGTMSE
With a view to improve telephonic responses, CGTMSE has set up a Toll-Free
No. 1800222659 for the benefit of its MLIs with regard to their general/specific queries.
We may mention that while the general queries shall be addressed by the First Level
Operator, the call shall be transferred to the concerned Desk Officer for specific queries
for suitable response.
Further, separate E-mail IDs have also been created, the details of which are
enclosed in Annexure I. Your different type of queries can also be forwarded through
E-mails to these specific E-mail IDs indicated against the type of query. The Trust shall
ensure that the queries are responded in a time-bound manner.
In addition to the above, the Trust has also appointed its representatives one
each in Southern Zone, Western Zone, Eastern Zone and Northern Zone. The details of
these representatives with their contact numbers and E-mail IDs along with their area of
operations are given in Annexure II. You are requested to take full benefit of the
arrangement.
We are confident that the proposed course of action would be very beneficial to
the MLIs in early disposal of their queries.
Annexure I
Email Ids
Type of queries
claimssection@cgtmse.i Claim process, claim status, claim payments, problem in
n
claim lodgement, any other query relating to claim.
NPA date modification, upgradation of accounts, problem in
npa@cgtmse.in
feeding disbursement details, any other issue relating to NPA
OTS, recovery after 1st instalment claim, 2nd installment
secondclaim@cgtmse.in
related query
Process of lodging guarantee, change in sanction amount
limit, problem in enhancement, revival of accounts, tenure
extension, change in name of the borrower, address,
constitution, linking the account of the same borrower, MLI id
gf@cgtmse.in
transfer, GF payment related query, registration of new MLI,
RRB registration, guarantee approvals, eligibility of activity to
be covered under CGS, new password request, creation of
new zonal/regional user id, approval of accounts
ASF RP allocation/ deallocation, closure of accounts, any
asf@cgtmse.in
other ASF related query
mis@cgtmse.in
MIS data
support@cgtmse.in
IT related query
helpdesk@cgtmse.in
General query
Annexure-II
Sr.
No.
Name of the Officer
Contact No.
E-mail ID
Area of
Operation
(Zone)
Shri Arun Kumar Goyal
9871932555
arkrgo@gmail.com / akg@cgtmse.in
Northern Zone
Shri Pradip Kumar Saha
9830469754
pradipkumarsaha.19@gmail.com /
pksaha@cgtmse.in
Eastern Zone
Shri M.L. Goyal
7666088778
boimlg@yahoo.com / mlg@cgtmse.in Western Zone
Shri Sundaramurthy
Gunasegaran
9839014410 /
8870222434
sguna1406@gmail.com /
guna@cgtmse.in
Southern Zone

Modifications in the Interest Rate Cap under Credit Guarantee Scheme (CGS) of CGTMSE
We invite your attention to our Circular No. 71/2013-14 dated December 17, 2013 (copy
available on our website www.cgtmse.in), whereby modifications in Clause 5 (vi), Chapter-II of
CGS was communicated to you whereby any credit facility sanctioned by MLIs under CGS, to
eligible Borrowers with Interest Rate more than 4% over its Base Rate (BR) was made ineligible
for coverage under CGS.
It has now been decided to further reduce the cap on Interest Rate which could be
charged by MLIs for CGTMSE covered proposals from up to 4% above base rate, as applicable
presently, to up to 2% and 3% above Base Rate for loans up to ` 50 lakh and loans above ` 50
lakh respectively considering overall exposure of the borrower. It may be clarified here that in
case of any enhancements of credit facility sanctioned under the revised guidelines of Base
Rate plus 2% crosses ` 50 lakh, the cap of interest rate could be enhanced to 3% for the entire
loans sanctioned and covered under CGS.
The revised guidelines shall be applicable for the credit facilities sanctioned by MLIs on
or after September 01, 2015, including additional term loans for existing credit facilities covered
under CGS. The revised guidelines shall, however, not be applicable for existing working capital
cases already covered under CGS where enhancement and / or renewal takes place
subsequent to September 01, 2015.
Needless to mention that any credit facilities sanctioned and proposed to be covered
under CGS which is more than the cap of interest rate indicated above will not be eligible for
coverage under CGS. Further, in case of those MLIs for whom Reserve Bank of India has not
enjoined Base Rate concept, the existing provision of CGS will continue excepting for Regional
Rural Bank MLIs for which separate set of guidelines are being issued.

It has now been decided to further reduce the cap on Interest Rate which could be
charged by MLI - RRBs for CGTMSE covered proposals from up to 4% above ABR, as
applicable presently, to up to 2% above ABR for loans up to ` 50 lakh considering overall
exposure of the borrower.Please note that the ABR of 10.14% p.a. for the FY 2014-15,advised
to you earlier, would remain valid for the credit proposals sanctioned in FY 2015-16 and
proposed to be covered under CGS, till the ABR for subsequent FY is advised to MLI-RRBs by
CGTMSE.
The revised guidelines shall be applicable forthe credit facilities sanctioned by MLI RRBson or after September 01, 2015, including additional term loans for existing credit facilities
covered under CGS. The revised guidelines shall, however, not be applicable for existing
working capital cases already covered under CGS where enhancement and / or renewal takes
place subsequent to September 01, 2015.
Needless to mention that any credit facilities sanctioned and proposed to be covered
under CGS which is more than the cap of interest rate indicated above will not be eligible for
coverage under CGS.
Review of Interest cap and other registration criteria of Regional Rural
Banks (RRBs) as Member Lending Institutions (MLIs) of CGTMSE
Please refer to our Circular No. 80/2014-15 dated July 16, 2014on the above subject
(available on www.cgtmse.in) communicating, inter alia, Average Base Rate (ABR)
for FY 14-15. We had also mentioned in the said Circular that ABR to all RRB MLIs
for FY 15-16 shall be advised separately. In this connection we advise that the ABR for FY 2015-16 shall
be 9.52% p.a. The ABR for FY 2015-16 would be applicable for all loans/credit facilities
sanctioned/renewed by RRB MLIs during the current Financial Year and proposed to be covered
under Credit Guarantee Scheme. The annual interest that can be levied on the loans/ credit facilities
sanctioned/renewed by RRB MLIs and proposed to be covered under CGS should not be more
than the applicable cap rate (advised to MLIs from time to time, the present cap rate being 4% p.a. which
shall be reduced to 2% for the credit facilities sanctioned by RRB MLIs w.e.f. December 01, 2015
ref. our letter no. CGTMSE/(44)/630 dated September 30, 2015) over applicable ABR. Please note that
the ABR of 9.52% p.a. for the FY 2015-16 would remain valid till the ABR for subsequent FY is advised
by us.
Modifications in the Interest Rate Cap under Credit Guarantee Scheme
(CGS) of CGTMSE
It has now been decided to restore the Interest Rate Cap of 4% over the Base Rate
as was advised by us vide our Circular No. 71/2013-14 dated December 17, 2013
(available on our website "www.cgtmse.in") i.e. any credit facility which has been
sanctioned by MLI, under the Credit Guarantee Scheme (CGS), to an eligible
borrower, with interest rate more than 4% over its Base Rate (BR) will not be eligible
for coverage under the CGS. However, in case of those MLIs, other than Regional
Rural Banks for whom separate guidelines are being issued, for whom Reserve Bank
of India has not enjoined Base Rate concept, the existing provisions of CGS will
continue. In the light of the above, our guidelines of restricting the interest cap to
up to 2% and 3% over the Base Rate for loans up to 50 lakh and loans above 50
lakh respectively stands withdrawn. MLIs are requested to reapply in respect of
those guarantees rejected by CGTMSE on account of its guidelines of restricting the
interest cap to up to 2% and 3% above Base Rate for loans up to 50 lakh and loans
above 50 lakh respectively.
Circular No.106 / 2015 16

Modification in time lines for delay in marking of NPA in CGTMSE portal
In terms of CGTMSE Circular No.57 / 2009 - 10 dated November 05, 2009 (available on
www.cgtmse.in), the lending institution is required to mark, in CGTMSE portal, the date of
classification of the account as NPA in a particular quarter by the end of the subsequent quarter.
However, the Trust had been condoning the delays in marking of NPAs beyond the stipulated
period of time.
We advise in this regard that CGTMSE is in the process of releasing software to allow upgradation of NPAs by MLIs themselves which was hitherto done in CGTMSE as this was one of
the obstacles faced by MLIs in timely marking of NPAs. Further, the guidelines on differential
pricing for charging of fees by CGTMSE are being shortly rolled out by the Trust whereby the
proposed risk premium would, inter alia, be based on the percentage of NPAs marked by the
MLIs in CGTMSE portal. With a view to ensure that the risk premium being charged by
CGTMSE is accurate, the marking of NPAs in CGTMSE portal is necessarily to be done in a
time bound manner.
In view of the above, it has now been decided that CGTMSE will strictly adhere to the time lines
for reporting of NPAs as indicated in our Circular No. 57/2009-10 dated November 05, 2009.
MLIs are requested to approach CGTMSE for marking all those accounts as NPAs, latest by
February 29, 2016, which have not been marked by them within the prescribed time period.
MLIs may note that this is a one-time measure and CGTMSE may not allow any further
extension to update the NPA details in its portal in respect of those accounts where the NPAs
have not been marked in CGTMSE portal within the stipulated time period.
Charging of Annual Service Fee (ASF) / Annual Guarantee Fee (AGF) at

differential rates depending upon NPA levels/ Claim Payout ratio of MLIs
As you are aware, the Trust presently adopts non-discretionary approach in levying Guarantee
Fee (GF)/Annual Service Fee (ASF)/Annual Guarantee Fee (AGF) without reference to the level
of NPAs reported by the Member Lending Institutions (MLIs) on the CGTMSE portal vis--vis
the guarantees issued to them as also without reference to the claims paid to the MLIs vis--vis
the fees and recoveries received from the MLIs. Considering the very high level of NPAs
reported by some of the MLIs as also significantly larger amount of claims settled for some of
the MLIs, it has now been felt necessary to introduce risk based pricing structure rather than
uniform fees being charged so far. The Trust with its over 15 years of working in the Credit
Guarantee field, has built up adequate data to support the risk bases pricing. Therefore it has
been decided to introduce following risk premium structure in place of existing guarantee fee
structure:
(1) Risk premium on NPAs in Guaranteed

portfolio
NPA Percentage
Risk Premium
(2) Risk premium on Claim Payout Ratio
Claim Payout Percentage
Risk Premium
0-5%
SR
0-5%
SR
>5-10%
10% of SR
>5-10%
10% of SR
>10-15%
15% of SR
>10-15%
15% of SR
>15-20%
20% of SR
>15-20%
20% of SR
>20%
25% of SR
>20%
25% of SR
SRStandard Rate
The above Risk premium structure would be governed by the following:
1. The risk premium, wherever applicable, would be charged with prospective effect i.e.
credit facilities sanctioned by MLIs on or after April 01, 2016 and covered under the
Credit Guarantee Scheme. The existing loans under credit Guarantee will continue to
carry the old rates till their maturities or renewal.
2. The rates under this mechanism will be floating and will undergo changes every year
based on the NPA level and payout ratios of the concerned Bank.
3. The MLIs having NPA percentage as well as claim payout ratio more than 5%, the risk
premium under both the categories shall be applicable to such MLIs.
4. The risk premium structure will also be applicable to renewal cases (i.e. renewals after
expiry of guarantee period) in respect of working capital limits.
5. In respect of working capital accounts covered under the Credit Guarantee Scheme where
original sanctions are prior to April 01, 2016 and the subsequent enhancements in the
limits are on or after April 01, 2016, the earlier fixed rate structure (i.e. pre-revised
structure) would continue to apply even for the enhanced portion.
6. The review of risk premium would be an annual exercise and the revised risk premium
would be applicable from the first day of each financial year. The subsequent revisions in
the risk premium would be applicable to all those guarantees originally approved under
differential pricing structure.
7. It is clarified here that while levying the guarantee fee for the first time, the fee is
collected for the full 365 days from the guarantee start date (i.e. fee payment date) and
the second and subsequent year onwards in respect of already issued guarantees, the fee
is collected till the end of financial year excepting for the terminal year of guarantee
where the fee is collected for the proportionate period. Thus, while the fee applicable for
the first year would be for the entire 365 days at applicable rate, the fee at the revised
rates in subsequent years, based on revisions in NPA percentage/claim pay-out ratio,
would be applicable only for the broken period of the respective year. This has been
explained in illustrations attached.
8. It is further clarified that the guarantees approved under fixed rate structure i.e. in respect
of credit facilities sanctioned by MLIs on or before March 31, 2016 would continue to be
governed by the fixed rate structure till the expiry of respective guarantee period or first
settlement of claim, whichever is earlier.
9. For working out the percentages of NPAs/claim pay-out ratio with a view to arrive at the
risk premium, the data generated as on September 30 of immediately preceding financial
year would be relied upon. E.g. for working out the risk premium applicable as effective
from April 01, 2016 onwards, the base data for working out the percentage of
NPAs/claim pay-out ratio would be as on September 30, 2015 and so on. The MLIs
would be advised by January every year about their respective NPA percentage and claim
pay-out ratio as per the CGTMSE records and the risk premium applicable to them
effective April 01 of subsequent financial year.
10. As regards calculation of NPA percentages and claim pay-out ratio, it may be mentioned
that while NPA percentage would be worked on the basis of cumulative NPAs upto
September 30 each year as marked by the MLI in CGTMSE portal (net of upgraded
accounts and the accounts where the claims would not hit CGTMSE in respect of the
NPAs marked) in terms of amount (i.e. Guaranteed amount of the corresponding NPA
account) vis--vis the cumulative guarantees issued by the Trust as on September 30
every year as indicated above, the claim pay-out ratio would be worked out on the basis
of cumulative claims settled by the Trust and the cumulative receipts (includes Guarantee
and Annual Service /Annual Guarantee Fee receipts, recoveries out of OTS and
recoveries passed on by MLIs after first settlement of claim) as on September 30 each
year. The cumulative claims paid upto 1.05 times of the cumulative receipts will not
attract any risk premium as indicated in the table above.
11. Initially, while introducing the differential rate structure for the first time w.e.f. April 01,
2016, while guarantees issued by the Trust could be taken till September 30, 2015, the
cut-off date for NPA marked in the system would be extended till February 28, 2016, as a
one-time measure, in order to allow adequate time to MLIs to upgrade/modify the status
of NPAs in CGTMSE portal as also give time to pass on to CGTMSE recoveries, if any,
in respect of settled cases. The MLIs would be intimated about their respective NPA
percentage and claim payout ratio and the applicable risk premium effective from April
01, 2016 by the first week of March 2016.
An illustration taking various dates of sanctions and for different scenarios in different FYs is
attached for better understanding of the proposed guidelines.
The above guidelines supersedes the guidelines issued by us on differential pricing structure vide
our Circular Nos. 88/2015-16 and 92/2015-16 dated April 17, 2015 and July 08, 2015
respectively. We once again reiterate that any NPA upgradation in the accounts already reported
to CGTMSE as NPAs may be advised to CGTMSE expeditiously for carrying out necessary
corrections, as advised us vide our circular No. 96/2015-16 dated September 04, 2015, since the
same will have bearing on the NPA% of the MLI as reported to the Trust. Further, the closure of
accounts covered under the Credit Guarantee Scheme where the claims are not expected to be
lodged may also be reported to CGTMSE for carrying out necessary corrections to enable
CGTMSE to work out correct NPA percentage for levying risk premium. Please note that this
exercise will have to be completed latest by February 29, 2015 since the new structure is
proposed to be made applicable w.e.f. April 01, 2016 as mentioned above
We request you to kindly bring the contents of this Circular to the notice of your all offices.
Yours faithfully,
(S.S.Bakshee)
General Manager
Encl : As above.
Illustrations
Standard Rate taken as 1%
EG: 1 UVW Bank

Calculation:
NPA Percentage
Risk Premium
>5-10%
10% of SR
Position as on September 30, 2015
Claim Payout Ratio Risk Premium

0-5%
No risk premium

1.10%
Effective rate applicable
Sanctioned Date
01/04/2016
Guaranteed Amt
1000000
Approved Date
05/04/2016
Applicable rate as effective from 01/04/2016

would be applicable.
1.10%
AGF
11000
Guarantee start date/ Fee paid and valid till
11/04/2016 - 10/04/2017
The risk premium applicability for the above case for the next year is as follow:
Calculation:
NPA Percentage
Risk Premium
>15-20%
20% of SR
Claim Payout Ratio
Risk Premium
0-5%
No risk premium

1.20%

1.20%
Annual Fee for the period
11/04/2017 - 31/03/2018
EG: 2 YYZBank
Calculation:
NPA Percentage
>20%
Risk Premium
25% of SR
Claim Payout Ratio

>5-10%
Risk Premium
10% of SR

1.35%
Sanctioned Date
15/09/2016
Guaranteed Amt
1000000
Approved Date
18/09/2016

1.35%
AGF
13500
22/09/2016 - 21/09/2017
Calculation:
NPA Percentage
Risk Premium
>15-20%
20% of SR
Claim Payout Ratio
Risk Premium
>10-15%
15% of SR

1.35%

1.35%
22/09/2017 - 31/03/2018
EG: 3 ABC Bank

Calculation:
NPA Percentage
Risk Premium
>10-15%
15% of SR
Claim Payout Ratio

0-5%
Risk Premium
No risk premium

1.15%
Sanctioned Date
10/04/2017
Guaranteed Amt
1000000
Approved Date
12/04/2017
Applicable rate as effective 01/04/2017

since sanction date is after 01/04/2017.
1.15%
AGF
11500
15/04/2017 - 14/04/2018
Calculation:
NPA Percentage
Risk Premium
>5-10%
10% of SR
Claim Payout Ratio
Risk Premium
0-5%
No risk premium

1.10%

1.10%
15/04/2018 - 31/03/2019
EG 4 :XYZ Bank
Calculation:
NPA Percentage
>15-20%
Risk Premium
20% of SR
Claim Payout Ratio

0-5%
Risk Premium
No risk premium

1.20%
Sanctioned Date
11/11/2017
Guaranteed Amt
1000000
Approved Date
15/11/2017
Applicable rate as effective 01/04/2017 since

sanction date is after 01/04/2017.
1.20%
AGF
12000
19/11/2017 - 18/11/2018
Calculation:
NPA Percentage
Risk Premium
>10-15%
15% of SR
Claim Payout Ratio
Risk Premium
0-5%
No risk premium

1.15%

1.15%
19/11/2018 - 31/03/2019
EG 5 :PQR Bank
Calculation:
NPA Percentage
>10-15%
Risk Premium
15% of SR
Claim Payout Ratio

>5-10%
Risk Premium
10% of SR

1.25%
Sanctioned Date
28/03/2017
Guaranteed Amt
1000000
Approved Date
03/04/2017

would be applicable since sanction date
is prior to 01/04/2017 although guarantee
approved date is 03/04/2017.
1.25%
AGF
12500
05/04/2017 - 04/04/2018
Calculation:
NPA Percentage
Risk Premium
>5-10%
10% of SR
Claim Payout Ratio
Risk Premium
>5-10%
10% of SR

1.20%

1.20%
05/04/2018 - 31/03/2019
EG 6 :EFG Bank
Calculation:
NPA Percentage
>10-15%
Risk Premium
15% of SR
Claim Payout Ratio

>5-10%
Risk Premium
10% of SR

1.25%
Sanctioned Date
20/01/2018
Guaranteed Amt
1000000
Approved Date
22/01/2018
Applicable rate as effective from

01/04/2017 would be applicable.
1.25%
AGF
12500
25/01/2018 - 24/01/2019
Calculation:
NPA Percentage
Risk Premium
>5-10%
10% of SR
Claim Payout Ratio
Risk Premium
>20%
25% of SR

1.35%

1.35%
25/01/2019 - 31/03/2019
EG 7 :MNO Bank
Calculation:
NPA Percentage
0-5%
Risk Premium
No risk premium
Claim Payout Ratio

>5-10%
Risk Premium
10% of SR

1.10%
Sanctioned Date
30/06/2017
Guaranteed Amt
1000000
Approved Date
05/07/2017
Applicable rate as effective 01/04/2017

since sanction date is after 01/04/2017.
1.10%
AGF
11000
09/07/2017 - 08/07/2018
Calculation:
NPA Percentage
Risk Premium
0-5%
0-5%
Claim Payout Ratio
Risk Premium
>5-10%
>5-10%

1.10%

1.10%
09/07/2018 - 31/03/2019
Subrogation of rights and recoveries on account of claims Paid

Kind Attention : SME/Priority Sector Department
We invite your attention to Clause-11(iii), Chapter-V of Credit Guarantee Scheme whereby every
amount recovered and due to be paid to the Trust shall be paid without delay, and if any amount
due to the Trust remains unpaid beyond a period of 30 days from the date on which it was first
recovered, interest shall be payable to the Trust by the lending institution at the rate which is 4%
above Bank Rate for the period for which payment remains outstanding after the expiry of the
said period of 30 days.
It has been observed during the course of few inspections carried out by the Trust recently that
the recoveries made by MLls, post settlement of claims by CGTMSE, are not passed on to
CGTMSE in most of the cases. It is once again clarified that MLls are required to pass on the
entire amount recovered by it from Borrowers and CGTMSE, on its part, would refund the
amount pertaining to the MLI, if any, after working out the actual loss. The sharing of loss is
done by CGTMSE in the same proportion in which risks are being shared between CGTMSE
and MLI for the underlying guarantee. It may further be mentioned here that the recoveries so
passed on shall be duly factored by CGTMSE as "recoveries from MLls" while working out
claim payout percentage for calculating risk premium under differential pricing model as advised
by CGTMSE vide its circular No. 107/2015-16 dated January 28, 2016 (copy available on our
website).
We also invite your attention to our letter reference No. 6707/Claims dated March 04, 2014
requesting MLls to provide certificate from Statutory Auditors that recoveries made post
settlement of claims have been fully passed on to CGTMSE as per the provisions of the Credit
Guarantee Scheme. The said certificate was requested to be submitted once in a year i.e. as on
March 31 of every year by September 30 of every year commencing from the date ended March
31, 2014. We observe that very few certificates have been received by us. We once again reiterate
that the MLls are required to submit these certificates within the given period of time.
Circular No.111 / 2015 - 16
Dear Sir/Madam,
Credit Guarantee Scheme (CGS) Introduction of new module for upgradation of

NPA cases
As you are aware, CGTMSE has been upgrading the accounts already marked as NPAs in
CGTMSE portal upon receiving the requests from Member Lending Institutions (MLIs) via
emails and letters along with the copy of the request letter duly signed by the officer not below
the rank of AGM. However, consequent upon migration to CBS system by most of the MLIs, the
Trust has been receiving requests from the MLIs for permitting them to upgrade the accounts at
their end itself instead of approaching CGTMSE frequently with a request for upgradation.
Considering the difficulties faced by the MLIs, it has now been decided to permit MLIs to
upgrade the accounts in CGTMSE portal which have been marked earlier by them as NPAs. With
a view to operationalize the process, we have created online module in CGTMSE portal whereby
MLIs themselves will be allowed to up-grade already marked NPA accounts.
The upgradation module will have a maker and checker concept where the maker will be the
officer at operating level and checker will be the MLI's approving authority not below the rank of
AGM or of equivalent rank. Once the transaction is approved by the checker, the CGTMSE
portal will automatically upgrade the account in its record and, thus, CGTMSE will have no role
to play in the upgradation process and no correspondence need be forwarded to CGTMSE in this
regard. Taking into consideration the criticality of transaction viz. approval of upgradation of
account at MLI level, new user ID and password would be generated for the checker (approver)
for all the MLI IDs which will be strictly used only by the MLI ID's approving authority not
below the rank of AGM or of equivalent rank.
Process for upgradation of NPA accounts is given below:
1. The operating level officer of the concerned MLI ID shall use his existing ID
and password (no separate id and password shall be provided by CGTMSE)
and shall submit the request to the checker (approver) for upgradation of the
NPA cases per CGPAN on the CGTMSE online portal by using the following
path:
Guarantee Maintenance->Periodic Info->NPA account upgradation
2. Once the form is saved, the request will be available for approval by the MLI
ID's approving authority not below the rank of AGM or of equivalent
rank who will be having his own user ID and password separately given to
him by CGTMSE which will be termed as "Checker User Id and Password".
3. Checker (Approving authority) will then have to login into CGTMSE portal
using the checker user id and password by using following path :
Guarantee Maintenance -> Submission for NPA Upgradation.
4. After approval by the checker, applications will be upgraded in CGTMSE
portal.
5. Approval process will end at the MLI level and no approval will be done by
CGTMSE.
The process for creation of checker user id and password is given
below :
1. Operating level officer having existing user id and password shall
submit the request for generation of Checker User ID and Password for
its respective MLI ID by using the following path:
Sys. Admin Audit -> Creation of MLI Checker User ID
2. Once the form is submitted by the operating level officer, a report will
be generated with all the information as given in the form for the
designated official in the Head Office of the respective MLIs to view.
Official from the Head Office will login using the user ID and password
as provided to them at the time of MLI registration. Transaction

confirmation will be sent to the Head Offices on the email id as
provided by them. No separate ID and password will be provided to the
MLI's Head Office for verification of the above report.
3. Head offices in return will approve / reject the information given in the
report. Please note that the concerned official of the Head Office of
respective MLI, while approving the information given in the report,
shall exercise due caution to check that the entire information
submitted in the report is true and that the official named in the form
is not below the rank of AGM or equivalent. The following path may be
used for approving or rejecting the transaction :
Sys. Admin Audit -> Approve MLI Checker User ID
4. After approval of the form by Head Office of respective MLI and after its
subsequent verification by CGTMSE, the Checker User ID and Password
will be created and communicated to the respective approving
authority on the email id specified by the operating level officer of the
MLI ID in the form while submitting the same. It is, therefore, essential
that the email id of checker (approving authority) is correctly
mentioned in the form. It is also required to be ensured that the local
server/MLIs server does not block the incoming mails for any reason
since communication of id and password details are only through
emails. In case the transaction is rejected by the Head Office, the form
shall be reverted to the operating level officer who shall resubmit the
same with necessary corrections.
5. The checker (approving authority), can commence approval of
transactions flowing from the operating level officer only upon receipt
of transaction id and password on his mail. Needless to mention that
the checker (approving authority) will strictly maintain the
confidentiality of his id and password and shall not share with anybody
under any circumstances.
6. During the time of first login, checker will have to change the system
generated password as communicated to him via email. Then checker
can login into the CGTMSE portal using the changed password
7. The checker user ids and passwords are officer specific since officer
specific details are fed in request form for generation of checker user id
and password by the operating level officer and approved by the Head
office of respective MLI. Therefore, in case of change of checker
(approving authority), new checker user id and password shall be
generated for the new incumbent by following the entire process once
again. Previous transaction id and password will be discontinued in
such cases.
8. Each MLI ID will have only one checker user id and password i.e. each
MLI ID will have only one checker (approving authority) although there
may be more than one user id and passwords for the use of operating
level officers. The transactions fed by these multiple users shall flow to
the single checker for decision.
The above module for NPA upgradation has been made live and can now be operated by the
MLIs. CGTMSE shall consider upgradation of NPA accounts as per the existing practice
maximum upto March 31, 2016. Thereafter, all the requests for NPA upgradations shall be
mandatorily processed/approved under the above NPA upgradation module. Any difficulties
encountered shall be mailed to us at npa@cgtmse.in with a cc to shrutis@cgtmse.in for solution.
Madam / Dear Sir,
Modifications in Guarantee Application Form in CGTMSE Portal
As you may be aware, Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)
has been operating Credit Guarantee Scheme since August 2000. In order to make the
operational mechanism of the Scheme more user friendly for its Member Lending Institutions
(MLIs), the Trust has been carrying out modifications in its existing software based on the
suggestions received from various MLIs. As a part of this exercise, we have carried out further
modifications in on line "Guarantee Application Form" by inserting the provision for feeding
following three details:
1. Udyog Aadhaar Number
2. Bank A/c Number
3. IT PAN
Udyog Aadhaar Number - Although it is not a mandatory field, it is suggested to

invariably feed this number, wherever available, as the same would be helpful in tracking
the borrower's account.
Bank A/c Number - This is not a mandatory field for the present. However, the MLIs, in
their own interest, are requested to feed the Borrower's Loan A/c Number/Cash credit A/c
Number (TC/WC) in the relevant field in an application form at the time of application
for guarantee cover. This provision has been made on the request of MLIs to facilitate
them to track CGTMSE covered accounts, allocation of fees and also for monitoring of
NPAs, timely claim lodgement etc. at HO/ZO-RO level of MLIs. .
IT PAN - Presently, the MLIs are mandatorily required to indicate the details of IT PAN
of the borrower in the Application Form in respect of credit facilities of ` 10 lakh and
above. It has now been decided to reduce the floor limit to ` 5 lakh and above considering
overall exposure of the borrower i.e. the MLIs shall now furnish the details of IT PAN, in
the Application Form, while lodging the applications for guarantee cover in respect of
credit facility of ` 5 lakh and above. The feeding of IT PAN details have not been kept
mandatory, for the present, for credit facilities of ` 5 lakh and above and upto less than `
10 lakh. However, the IT PAN details would be mandatory for such credit facilities
sanctioned by MLIs on or after April 01, 2016 and proposed to be covered under the
Credit Guarantee Scheme of CGTMSE.
Circular No.113 / 2016 - 17
Dear Sir/Madam,
Introduction of new module for Updating Recovery Details
As you are aware, in terms of Chapter VI, Point No. 13, of Credit Guarantee Scheme of
CGTMSE, the recoveries made by MLIs from the defaulting borrowers post settlement of
1st/2nd claim by CGTMSE are required to be passed on to CGTMSE in full after netting off the
legal expenses. Also when the refund of first installment of claim released by CGTMSE is being
passed on by the MLI, MLI has to pass the gross amount (including ASF) without netting off any
expenses. Upon receipt of such recovery, CGTMSE works out the net loss and shares the
recovery so passed on by the MLIs, with the respective MLI in the given proportion. Such
recoveries are presently passed on by MLIs by means of Demand Drafts.
With a view to automate the process of receipt of recovery from MLIs, effecting one time
settlement or closure of CGPAN, it has been decided to create an online module in CGTMSE
portal whereby MLIs will feed the recovery/payment details pertaining to the each CGPAN
whose 1st/2nd installment of claim has been settled. The MLIs will then be allowed to lodge the
application for the second / final installment of claim provided other scheme guidelines with
regard to release of 2nd installment are complied with.The process for updating the recovery
details in CGTMSE portal is given in the Annexure.
The above module for Updating Recovery Details has been made live and can now be operated
by the MLIs. MLIs can use their existing user ids for this module also. Any difficulties
encountered shall be mailed to us at secondclaim@cgtmse.in with a cc to shrutis@cgtmse.in for
solution.
We request you to kindly bring the contents of this Circular to the notice of all your offices
Yours faithfully,
(S.S.Bakshee)
General Manager
Annexure
1. Recovery module will be mainly updated by the MLIs for those units where 1st
installment has been settled by CGTMSE.
2. By using their existing user ID and password, MLI will login into the CGTMSE portal
and
update
the
recovery
details
by
using
the
path:
Claim Processing Update Recovery Info
3. By giving the required claim reference number, a form will open where information like
linked CGPAN(s), Unit Name, 1st installment amount, Recovery amount already remitted
to CGTMSE (if any) etc. related to the respective claim reference number will be
populated by the CGTMSE system. MLI then needs to choose the type of recovery from
the drop down provided and fill in the amounts in "Total Recovery" and "legal expenses"
columns.
4. To proceed further MLI will then have to tick on the check box given in the 'Pay' column
for those units for which payment needs to be passed on to CGTMSE.
5. In case the recovery in respect of more than one claim reference number is to be updated
by the MLI, an option 'Add More +' is provided where the MLI will have to click and
after giving the claim reference number, continue feeding other details as was done in the
earlier case.
6. After ticking the 'Pay' check box, MLI can view the total amount to be remitted by
clicking on the button 'Show Total Remitted Amount'. The system will then proceed to
the "Payment Section" once the MLID user clicks the 'Payment / Save' button. The
system will proceed to the next screen viz. 'payment details' only in cases where 1st claim
has been settled by CGTMSE.
7. If by mistake MLI feeds wrong Claim reference number, than MLI will not tick the 'Pay'
check box. System will automatically ignore the details fed against the claim reference
number and will not save any data for that claim reference number.
8. In the payment details screen, MLI will have to give all the payment related information
like mode of payment, payment date, Instrument Number / UTR number, Instrument
date, drawn at bank / branch etc. The MLIs are expected to feed the transaction details
in the Recovery Module only after passing on the respective recovery amount to
CGTMSE either by means of DD or by RTGS / NEFT since DD No. / UTR No. is
required to be fed in the 'Payment Details' of the Recovery Module.b> Instrument /
RTGS amount will be pre-filled by the system from the 'Total amount' in the recovery
table. It is reiterated that this part of the process will be applicable only where 1st claim
has been settled by CGTMSE.
9. After clicking the save button an alert, confirming the information; 'Total amount;
DD/RTGS amount; DD/UTR number will appear with confirm and cancel options. After
confirming, the transaction will be processed. After the receipt and appropriation of
recovery, as received from MLIs by CGTMSE, the unit will be eligible for second / final
installment provided other scheme guidelines with regard to release of 2nd installment
are complied by the MLI.
10. In case of OTS / partial recovery, MLI can update the recovery information for the
respective Claim reference number multiple times in the Recovery Module till the entire
recovery has been passed on by the MLI.
11. A periodic report, CGPAN wise, will be generated giving the information regarding
recovery passed on by the MLI to CGTMSE.
MLIs can also use the 'Recovery Module' to feed / correct the recovery amount already fed in the
claim form for cases where the claim has been lodged, however 1st installment of claim has not
been settled, by using the same process as mentioned above. However, MLI here will have to
feed only the total recovery received (recovery already made (as indicated in the claim form) +
new recovery (if any)) and the same will be updated in the claim form. For such cases, after
updating the Recovery amount and ticking on the 'pay' checkbox, MLI will save the data by
clicking on the Payment / Save button. For these cases, next screen viz. 'payment details' will not
open and the system will automatically update the recovery amount already indicated in the
claim form. Please note that recovery, in such case, need not be passed on to CGTMSE since the
1st installment of claim shall be settled by CGTMSE based on the revised outstanding amount.

Cgtmse M

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Circular No.

Circular No. 4/2001-02

Circular No. 6/2002-03

In case of accounts covered under CGFSI where rephasement/ reschedulement is

Queries raised by MLIs

Whether debits of Term Loan interest to

Since interest on term loan is not covered under

Whether such debits of Term Loan interest Yes

Circular No. 8/2002-03

Circular No. 9/2002-03

4) Levying of pro-rata guarantee fee for enhancement in working capital in case of

guarantee fee & / or annual service fee not due,

Circular No. 28 / 2005-06

Eligibility of credit facilities extended to Handicrafts artisans under Credit Guarantee

Circular No. 29 / 2005-06

List of activities/Enterprises Identified under Agri-clinic and Agri Business Centres

Project Maintenance and Repairs of Agricultural Implements & SSSBE*

Project Agri Service Centres

Project Seed Processing Units

Project Tissue Culture

Project Production of Bio-fertilizers, Bio-pesticides, Bio-control SSI**

Project Honey and Bee product Processing Units

Project Feed Processing and Testing Units

Project Setting up of Information Technology Kiosks in rural areas SSI**

Project Setting up of Cool chain from the farm level onwards

Circular No. 31 / 2006-07

(b) All eligible women Entrepreneurs;

Circular No. 33 / 2006-07

THE ABOVE IS NOT INCLUDED**

Circular No. 35 / 2006-07

Annual Service Fee

of SSI /SSSBE(IR) units.

or existing small scale industrial

Micro and Small Enterprises to which credit

'Guarantee Cover' means maximum cover

As per the MSMED Act, 2006 an

"Trust" means the Credit Guarantee Fund

Extent of the guarantee :

Extent of the guarantee :

The Trust shall provide guarantee

The Trust shall provide up to 75% of the

respect of term credit/ composite

the term credit in respect of term credit /

Circular No. 37 / 2007-08

Extent of the guarantee

Extent of the guarantee

The Trust shall provide guarantee

The Trust shall provide up to 75% of the

Circular No. 38 / 2007-08

Circular No. 40 / 2007-08

Circular No. 41 / 2007-08

lodgement of all applications across the country subject to the following:

The applications should be lodged/ re-lodged on or before March 31, 2008.

Circular No. 42 / 2007-08

Circular No. 43 / 2007-08

Circular No. 44 / 2007-08

Life Insurance cover for Chief Promoters of units with

Circular No. 45 / 2007- 08

Credit Guarantee Scheme (CGS)

Circular No. 47 / 2008- 09

Circular No. 48 / 2008- 09

Credit Guarantee Scheme (CGS) - Modification in the