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I. INTRODUCTION
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), has framed a Scheme for the
purpose of providing guarantees in respect of credit facilities extended by eligible Banks & NBFCs
jointly to Micro and Small Enterprises (MSEs) borrowers under Co-Lending models as prescribed by
RBI from time to time. Details of the scheme are as under:
The Scheme shall be known as the “Credit Guarantee Scheme for Co-Lending (CGSCL) shall come into
force w.e.f. February 25, 2022. The same shall cover eligible credits sanctioned under Co-Lending
arrangement by pair of lending institutions to eligible borrowers under MSE sector.
2. Definitions
(i) “Trust” means the Credit Guarantee Fund Trust for Micro and Small Enterprises set up by
Ministry of MSME, Government of India and SIDBI with the purpose of guaranteeing credit
facility(ies), extended by the pair of lending institution(s) to the eligible borrowers.
(ii) “Amount in Default” means the principal and interest amount outstanding in the account(s) of
the borrower in respect of financial assistance as on the date of the account becoming NPA, or
the date of lodgement of claim application whichever is lower or such other date as may be
specified by CGTMSE for preferring any claim against the guarantee cover subject to a maximum
of amount guaranteed.
(iii) "Member Lending institution(s)"(MLIs) under the Scheme means a pair of Bank and NBFC
registered with CGTMSE as MLI under CGS-I and CGS-II respectively where NBFC means an NBFC
registered with RBI under Section 45-IA of the Reserve Bank of India Act, 1934 and a Bank means
Scheduled Commercial Bank (approved by RBI for Co-lending) for the time being included in the
second Schedule to the Reserve Bank of India Act, 1934, meeting the eligibility norms as may
be specified by the Trust from time to time, or any other institution(s) as may be directed by
the Government of India from time to time. The Trust may, on review of performance, remove
any of the lending institution from the list of eligible institution.
(iv) "Scheme" means the Credit Guarantee Scheme for Co-Lending by a pair of eligible NBFC and
Scheduled Commercial Bank approved by RBI for colending. There are following two
options/models to operate under Co-Lending:
Under this arrangement, the partner Bank and NBFC will jointly lend to the borrower
through an escrow account. The due diligence and appraisal will be done by both
institutions. There will be irrevocable commitment on the part of the bank to take into
Credit Guarantee Scheme for Co-Lending (CGSCL)
its books its share of the individual loans as originated by the NBFC. The guarantee cover
under this Option will be for individual loan/credit facility.
“Option / Model 2” - Direct Assignment
Under this arrangement, the partner Bank can exercise its discretion regarding taking into
its books the loans originated by NBFC as per the Agreement. The guarantee cover under
this Option will be for the specified loans/credit facilities selected for co-lending.
(v) “Eligible Pair” means a pair of Scheduled Commercial Bank and NBFC who have entered into a
Co-Lending arrangement based on the RBI circular RBI/2020-21/63
FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 05, 2020 stating “Scheduled
Commercial Banks are permitted to co-lend with all registered NBFCs based on a prior
agreement”. Only the MLIs registered with CGTMSE under CGS-I & CGS-II will be eligible as a
pair for CLM arrangement under CGSCL.
(vi) “Dealing Institution for the Trust” means either of the Institutions of the eligible pair. Unless
specified otherwise, the Trust will recognise registered NBFC within the eligible pair as the
dealing institution for CGSCL.
(vii) “Credit facility” means any financial assistance by way of term loan and / or working capital
facilities extended by the pair of Member 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 pair of member lending institution to the borrower,
whether disbursed or not. The credit facility extended shall mean the credit facilities covered
under CGSCL and for which guarantee fee has been paid, as at March 31st, of the relevant year.
(viii) “Collateral security” means the security provided in addition to the primary security, in
connection with the credit facility extended by a pair of member lending institution to a
borrower.
(ix) “Eligible borrower” means new or existing Micro and Small Enterprises to which credit facility
has been provided by the lending institution without any collateral security and/or third-party
guarantees.
However, portion of credit facility not covered by collateral security can be covered under
“Hybrid / Partial Collateral Security Model”. In the partial collateral security model, the MLIs are
allowed to obtain collateral security for a part of the credit facility, whereas the remaining part
of the credit facility, can be covered under Credit Guarantee Scheme of CGTMSE
(x) “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.
(xi) "Tenure of guarantee cover” means the maximum period of guarantee cover from guarantee
sanction date which shall run through the agreed tenure of the term loan and for the period of
5 years or block of 5 years from guarantee start date where working capital facilities alone are
extended or loan termination date, whichever is earlier or such period as may be specified by
the Trust.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
(xii) “Material date” means the date on which the first annual guarantee fee on the amount covered
in respect of eligible borrower is credited to the Trust by the Member lending institution.
(xiv) “Primary security” in respect of a credit facility shall mean the assets created out of the credit
facility so extended and/or existing unencumbered assets which are directly associated with the
project or business for which the credit facility has been extended.
(xv) “SIDBI” means the Small Industries Development Bank of India, established under Small
Industries Development Bank of India Act, 1989 (39 of 1989).
(xvi) “Micro and Small Enterprises” 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, as amended from time to time.
(xvii) “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 Proprietary 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 and owner of the immovable property in case of guarantee
under Hybrid / Partial collateral security model.
(xviii) “Blended / Effective Interest Rate” means weighted average rate of Interest charged to the
MSE borrowers under CLM arrangement for the credit facility sanctioned. Only those credit
facilities where the effective interest rate charged to the MSE borrower under CLM
arrangement is upto a maximum of 18% shall be eligible for coverage under CGSCL.
(xix) "Payout cap” means the maximum amount that would be available for Claim settlement as per
the terms stipulated by the Trust from time to time.
(xx) “Annual Guarantee Fee”(AGF) means guarantee fee which would be charged annually till the
tenure of the credit facility / guarantee coverage.
(xxi) “Financial Year” means the period of one year starting from 1st day of April of any given year till
March 31st.
(xxii) “Lock-in Period” means the period during which guarantee cannot be invoked by eligible
member lending institutions.
(xxiii) “Secured Credit Facility for the said Scheme” means the credit facility secured only by way of
primary security.
(xxiv) “Unsecured Credit Facility” means the credit facility where no assets are charged to the lending
institution for securing the credit facility.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
(i) Subject to the other provisions of the Scheme, the Trust undertakes, in relation to
credit facilities extended to an eligible borrower from time to time by an eligible
pair of institutions which has entered into the necessary agreement for this
purpose with the Trust, to provide a guarantee on account of the said credit
facilities.
(ii) The Trust reserves the discretion to accept or reject any proposal referred by the
pair of member lending institutions which otherwise satisfies the norms of the
Scheme.
The Trust shall cover credit facilities extended by pair of Member Lending Institutions
to a single eligible borrower in the Micro and Small Enterprises sector for credit facility
(i) not exceeding ₹200 lakh for credit facility secured by way of Primary Security; and
(ii) not exceeding ₹100 lakh for unsecured credit facility by way of term loan and/or
working capital facilities without any collateral security and/or third party guarantees
or such amount as may be decided by the Trust from time to time.
The cap of ₹200 lakh or `100 lakh, as applicable for secured and unsecured loans
respectively, is the maximum guarantee coverage limit per borrower under CGSCL
based on the outstanding credit facilities extended by pair of member lending
institutions to eligible borrower and the borrowers can avail incremental credit
facilities (i.e. to the extent of reduction in the outstanding exposure limit) under Credit
Guarantee Scheme of CGTMSE, subject to a maximum cap of ₹200 lakh or `100 lakh as
applicable for secured and unsecured loans respectively.
(i) Credit facility(ies) is/are standard and regular (not SMA) as per RBI guidelines;
and / or
(ii) The business or activity of the borrower for which the credit facility was granted
has not ceased; and / or
(iii) The credit facility has not wholly or partly been utilized for adjustment of any
debt deemed bad or doubtful of recovery, without obtaining a prior consent in
this regard from the Trust.
Under “Hybrid Security” product the MLIs will be allowed to obtain collateral security
for a part of the credit facility, whereas the remaining unsecured part of the credit
facility, upto a maximum of ₹200 lakh, can be covered under CGSCL. CGTMSE will,
however, have notional second charge on the collateral security provided by the
borrower for the credit facilities extended. Under the hybrid security product, there is
no requirement for MLIs to create security / charge in favour of CGTMSE by way of
legal documentation.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
All proposal for sanction of guarantee approvals for credit facility(ies) above `50 lakh
should be of investment grade.
The following credit facilities shall not be eligible for being guaranteed under the
Scheme: -
(i) Any credit facility in respect of which risks are additionally covered under a
scheme operated / administered by any other Credit Guarantee organisation,
Government or by any general insurer or any other person or association of
persons carrying on the business of insurance, guarantee or indemnity or the
Reserve Bank of India, to the extent they are so covered.
(ii) Any credit facility for loans upto `10 lakh to micro enterprises shall not be eligible
to be covered under the scheme if the said credit facility has been covered under
MUDRA guarantee scheme through NCGTC Limited or any other Guarantee
Scheme while applying for guarantee cover for such proposal.
(iii) Any credit facility, which does not conform to, or is in any way inconsistent with,
the provisions of any law, or with any directives or instructions issued by the
Central Government or the Reserve Bank of India, which may, for the time being,
be in force.
(iv) Any credit facility granted to any borrower, who has availed himself of any other
credit facility covered under this scheme or under the schemes mentioned in
clause (i) (ii) and (iii) above, and where the lending institution has invoked the
guarantee provided by the Trust or under the schemes mentioned in clause (i)
(ii) and (iii) above, but has not repaid any portion of the amount due to the Trust
or under the schemes mentioned in clause (i) (ii) and (iii) above, as the case may
be, by reason of any default on the part of the borrower in respect of that credit
facility.
(v) Any credit facility which has been sanctioned by the lending institution against
collateral security and / or third-party guarantee. However, MLIs can cover the
part of the credit facility(ies) not covered by collateral security under Hybrid
model of Credit Guarantee Scheme of CGTMSE.
(vi) Any credit facility which has been sanctioned by MLI(s) where the blended
interest rate charged to the MSE borrowers under CLM arrangement is
exceeding 18%.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
entered into a fresh agreement with the Trust in such form as may be required by the
Trust from time to time, under the Scheme.
(i) The lending institution shall evaluate credit applications by using prudent
banking judgement and shall use their business discretion / due diligence in
selecting commercially viable proposals and conduct the account(s) of the
borrowers with normal banking prudence.
(ii) The lending institution shall closely monitor the borrower account.
(iii) The lending institution shall safeguard the securities taken from the borrower
in respect of the credit facility in good and enforceable condition.
(iv) The lending institution shall ensure that the guarantee claim in respect of the
credit facility and borrower is lodged with the Trust in the form and in the
manner and within such time as may be specified by the Trust in this behalf and
that there shall not be any delay on its part to notify the default in the
borrowers account which shall result in the Trust facing higher guarantee
claims.
(v) The payment of guarantee claim by the Trust to the lending institution does not
in any way take away the responsibility of the lending institution to recover the
entire outstanding amount of the credit from the borrower. The lending
institution shall exercise all the necessary precautions and maintain its recourse
to the borrower for entire amount of credit facility owed by it and initiate such
necessary actions for recovery of the outstanding amount, including such action
as may be advised by the Trust.
(vi) The lending institution shall comply with such directions as may be issued by
the Trust, from time to time, for facilitating recoveries in the guaranteed
account, or safeguarding its interest as a guarantor, as the Trust may deem fit
and the lending institution shall be bound to comply with such directions.
(vii) The lending institution shall, in respect of any guaranteed account, exercise the
same diligence in recovering the dues, and safeguarding the interest of the Trust
in all the ways open to it as it might have exercised in the normal course if no
guarantee had been furnished by the Trust. The lending institution shall, in
particular, refrain from any act of omission or commission, either before or
subsequent to invocation of guarantee, which may adversely affect the interest
of the Trust as the guarantor. In particular, the lending institution should
intimate the Trust while entering into any compromise or arrangement, which
may have effect of discharge or waiver of personal guarantee(s) or security. The
lending institution shall also ensure either through a stipulation in an
agreement with the borrower or otherwise, that it shall not create any charge
on the security held in the account covered by the guarantee for the benefit of
any account not covered by the guarantee, with itself or in favour of any other
creditor(s) without intimating the Trust. Further the lending institution shall
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Credit Guarantee Scheme for Co-Lending (CGSCL)
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Credit Guarantee Scheme for Co-Lending (CGSCL)
Guarantee Fee will be charged on the guaranteed amount for the first year and on the
outstanding amount for the remaining tenure of the credit facility as under:
All loans disbursed to the same customer by the pair of MLIs will be charged guarantee fee
as per the fee structure stated above, basis their cumulative credit facility amount. Hence,
guarantee fee for any subsequent loan to the same borrower by the pair of MLIs will be
charged as per the respective slab considering cumulative sanction of credit facilities to the
borrower.
In case of term loans, AGF would be calculated on outstanding amount as on 31st December
or any date decided by the Trust against each guarantee account and for working capital,
AGF would be calculated on the amount as requested by MLI within the working capital limit
availed by the borrower/enterprise and the guarantee amount will be restricted to the
amount of working capital on which fee is paid.
For cases covered under Hybrid Security Model Guarantee fee will be charged on the
guaranteed amount for the first year and on the outstanding amount after netting off
collateral value and unsecured portion, if any, subsequently resulting in lower guarantee fee
charged to MSEs.
Risk Premium, as and when, decided by the Trust will be imposed.
The Trust reserve right to change the fee structure from time to time.
1) Charging of AGF
(i) Annual Guarantee fee (first time fee) shall be paid to the Trust by the member lending
institution availing of the guarantee within 30 days from the date of Demand Advice of
guarantee fee OR the date of first disbursement in case of Term Loan, whichever is later
or such date as specified by the Trust.
(ii) The Annual Guarantee fee (subsequent to first time fee) at specified rate on pro-rata basis
for the first and last year and in full for the intervening years would be generated by 1st
week of February every year. AGF so demanded would be paid by the MLIs on or before
31st March each year or any other specified date by CGTMSE, of every year.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
2) The guarantee cover will start from the date of realisation of payment of guarantee fee by
the Trust and shall run through the agreed tenure of guarantee cover subject to timely
payment of annual guarantee fee.
3) In the event of non-payment of annual guarantee fee within the stipulated time, the
guarantee under the scheme shall not be available to the lending institution / eligible pair
unless the Trust agrees for continuance of guarantee and the lending institution pays penal
interest on the guarantee fee due and unpaid for the entire period of delay at such rates
specified by the Trust from time to time.
In the event of non-payment of annual service / guarantee fee within the stipulated time
or such extended time that may be agreed to by the Trust on such terms, or in case of
expiry of the guarantee coverage liability of the Trust to guarantee such credit facility
would lapse / cease to exist in respect of those credit facility(ies) against which the service
charges / fee(s) are due and not paid or guarantee coverage has expired.
Provided further that, the Trust may consider renewal/revival of guarantee cover for such
of the credit facility upon such terms and conditions as the Trust may decide.
In the event of any error or discrepancy or shortfall being found in the computation of the
amounts or in the calculation of the guarantee fee / annual service fee, such deficiency /
shortfall shall be paid by the eligible lending institution to the Trust together with interest
on such amount at a rate prescribed by the Trust from time to time. In the event of any
representation made by the lending institution in this regard, the Trust shall take a decision
based on the available information with it and the clarifications received from the lending
institution, and its decision shall be final and binding on the lending institution.
5) The amount equivalent to the annual guarantee fee and / or the service fee payable by the
eligible lending institution may be recovered by it, at its discretion from the eligible
borrower.
6) The annual guarantee fee and / or annual service fee once paid by the lending institution
to the Trust is non-refundable. Annual Guarantee fee / Annual Service Fee, shall not be
refunded, except under certain circumstances like –
➢ Excess remittance,
➢ Remittance made more than once against the same credit application,
➢ Annual Guarantee fee and / or annual service fee not due,
➢ Annual Guarantee fee paid in advance but application not approved for
guarantee cover under the scheme, etc.
Payment to be made through NEFT/RTGS into the Virtual Account Number generated on
CGTMSE Portal. Annual Guarantee Fee (AGF) demanded by the Trust is inclusive of
applicable GST. However, the Trust reserves the right to change mode of payment of AGF.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
IV. GUARANTEES
• 75% of the amount in default for credits facility secured by way of primary security.
• 50% of the amount in default for unsecured credits facility.
Payout Cap
• The payout cap for any given year will be calculated at 2 times of the total receipts (i.e.
guarantee fee plus recoveries post 1st claim settlement paid to CGTMSE under the Scheme) of
the previous financial year passed to CGTMSE by the lending institutions or dealing institutions
as applicable.
V. CLAIMS
The Member Lending Institutions (MLIs) are required to inform the date on which the account
was classified as NPA in a particular calendar quarter, by end of subsequent quarter.
10.1 The lending institution may invoke the guarantee in respect of credit facility within a
maximum period of 3 years from the NPA date or lock-in period end date, whichever is
later.
Lock-in period shall be of 18 months from either the date of last disbursement of the
loan to the borrower or the guarantee start date in respect of credit facility to the
borrower, whichever is later.
Claim(s) against default in account can be lodged by MLI if the following conditions are satisfied: -
a. The guarantee in respect of that credit facility is in force at the time of account turning
NPA.
c. The amount due and payable to the lending institution in respect of the credit facility
has not been paid and the dues have been classified by the lending institution as Non-
Performing Assets as per RBI guidelines. Provided that the lending institution shall not
make or be entitled to make any claim on the Trust in respect of the said credit facility
if the loss in respect of the said credit facility had occurred owing to actions / decisions
taken contrary to or in contravention of the guidelines issued by the Trust.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
d. The credit facility has been recalled and the recovery proceedings have been initiated
under due process of law. Mere issuance of recall notice under SARFAESI Act 2002
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 SARFAESI Act 2002, provided sufficient assets are available to recover the entire
dues, 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
instalment 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 instalment from
the Trust.
In addition to the above, Arbitration proceedings will also be considered eligible legal
action only under Option-2.
f. Claims of the respective MLI will be settled as per payout cap. Any claim lodged /
received exceeding the payout cap will be suspended till such time the position is
remedied i.e. payout is brought within the payout cap limit.
10.3 The claim should be preferred by the lending institution in such manner and within such
time as may be specified by the Trust in this behalf.
10.4 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 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 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.
10.5 In the event of default, the lending institution shall exercise its rights, if any, to take
over the assets of the borrowers and the amount realized, if any, from the sale of such
assets or otherwise shall first be credited in full by the lending institutions to the Trust
before it claims the remaining 25 per cent of the guaranteed amount.
10.6 The lending institution shall be liable to refund the claim released by the Trust together
with penal interest at the rate specified by the Trust above the prevailing Bank Rate, if
such a recall is made by the Trust in the event of serious deficiencies having existed in
the matter of appraisal / renewal / follow-up / conduct of the credit facility or where
lodgement of the claim was more than once or where there existed suppression of any
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Credit Guarantee Scheme for Co-Lending (CGSCL)
material information on part of the lending institutions for the settlement of claims.
The lending institution shall pay such penal interest, when demanded by the Trust, from
the date of the initial release of the claim by the Trust to the date of refund of the claim.
10.7 MLIs can update, allocate and remit the recoveries/ OTS amount received post
settlement of first instalment of claim in the CGTMSE portal.
10.8 While online lodgement of first claim, MLIs have to submit the Declaration &
Undertaking (D&U) electronically along with the checklist displayed in the system.
The settlement of second / final instalment will be as per the extant guidelines of CGS-I/CGS-
II (which are identical).
Claim Settlement
All claims of the eligible pair will be settled in the designated escrow account or in the account as
informed by pair of MLIs and acceptable to the Trust.
(i) The lending institution shall furnish to the Trust, the details of its efforts for recovery,
realizations and such other information as may be demanded or required from time to
time. The lending institution will hold lien on assets created out of the credit facility
extended to the borrower, on its own behalf and on behalf of the Trust. The Trust shall
not exercise any subrogation rights and that the responsibility of the recovery of dues
including takeover of assets, sale of assets, etc., shall rest with the lending institution.
(ii) 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.
(iii) 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 specified by the Trust for the period for which payment remains
outstanding after the expiry of the said period of 30 days.
(iv) MLIs are required to provide a certificate from their Statutory Auditors in respect of
remittance of recoveries made, post settlement of claims. MLIs can obtain the recovery
certificate duly authenticated by their Head of Audit Department / Zonal /Regional
Offices confirming remittance of entire recoveries netting off legal expenses, if any, and
including refund of 1st claim, if any, to CGTMSE during the FY as per the format given vide
Circular No.188/2021-22 dated November 03, 2021. Head Office of the respective MLI
may consolidate the information so received from their MLIDs/Regional/Zonal/Circle
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Credit Guarantee Scheme for Co-Lending (CGSCL)
Offices and submit the final consolidated certificate to CGTMSE duly signed by an
authorized official not below the rank of General Manager/President. Such certificate for
a particular FY must be submitted by MLIs by September 30th of the succeeding year.
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Credit Guarantee Scheme for Co-Lending (CGSCL)
VI. MISCELLANEOUS
The amount received from the lending institutions shall be appropriated in the order in
which the service fee / annual guarantee fee, penal interest and other charges have fallen
due. If the service fee / annual guarantee fee and the penal interest have fallen due on
the same date, then the appropriation shall be made first towards service fee / annual
guarantee fee and then towards the penal interest and finally towards any other charges
payable in respect of the eligible credit facility.
13. Appropriation of amount realized by the lending institution in respect of a credit facility after
the guarantee has been invoked.
Where subsequent to the Trust having released a sum to the lending institution towards
the amount in default in accordance with the provisions contained in the Section 10 of
this scheme, the lending institution recovers money subsequent to the recovery
proceedings initiated by it, the same shall be deposited by the lending institution with
the Trust, after adjusting towards the legal cost incurred by it for recovery of the amount.
The Trust shall appropriate the same first towards the pending annual service fee /
annual guarantee fee, penal interest, and other charges due to the Trust, if any, in
respect of the credit facility towards which the amount has been recovered by the
lending institution, and the balance, if any, shall be appropriated in such a manner so
that losses on account of deficit in recovery of the credit facility between the Trust and
the lending institution are in the proportion of 50%/75% / 80% / 85% and 50%/ 25% /
20% / 15%, respectively.
(i) If the liabilities of a borrower to the lending institution on account of any eligible credit
facility guaranteed under this Scheme are transferred or assigned to any other borrower
and if the conditions as to the eligibility of the borrower and the amount of the facility
and any other terms and conditions, if any, subject to which the credit facility can be
guaranteed under the Scheme are not satisfied after the said transfer or assignment, the
guarantee in respect of the credit facility shall be deemed to be terminated as from the
date of the said transfer or assignment.
(ii) If a borrower becomes ineligible for being granted any credit facilities under the Scheme,
by reason of cessation of his activity or his undertaking ceasing to come within the
definition of a MSE unit, the liability of the Trust in respect of any credit facilities granted
to him by a lending institution under the Scheme shall be limited to the liability of the
borrower to the lending institution as on the date on which the borrower becomes so
ineligible, subject, however, to the limits on the liability of the Trust fixed under this
Scheme. However, notwithstanding the death or retirement of a partner where the
borrower is a partnership firm or the death of one of the joint borrowers, if the lending
institution is entitled to continue the credit facilities to the surviving partner or partners
or the surviving borrower or borrowers, as the case may be and if the credit facilities
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Credit Guarantee Scheme for Co-Lending (CGSCL)
have not already become non-performing asset, the guarantee in respect of such credit
facilities shall not to be deemed to be terminated as provided in this paragraph.
The lending institution shall submit such statements and furnish such information as the
Trust may require in connection with any credit facility under this Scheme.
(i) The lending institution shall also furnish to the Trust all such documents, receipts,
certificates and other writings as the latter may require and shall be deemed to have
affirmed that the contents of such documents, receipts, certificates and other writings
are true, provided that no claim shall be rejected and no liability shall attach to the
lending institution or any officer thereof for anything done in good faith.
(ii) The Trust shall, insofar as it may be necessary for the purposes of the Scheme, have the
right to inspect or call for copies of the books of account and other records (including
any book of instructions or manual or circulars covering general instructions regarding
conduct of advances) of the lending institution, and of any borrower from the lending
institution. Such inspection may be carried out either through the officers of the Trust or
of SIDBI (in case of Institutions other than SIDBI) or any other person appointed by the
Trust for the purpose of inspection. Every officer or other employee of the lending
institution or the borrower, who is in a position to do so, shall make available to the
officers of the Trust or SIDBI or the person appointed for the inspection as the case may
be, the books of account and other records and information which are in his possession.
16. Conditions imposed under the Scheme to be binding on the lending institution
(i) Any guarantee given by the Trust shall be governed by the provisions of the Scheme as if
the same had been written in the documents evidencing such guarantee.
(ii) The lending institution shall as far as possible ensure that the conditions of any contract
relating to an account guaranteed under the Scheme are not in conflict with the
provisions of the Scheme but notwithstanding any provision in any other document or
contract, the lending institution shall in relation to the Trust be bound by the conditions
imposed under the Scheme.
(i) The Trust reserves to itself the right to modify, cancel or replace the scheme so, however,
that the rights or obligations arising out of, or accruing under a guarantee issued under
the Scheme up to the date on which such modification, cancellation or replacement
comes into effect, shall not be affected.
(ii) Notwithstanding anything contained herein, the Trust shall have a right to alter the terms
and conditions of the Scheme in regard to an account in respect of which guarantee has
not been issued as on the date of such alteration.
(iii) In the event of the Scheme being cancelled, no claim shall lie against the Trust in respect
of facilities covered by the Scheme, unless the provisions contained in Clause (i) and (ii)
15
Credit Guarantee Scheme for Co-Lending (CGSCL)
of Section 10 of the Scheme are complied with by the lending institution prior to the date
on which the cancellation comes into force.
18. Interpretation
If any question arises in regard to the interpretation of any of the provisions of the
Scheme or of any directions or instructions or clarifications given in connection
therewith, the decision of the Trust shall be final.
In respect of any matter not specifically provided for in this Scheme, the Trust may make
such supplementary or additional provisions or issue such instructions or clarifications as
may be necessary for the purpose of the Scheme.
****
16
Annexure II
To
Dear Sir,
In consideration of the Credit Guarantee Fund Trust for Micro and Small
Enterprises (hereinafter referred to as “the Trust” which expression shall, unless
repugnant to the context, also include its successors and assigns), agreeing to
guarantee under the CREDIT GUARANTEE SCHEME FOR CO-LENDING (CGSCL)
(a copy whereof is hereto annexed and which is hereinafter referred to as “the
Scheme”), certain credit facilities granted by us to eligible borrowers in the Micro and
Small Enterprises (MSE) Sector, we ____________________________________
(Name of lending institution), do hereby agree with the Trust as follows :
1. That the provisions of this Undertaking shall be in addition to, and not in derogation
of, the provisions of the Scheme and the guidelines and instructions issued by the
Trust from time to time.
2. That the provisions of the Scheme and such modifications as may be made
thereto from time to time shall be deemed to be incorporated in this Undertaking
and shall be binding on us, in so far they relate to the credit facilities granted by
us to borrowers which have been or are eligible for being guaranteed thereunder.
3. That the provisions of the Scheme along with modifications, if any, and this
Undertaking shall be applicable to or in relation to all credit facilities eligible for
guarantee under the Scheme.
4. That we shall claim the benefit of the guarantee under the Scheme only in respect
of the credit facilities specified in the Scheme and to the extent provided therein
and that we shall for this purpose obtain and preserve affidavits or other
documents from the borrowers concerned or otherwise satisfy ourselves by
reference to the borrowers’ books of account or other records that the borrowers
in respect of whom the benefit of the guarantee has been or is to be provided by
the Trust are eligible for the guarantee under the Scheme.
6. That the books of accounts, ledgers and other documents relating to eligible credit
facilities, covered by the Scheme shall, as far as may be practicable, be
segregated and maintained in a proper manner so as to facilitate such scrutiny or
inspection as may be undertaken by The Small Industries Development Bank of
India (SIDBI) or by the Government of India (GOI) or by the Trust or by any other
person nominated by the Trust in this behalf.
7. That we undertake to make available to the Officers of GOI / SIDBI or of the Trust
or of any agency which may be specified by the Trust in this behalf, as the case
may be, all our books and records and provide such other facilities as may be
required for such scrutiny and inspection.
8. That we shall furnish to the Trust a statement in a form and manner required by
the Trust, showing the outstanding balances with break-up of principal and interest
/ other expenses details, details of restructuring package, etc. in respect of the
eligible credit facilities covered under the Scheme, as and when required by the
Trust.
9. That we shall furnish to the Trust thereafter such statements or information as the
Trust may require about the eligible credit facilities in such form and manner, and
at such intervals, as may be required by the Trust.
10. That in order to enable the Trust to ascertain whether a claim made on it is on
account of any eligible credit facility which has been so covered, we shall preserve
in good order the detailed statement or statements referred to in clauses 7, 8 and
9 hereof as also the relevant documents relating to the credit facility.
11. That we shall, in respect of every eligible credit facility, exercise due diligence in
recovering the dues, and safeguarding the interest of the Trust. We shall, in
particular, refrain from any act of omission or commission either prior to or
subsequent to invocation of guarantee, which may adversely affect the interest of
the Trust as the guarantor, and obtain prior permission of the Trust before entering
into any compromise or agreement with the borrower or any other party which
may have the effect on discharge of assets.
12. That for invoking the guarantee under the Scheme we undertake to submit to the
Trust an application in such form as may be specified by the said Trust and furnish
such other information as may be required of us by the Trust.
13. That we shall secure for the Trust or its appointed agency the right to inspect the
business and factory premises and books of account of the borrowers if and when
considered necessary by the Trust.
14. That we shall secure for the Trust or its appointed agency the right to list the
defaulted borrowers names and particulars on the web site by the Trust.
15. That notwithstanding anything to the contrary contained in the Scheme, if any loss
occurs in respect of an account covered by the Scheme owing to actions /
decisions taken contrary to or in contravention of the guidelines issued by the
Trust, we shall not make and shall not also be entitled to any claim on the Trust in
respect of the said account.
Annexure II
16. That all applications, documents, receipts, statements and other papers shall be
signed on behalf of our institution by the Chief Executive Officer or by other
persons in our employment who shall be deemed to be authorised by us to sign
all such applications, documents, receipts, statements and other papers and that
any irregularity in the signature, or want of authority of the persons so signing shall
not in any way affect or prejudice the rights of the Trust or affect our liability in
respect thereof.
17. That all data, including applications, periodical returns, funds transfer, updated or
transferred to the Trust in the electronic form, shall be deemed to be signed on
behalf of our institution by the Chief Executive Officer or by other persons in our
employment who shall be deemed to be authorised by us to sign all such
applications, documents, receipts, statements and other papers and that any
irregularity in the use of member-id, or want of authority of the persons so signing
shall not in any way affect or prejudice the rights of the Trust or affect our liability
in respect thereof.
18. That we shall introduce and follow such accounting arrangements as may be
necessary or as may be required by the Trust or take such other steps as may be
necessary or expedient for protecting its interests in respect of the outstanding
balances on account of credit facilities in regard to which the Trust’s guarantee is
invoked by us.
19. That this Undertaking shall take effect from the first day of ____________.
20. That the stamp duty payable on this Undertaking shall be borne by us.
Yours faithfully,
Note :
(i) This Undertaking is to be executed by the lending institution for getting itself
registered as Member to avail of the guarantee facility extended by the Trust.
(iii) This Undertaking is to be stamped as an agreement. The value of stamp duty will
depend upon the place where it is executed and/ or acted upon.
*****
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