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C - Credit Facilities & Parameters

1.       What is quantum of credit facility that can be covered under the Scheme?

Fund and non-fund based (Letters of Credit, Bank Guarantee etc.) credit facilities up to 200 lakh per eligible borrower are covered under the guarantee scheme provided they are extended purely on the project viability without collateral security or third party guarantee.

 

2.       Can a credit facility of over 200 lakh be covered under the Scheme?

Yes, provided that the entire credit facility is extended without any collateral security and it is otherwise eligible for a guarantee cover under the Scheme. The guarantee cover available will be restricted to credit of 200 lakh even though credit extended is more than 200 lakh to an eligible borrower. In other words, maximum of credit risk borne by CGTMSE is restricted to 100 lakh i.e. 50% of amount in default.

 

3.      What would be the guarantee / service fee that would be payable by the member-lending institution on credit facility sanctioned in excess of 200 lakh?

Presently, annual guarantee fee is payable @1% (0.75% or 0.85% in case of Women, Micro and units in North Eastern Region including state of Sikkim) for loans up to 5 Lakh and 5 Lakhs and above respectively, also from April,01, 2016 differential pricing on the fees is applicable on the credit facility agreed to be covered by the Trust. In this case, maximum of 200 lakh would be extended guarantee cover even though the sanctioned amount exceeds 200 lakh.

 

4.      Can term loan or working capital facility alone be extended by an eligible lender and still be covered under the guarantee scheme?

Yes, a lender can extend either term loan or working capital facility alone and still be eligible for a guarantee cover if it meets the other eligibility parameters. Needless to say, the credit facility extended to a borrower should be without any collateral security and/or third party guarantee.

 

5.     Can a credit facility extended to a borrower against a collateral security be covered under the Guarantee Scheme, if the lending institution relinquishes its rights on the collateral security?

Yes, provided the lending institution relinquishes its rights on the collateral assets and releases the same in favour of the borrower before seeking guarantee cover and subject to fulfilment of the other norms of the Scheme. Further, in case the MLIs has to retain the collateral security for the existing credit facility, a new credit facility extended to same borrower, without taking collateral can be covered under the scheme provided, the MLI is not extending the charge on the existing collateral to new facility.

 

6.     Is there any ceiling in respect of interest to be levied on the credit facility advanced to the borrower if the same is to be covered under the Scheme?

Any credit facility which has been sanctioned by the lending institution with the maximum interest rate not more than 14% p.a. and 18% p.a. including cost of guarantee cover/(Average Base Rate decided by the trust from time to time as applicable to RRBs prior to 01/08/2017.) would be eligible for coverage under CGS I and CGS II respectively.. This supersedes the existing guidelines of CGTMSE on ceiling of interest rate that could be charged by MLIs on guaranteed loans (Refer Circular no. 131) .The revised guidelines on ceiling on Interest Rate that could be charged for the guarantee covered credit facilities would be applicable also to those MLIs who would not be eligible for enhanced credit guarantee coverage from 100 lakh to 200 lakh

 

7.      Is it possible to cover credit facilities, which have already become NPA?

No, the credit facility that has already become NPA cannot be covered under the Scheme.

 

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