Facilities & Parameters
Credit Guarantee Schemes for Banks (CGS-I) Credit Guarantee Schemes for Banks (CGS-I)
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 on the project viability without collateral security or third party guarantee.However, under the "Hybrid Security" product, the MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of 200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE.
2. Can a credit facility of over 200 lakh be covered under the Scheme?
Yes, 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 150 lakh i.e. 75% 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?
AGF would be charged on the outstanding loan amount instead of guaranteed amount for credit facilities sanctioned / renewed to MSEs on or after April 01, 2018. Please refer to Circular No. 139/2017-18 and Circular No.141/ 2017-18 (for Retail Trade) available in the website for more details.
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, MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of ₹200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however, have pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit 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.
8. As per Circular No 210, Retail/wholesale Trade is aligned with other activities in respect to fee, ceiling limit & extent of coverage. In this regard, whether existing Working Capital account of MSE Trading covered under CGTMSE is eligible for enhancement upto ₹200 lakh?
Yes, the revised ceiling limit of ₹200 lakh is also applicable to existing Working Capital covered under CGTMSE. Such WC account can be enhanced upto ₹200 lakh.