CGTSI/(44)/ 521

July 2, 2007

All Member Lending Institutions of CGTSI

Circular No. 36

/ 2007-08

Dear Sir,

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

CGTSI/(44)/ 678

July 30, 2007

All Member Lending Institutions of CGTSI

Dear Sir,

Financial Sector Plan for the North Eastern RegionModifications in the Credit Guarantee Scheme

Please refer our Circular No. 37 dated July 02, 2007, regarding the captioned subject. We have
received some queries relating to the maximum extent of guarantee cover. We advise that the
extent of guarantee cover has been raised to 80% for loans in the North Eastern Region.
Consequently, the maximum guarantee cover will be raised to Rs.40 lakh (Rupees Forty lakh only)
in place of the existing Rs. 37.50 lakh for such loans.

Yours faithfully,
Sd/-

(P.M.Radhakrishnan)
Deputy General Manager

September 10,2007

CGTSI/(44)/
All Member Lending Institutions of CGTSI

Circular No. 38 / 2007-08

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 CGTMSEs 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.

Yours faithfully,
Sd/-

(P.M.Radhakrishnan)
Deputy General Manager

September 21,2007

CGTSI/(44)/ 972
All Member Lending Institutions of CGTSI

Circular No. 39 / 2007-08

Dear Sir/Madam,

Modifications in the Credit Guarantee Scheme

In terms of Circular No. 36 / 2007-2008 dated July 02, 2007, the coverage of the
scheme has been extended to all new and existing Micro and Small Enterprises ( both in the
manufacturing sector as well as in the service sector). In this connection, in respect of Micro
and Small Enterprises (in the service sector), you are advised to adhere to the RBIs guidelines
on Lending to Priority Sector ie.

include small road and water transport operatiors, small

business, professional and self employed persons and all other service enterprises under the
ambit of Micro and Small Enterprises but exclude retail trade. You are requested to advise your
operating offices (Zonal / Branch Offices) accordingly in this regard.

Thanking you,

Yours faithfully,
Sd/-

(P.M.Radhakrishnan)
Deputy General Manager

October 15,2007

CGTSI/(44)/ 1075
All Member Lending Institutions of CGTSI

Circular No. 40 / 2007-08

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.
Thanking you,

Yours faithfully,
Sd/-

(P.M.Radhakrishnan)
Deputy General Manager

Anne
xure
Ch. No.

Original Provision

Modified Provision

1. (i)

The Scheme shall be known as the

Credit Guarantee Fund Scheme for
Small Industries (CGFSI)

The Scheme shall be known as the

Credit Guarantee Fund Scheme for
Micro
and
Small
Enterprises
(CGMSE)

2 (iv)

Eligible borrower means new 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.

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.

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
Guarantee Fund (Scheme) for
Small Industries.

Scheme
means
the
Credit
Guarantee Fund (Scheme) for Micro
and Small Enterprises

2 (xiii).

Small Scale Industrial Unit 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 (xv).

Trust means the Credit 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 Scheme :
The Trust shall cover credit facilities
extended,
by
eligible
lending
institution(s) in respect of a single
eligible borrower not exceeding
Rs.25 lakh 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 IT and
software industries, without any
collateral security and\or third
party guarantees.

Credit facilities eligible under

the Scheme :
The Trust shall cover credit facilities
extended,
by
eligible
lending
institution(s) in respect of a single
eligible borrower not exceeding
Rs.50 lakh by way of term loan
and/or working capital facilities on
or after entering into an agreement
with the Trust, to the Micro and
Small enterprises, without any
collateral security and\or third
party guarantees.

9.

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 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.

Extent of the guarantee :

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 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.