About CGTMSE Scheme
A - Member Lending Institutions - Eligibility, responsibility etc.
B. Eligible Borrowers
C. Credit facilities
D. Primary Security vis-a-vis Collateral security/personal vis-à-vis third party guarantee
E. Guarantee fee / Service fee
F. Credit guarantee - extent of cover, invocation, claim etc.
G. Legal proceedings, OTS etc.
H. General
I. Frequently Asked IT related Questions (For MLI's only).
A - Member Lending Institutions - Eligibility, responsibility etc.
1. Which are considered as eligible lending institutions under the Scheme?
All Scheduled Commercial Banks (either PSU, Private or Foreign Banks), selected Regional Rural Banks, selected state financial corporations or NBFC's or such of those institutions as may be directed by GOI can avail of guarantee cover in respect of their eligible credit facilities under the Scheme. Small Industries Development Bank of India (SIDBI), National Small Industries Corporation Ltd. (NSIC) and North Eastern Development Finance Corporation Ltd. (NEDFi) have been included as eligible institutions. .
2. Can a Private sector bank or a foreign bank be eligible for guarantee cover?
Yes, provided it is a commercial bank listed in the II Schedule to the Reserve Bank of India Act, 1934.
3. Is Regional Rural Bank eligible for guarantee cover?
Yes, fulfilling the criteria of circular dated June 10, 2014 on "Review of Interest cap and other registration criteria of Regional Rural Banks (RRBs) as Member Lending Institutions (MLIs) of CGTMSE". The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by select RRB(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility not exceeding 50 lakh 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.
4. Whether SFCs, Twin Function IDCs, Scheduled Co-operative Banks, Urban Co-operative Banks and NBFCs are eligible lending institutions for availing guarantee cover under the CGTMSE?
Select SFCs / NBFCs are being considered for inclusion as MLI, other institutions are not eligible to become a MLI.
5. When can the eligible lending institutions apply for guarantee cover in respect of eligible credit facilities under the Scheme?
The eligible lending institutions are required to enter into a 'one time' agreement with CGTMSE for becoming Member Lending Institutions (MLIs) of the Trust. MLIs can then apply for guarantee cover in respect of eligible credit facility sanctioned to any eligible borrower. The MLIs can apply 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.
6. Whether the Trust will re-appraise the proposals sanctioned by the MLIs for approving guarantee cover?
MLIs are expected to support only viable proposals using their commercial discretion and due diligence. CGTMSE will have full trust in their credit evaluation. The Trust will not re-evaluate the proposals sanctioned by MLIs. If the proposals satisfy the basic norms laid down under the CGS, the Trust will extend guarantee cover.
7. Where the MLIs can get the details of accounts covered under CGTMSE?
Our website www.cgtmse.in has 'Reports and MIS' module to enable the MLIs to generate standard reports. MLI can log on to the website-member page, using member-ID allotted and generate the reports desired by it viz. status of the application lodged, Demand for GF/ASF, monthly reports etc
B ELIGIBLE BORRWERS
1. Which type of borrowers can be covered under the Scheme?
New and existing Micro and Small Enterprises engaged in manufacturing or service activity excluding Retail Trade, Educational Institutions, Agriculture, Self Help Groups (SHGs), Training Institutions etc.
2. Whether Borrowers from all service sector enterprises are eligible under the Scheme?
As of now, all activities that come under service sector as per MSMED Act, 2006 except retail trade are eligible for coverage under the scheme.
3. Whether loans given to Small Road Transport Operators are eligible for coverage under the Scheme?
Yes. Small road and water transport loans are eligible for guarantee cover.
4. Is it compulsory for the borrower to obtain Income Tax Permanent Account Number [IT-PAN] to be an eligible borrower?
Under the Guarantee Scheme, a borrower is required to obtain IT PAN number prior to availing of credit facility from the eligible lending institution. Also it is a mandatory requirement under section 139A(5) read with section 272(C) of the I.T Act 1961 to indicate IT PAN on all tax documents which include returns, challans, appeals, etc. However, in respect of loans up to 5 lakh, CGTMSE is presently not insisting that the IT PAN be obtained at the time of availing of the guarantee cover. IT Pan No. is to be indicated in respect of credit facility above 5 lakh. Nevertheless, the MLIs have been advised to inform their borrowers to apply for IT PAN number. It is desirable to indicate IT Pan No. in all the application irrespective of the amount. (Refer Circular no. 112)
5. Is guarantee benefit available to existing units of a lending institution which has become a MLI of CGTMSE?
In case of existing units, additional credit facilities in the form of term loan or renewal of working capital facilities can be covered as and when the facilities are extended, provided no collateral security and/ or third party guarantee is obtained. Part of the credit facility with collateral and part of the facility without collateral for guarantee cover would not be entertained if it is considered as a composite credit.
6. Is it necessary that a borrower to be eligible should obtain all the required credit facilities from a single institution?
Credit facilities can be extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower up to a maximum limit of 200 lakh per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust. However, sharing of securities will not be permitted.
7. Co-financing to a MSE unit by Financial Institution with a Commercial Bank can be covered under the Scheme?
Yes, joint financing by a financial institution (e.g. SIDBI, NSIC, and NEDFi) and Commercial bank can be covered under the scheme. For e.g. MSE unit is financed by term loan from State financial institution and Working capital from a commercial bank. However, sharing of securities will not be permitted.
8. Whether credit facility extended to self-help group can be covered under the scheme?
No. At present, as per the Scheme, the credit facility extended to Self Help Group cannot be covered.
C.credit facilities
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.
D.Primary and secondary security
What is the difference between primary security and collateral security?
Primary security is the asset created out of the credit facility extended to the borrower and / or which are directly associated with the business / project of the borrower for which the credit facility has been extended. Collateral security is any other security offered for the said credit facility. For example, hypothecation of jewellery, mortgage of house, etc.
Example: Land, Plant & Machinery or any other business property in the name of a proprietor or unit, if unencumbered, can be taken as primary security.
2. Under the Scheme, any third party guarantee obtained for the credit facilities will make them ineligible for guarantee cover. What is third party guarantee?
As per the extent guidelines no third party guarantee should be obtained if the account is to be covered under the Credit Guarantee Scheme. However, in case the constitution of the borrower is proprietary or partnership, the personal guarantee of proprietor/ partner is not treated as third party guarantee. Similarly, Personal guarantee of directors, where borrower constitution is a company will not be treated as third party guarantee. Personal guarantee of spouse, friend etc. will be treated as third party guarantee.
E - Annual Guarantee Fee (AGF)
1. Whether the incidence of Annual Guarantee Fee be passed on by the lender to the borrower?
The discretion is left to the MLI.
2. Whether the rates of Annual Guarantee Fee can be varied after the commencement of guarantee cover?
Any change in the Annual Guarantee Fee will be intimated to MLI from time to time. Any change in rate will have only prospective effect on the future proposals to be covered under the Scheme. As regards to Fee charged annually, it is payable on the guaranteed credit facilities as on March 31, the prevailing rate at that time will apply.
3. Is service fee payable even after lodgement of claim?
Yes, Annual Service Fee/AGF is required to pay after lodgement of claim till settlement of first instalment of 75% of the guaranteed amount. However, no claim can be lodged before the expiry of the initial lock-in period (ie.18 months from the date of issue of the guarantee cover or the date of last disbursement, whichever is later).
4. What would be the Annual Guarantee Fee that would be payable by the member-lending institution on credit facility sanctioned in excess of 200 lakh?
The Annual Guarantee Fee payable would be on the loan amount approved by CGTMSE subject to a maximum of 200 Lakh. In this case, 200 lakh would be extended guarantee cover even though the sanctioned amount exceeds 200 lakh. Similarly, the Annual Guarantee Fee (AGF) would be payable on the approved amount by CGTMSE subject to a ceiling of 200 Lakh.
5. How is the Annual Guarantee fee payable for the first year?
In the first year of coverage of each guaranteed unit, the Annual Guarantee Fee is calculated for 1yr. In the succeeding year, it is worked out on pro-rata basis i.e. at the applicable rate of fee charged for the period (no. of days) of outstanding, till March 31. For calculation of Annual Guarantee Fee, number of days in a year is taken as 365. For subsequent years, service fee is charged for the whole year, on the credit facility guaranteed except for terminal year or closed cases where it is on pro rata basis.
A - Member Lending Institutions - Eligibility, responsibility etc.
B. Eligible Borrowers
C. Credit facilities
D. Primary Security vis-a-vis Collateral security/personal vis-à-vis third party guarantee
E. Guarantee fee / Service fee
F. Credit guarantee - extent of cover, invocation, claim etc.
G. Legal proceedings, OTS etc.
H. General
I. Frequently Asked IT related Questions (For MLI's only).
A - Member Lending Institutions - Eligibility, responsibility etc.
1. Which are considered as eligible lending institutions under the Scheme?
All Scheduled Commercial Banks (either PSU, Private or Foreign Banks), selected Regional Rural Banks, selected state financial corporations or NBFC's or such of those institutions as may be directed by GOI can avail of guarantee cover in respect of their eligible credit facilities under the Scheme. Small Industries Development Bank of India (SIDBI), National Small Industries Corporation Ltd. (NSIC) and North Eastern Development Finance Corporation Ltd. (NEDFi) have been included as eligible institutions. .
2. Can a Private sector bank or a foreign bank be eligible for guarantee cover?
Yes, provided it is a commercial bank listed in the II Schedule to the Reserve Bank of India Act, 1934.
3. Is Regional Rural Bank eligible for guarantee cover?
Yes, fulfilling the criteria of circular dated June 10, 2014 on "Review of Interest cap and other registration criteria of Regional Rural Banks (RRBs) as Member Lending Institutions (MLIs) of CGTMSE". The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by select RRB(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility not exceeding 50 lakh 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.
4. Whether SFCs, Twin Function IDCs, Scheduled Co-operative Banks, Urban Co-operative Banks and NBFCs are eligible lending institutions for availing guarantee cover under the CGTMSE?
Select SFCs / NBFCs are being considered for inclusion as MLI, other institutions are not eligible to become a MLI.
5. When can the eligible lending institutions apply for guarantee cover in respect of eligible credit facilities under the Scheme?
The eligible lending institutions are required to enter into a 'one time' agreement with CGTMSE for becoming Member Lending Institutions (MLIs) of the Trust. MLIs can then apply for guarantee cover in respect of eligible credit facility sanctioned to any eligible borrower. The MLIs can apply 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.
6. Whether the Trust will re-appraise the proposals sanctioned by the MLIs for approving guarantee cover?
MLIs are expected to support only viable proposals using their commercial discretion and due diligence. CGTMSE will have full trust in their credit evaluation. The Trust will not re-evaluate the proposals sanctioned by MLIs. If the proposals satisfy the basic norms laid down under the CGS, the Trust will extend guarantee cover.
7. Where the MLIs can get the details of accounts covered under CGTMSE?
Our website www.cgtmse.in has 'Reports and MIS' module to enable the MLIs to generate standard reports. MLI can log on to the website-member page, using member-ID allotted and generate the reports desired by it viz. status of the application lodged, Demand for GF/ASF, monthly reports etc
B ELIGIBLE BORRWERS
1. Which type of borrowers can be covered under the Scheme?
New and existing Micro and Small Enterprises engaged in manufacturing or service activity excluding Retail Trade, Educational Institutions, Agriculture, Self Help Groups (SHGs), Training Institutions etc.
2. Whether Borrowers from all service sector enterprises are eligible under the Scheme?
As of now, all activities that come under service sector as per MSMED Act, 2006 except retail trade are eligible for coverage under the scheme.
3. Whether loans given to Small Road Transport Operators are eligible for coverage under the Scheme?
Yes. Small road and water transport loans are eligible for guarantee cover.
4. Is it compulsory for the borrower to obtain Income Tax Permanent Account Number [IT-PAN] to be an eligible borrower?
Under the Guarantee Scheme, a borrower is required to obtain IT PAN number prior to availing of credit facility from the eligible lending institution. Also it is a mandatory requirement under section 139A(5) read with section 272(C) of the I.T Act 1961 to indicate IT PAN on all tax documents which include returns, challans, appeals, etc. However, in respect of loans up to 5 lakh, CGTMSE is presently not insisting that the IT PAN be obtained at the time of availing of the guarantee cover. IT Pan No. is to be indicated in respect of credit facility above 5 lakh. Nevertheless, the MLIs have been advised to inform their borrowers to apply for IT PAN number. It is desirable to indicate IT Pan No. in all the application irrespective of the amount. (Refer Circular no. 112)
5. Is guarantee benefit available to existing units of a lending institution which has become a MLI of CGTMSE?
In case of existing units, additional credit facilities in the form of term loan or renewal of working capital facilities can be covered as and when the facilities are extended, provided no collateral security and/ or third party guarantee is obtained. Part of the credit facility with collateral and part of the facility without collateral for guarantee cover would not be entertained if it is considered as a composite credit.
6. Is it necessary that a borrower to be eligible should obtain all the required credit facilities from a single institution?
Credit facilities can be extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower up to a maximum limit of 200 lakh per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust. However, sharing of securities will not be permitted.
7. Co-financing to a MSE unit by Financial Institution with a Commercial Bank can be covered under the Scheme?
Yes, joint financing by a financial institution (e.g. SIDBI, NSIC, and NEDFi) and Commercial bank can be covered under the scheme. For e.g. MSE unit is financed by term loan from State financial institution and Working capital from a commercial bank. However, sharing of securities will not be permitted.
8. Whether credit facility extended to self-help group can be covered under the scheme?
No. At present, as per the Scheme, the credit facility extended to Self Help Group cannot be covered.
C.credit facilities
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.
D.Primary and secondary security
What is the difference between primary security and collateral security?
Primary security is the asset created out of the credit facility extended to the borrower and / or which are directly associated with the business / project of the borrower for which the credit facility has been extended. Collateral security is any other security offered for the said credit facility. For example, hypothecation of jewellery, mortgage of house, etc.
Example: Land, Plant & Machinery or any other business property in the name of a proprietor or unit, if unencumbered, can be taken as primary security.
2. Under the Scheme, any third party guarantee obtained for the credit facilities will make them ineligible for guarantee cover. What is third party guarantee?
As per the extent guidelines no third party guarantee should be obtained if the account is to be covered under the Credit Guarantee Scheme. However, in case the constitution of the borrower is proprietary or partnership, the personal guarantee of proprietor/ partner is not treated as third party guarantee. Similarly, Personal guarantee of directors, where borrower constitution is a company will not be treated as third party guarantee. Personal guarantee of spouse, friend etc. will be treated as third party guarantee.
E - Annual Guarantee Fee (AGF)
1. Whether the incidence of Annual Guarantee Fee be passed on by the lender to the borrower?
The discretion is left to the MLI.
2. Whether the rates of Annual Guarantee Fee can be varied after the commencement of guarantee cover?
Any change in the Annual Guarantee Fee will be intimated to MLI from time to time. Any change in rate will have only prospective effect on the future proposals to be covered under the Scheme. As regards to Fee charged annually, it is payable on the guaranteed credit facilities as on March 31, the prevailing rate at that time will apply.
3. Is service fee payable even after lodgement of claim?
Yes, Annual Service Fee/AGF is required to pay after lodgement of claim till settlement of first instalment of 75% of the guaranteed amount. However, no claim can be lodged before the expiry of the initial lock-in period (ie.18 months from the date of issue of the guarantee cover or the date of last disbursement, whichever is later).
4. What would be the Annual Guarantee Fee that would be payable by the member-lending institution on credit facility sanctioned in excess of 200 lakh?
The Annual Guarantee Fee payable would be on the loan amount approved by CGTMSE subject to a maximum of 200 Lakh. In this case, 200 lakh would be extended guarantee cover even though the sanctioned amount exceeds 200 lakh. Similarly, the Annual Guarantee Fee (AGF) would be payable on the approved amount by CGTMSE subject to a ceiling of 200 Lakh.
5. How is the Annual Guarantee fee payable for the first year?
In the first year of coverage of each guaranteed unit, the Annual Guarantee Fee is calculated for 1yr. In the succeeding year, it is worked out on pro-rata basis i.e. at the applicable rate of fee charged for the period (no. of days) of outstanding, till March 31. For calculation of Annual Guarantee Fee, number of days in a year is taken as 365. For subsequent years, service fee is charged for the whole year, on the credit facility guaranteed except for terminal year or closed cases where it is on pro rata basis.
No comments:
Post a Comment