Credit Guarantee Scheme for Stand Up India (CGSSI) - F. No. 28/05/2016-CP/IF-II - Indian Law

MINISTRY OF FINANCE (Department of Financial Services) NOTIFICATION New Delhi, the 25th April, 2016 S.O. 1499(E). -In pursuance of the approval of the Cabinet vide its minutes of the meeting dated 6th January, 2016, the Central Government hereby makes the following scheme for the purpose of providing guarantees to loans extended under Stand Up India Scheme. CHAPTER I INTRODUCTION Title and date of commencement (i) The Scheme shall be known as the Credit Guarantee Scheme for Stand Up India (CGSSI) (ii) It shall come into force from the date notified by the Government of India. (iii) The broad objective of the Fund would be to guarantee credit facilities of over ₹ 10 lakh upto ₹ 100 lakh sanctioned by Scheduled Commercial Banks under the Stand Up India Scheme and other Lending Institutions. 1. Interest Rate The Interest Rate to be charged by the Member Lending Institution should be the lowest applicable rate for the category (as per rating) and should not in any case, be more than 3% p.a. over the Base Rate + tenor premium, if any, for the loan . 2. Definitions For the purposes of this Scheme (i) Stand Up India Scheme is the lending scheme as formulated and approved by Government of India. (ii) Amount in Default means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest), as on the date of the account becoming NPA, or the date of lodgement of claim application whichever is lower or such of the date as may be specified by NCGTC for preferring any claim against the guarantee cover subject to a maximum of amount guaranteed as mentioned in point no.10. (iii) Base Rate for a lending institution means the Base Rate so declared by that lending institution from time to time as per Reserve Bank of India guidelines based on which interest rate applicable for the loan will be determined. (iv) 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. (v) Collateral security means the security provided in addition to primary security / personal obligation of borrower/co-borrower. (vi) Eligible borrower means Scheduled Castes (SC), Scheduled Tribes (ST) and Women entrepreneurs, above 18 years of age, setting up Green Field Enterprises in non-farm sector. In case of non-individual enterprises, 51% of the shareholding and controlling stake should be held by either SC/ST and/or Women Entrepreneur. (vii) Fund means the Credit Guarantee Fund for Stand Up India (CGFSI) set up by Government of India with the purpose of guaranteeing assistance of above ₹ 10 lakh particularly for SC/ST/Women (relatively excluded sections of population) for setting up Greenfield enterprises; extended by the eligible lending institution. (viii) 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. (ix) Eligible Lending institution(s) means Scheduled Commercial Banks who meets eligibility criteria prescribed by the Fund and whose credit requirement does not exceed the specified limit. Specified limit of the assistance shall be above ₹ 10 lakh upto ₹ 100 lakh inclusive of working capital component or such other amount as may be decided by the Fund from time to time. (x) Material Date means the date on which the guarantee fee on the amount covered in respect of eligible borrower becomes payable by the lending institution to the Fund. (xi) Credit Facility means any financial assistance by way of term loan and / or fund based and non-fund based working capital (e.g. Bank Guarantee, Letter of credit etc) facilities extended by the eligible lending institution to the eligible borrower. (xii) Non Performing Assets means an asset classified as a non-performing asset based on the instructions and guidelines issued by the Reserve Bank of India from time to time. (xiii) Scheme means the Credit Guarantee Scheme for Stand Up India. (xiv) Lock-in-period means the period during which no invocation of guarantee can be made. A lock-in-period of 18 months has been stipulated from the date of commencement of guarantee cover or end of period of moratorium of interest, whichever is later. (xv ) NCGTC means National Credit Guarantee Trustee Company set up on March 28, 2014 by Government of India under the Companies Act 1956 to act as the Trustee to operate various Credit Guarantee Funds, set up/to be set up by Government of India from time to time. Accordingly, all matters pertaining to the operations of CGSSI would be undertaken by NCGTC on behalf of the said Fund Trust. CHAPTER II SCOPE AND EXTENT OF THE SCHEME 4. Guarantees by the Fund (i) Subject to the other provisions of the Scheme, the Fund undertakes, in relation to the credit facilities extended to an eligible borrower by an eligible lending institution which has entered into the necessary agreement for this purpose with the Fund, to provide guarantee against default in repayment of Stand Up India credit facilities extended by the lending institutions. (ii) The Fund reserves the discretion to accept or reject any proposal referred by a lending institution which otherwise satisfies the norms of the Scheme. 5. Stand Up assistance eligible under the Scheme: The Trust shall cover assistance of over ₹ 10 lakh upto ₹ 100 lakh inclusive of working capital extended by eligible lending institutions to a single eligible borrower on or after entering into an agreement with the Trust without any collateral security and/or third party guarantees or such amount as may be decided by the Trust from time to time. Provided that, as on the material date, (i) The dues to the lending institution have not become bad or doubtful of recovery; 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 utilised for adjustment of any debts deemed bad or doubtful of recovery, without obtaining a prior consent in this regard from the Trust. 6. Stand Up India Assistance not eligible under the Scheme The following credit facilities shall not be eligible for being guaranteed under the Scheme: - (i) Any credit facilities in respect of which risks are additionally covered under a scheme operated / administered by Deposit Insurance and Credit Guarantee Corporation or the Reserve Bank of India, to the extent they are so covered. (ii) Any credit facilities in respect of which risks are additionally covered by Government or by any general insurer or any other person or association of persons carrying on the business of insurance, guarantee or indemnity, to the extent they are so covered. (iii) Any credit facilities, 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 facilities granted to any borrower, who has availed of any other composite loan 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 composite loan. (v) Any credit facility which has been sanctioned by the lending institution against collateral security and / or third party guarantee. (vi) Any credit facility which has been sanctioned by the lending institution which is not conforming to the Stand Up India Scheme. 7. Agreement to be executed by the lending institution A lending institution shall not be entitled to a guarantee in respect of eligible Stand Up India credit facilities granted by it unless it has entered into an agreement with NCGTC in such form as may be required by NCGTC. 8. Responsibilities of lending institution under the Scheme: (i) The lending institution shall evaluate Stand Up India credit facilities in accordance with the guidelines issued by Reserve Bank of India / the Fund and conduct the account(s) of the borrowers with normal lending prudence. (ii) The lending institution shall collate all its outstanding eligible Stand Up India credit facilities extended against sanctions effected on or after the date of Gazette notification as at the end of a quarter (quarter ended March, June, September and December) into a batch and ensure to submit the information required by NCGTC for giving guarantee cover with regard to the Stand Up India borrowal account. (iii) The MLI would need to furnish a Management Certificate [as mentioned in point 9 (ii)] certifying the following: (a) All accounts in the quarterly batch conform to the Stand Up India Scheme and such credit facilities were sanctioned on or after the date of Gazette notification. (b) All accounts covered in the initial batch as well as new accounts added in the batch subsequently, are standard accounts. (c) All accounts which have turned NPA within the batch and for which claim has not been lodged have been included in the batch on which the guarantee fee is payable. (iv) The lending institution shall closely monitor the borrower account and follow up for repayment. (v) The lending institution shall ensure, to the extent applicable, linkage of every Stand Up India credit facility with Aadhar number and register the borrower s/co-borrower s name with an appropriate credit information bureau. (vi) The lending institution shall ensure that the guarantee claim in respect of the Stand Up India credit facility given to the borrower is lodged with NCGTC in form and manner and within such time as may be specified by NCGTC in this regard and that there shall not be any delay on its part to notify the default in the borrowers account which shall result in the Fund facing higher guarantee claims. (vii) The payment of guarantee claim by the Fund 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 with applicable interest. The lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of Stand Up India credit facility owed to it and initiate such necessary actions for recovery of the outstanding amount, including such action as may be advised by NCGTC. (viii) The lending institution shall comply with such directions as may be issued by NCGTC, from time to time, for facilitating recoveries in the guaranteed account, or safeguarding its interest as a credit guarantor, as NCGTC may deem fit and the lending institution shall be bound to comply with such directions. (ix) The lending institution shall, in respect of any guaranteed account, exercise the same diligence in recovering the dues, and safeguarding the interest of the Fund in all the ways open to it as it might have exercised in the normal course if no guarantee had been furnished by the Fund. 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 Fund as the guarantor. In particular, the lending institution should intimate NCGTC while entering into any compromise or arrangement, which may have effect of discharge or waiver of personal guarantee(s) or primary security. Further, the lending institution shall secure for the Fund or its appointed agency, through a stipulation in an agreement with the borrower or otherwise, the right to publish the defaulted borrowers' names and particulars NCGTC. CHAPTER III GUARANTEE FEE STRUCTURE 9. Guarantee Fee (i) For availing the guarantee coverage, the Member Lending Institution shall 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. All such sanctioned cases which have been disbursed (fully or partially) would only be eligible for applying for guarantee cover in quarterly batches. (ii) The Member Lending Institution shall pay a risk based guarantee fee of the sanctioned amount as per details given in Appendix. Such fee shall be paid on pro-rata basis for the first and last year and in full for the intervening years on the credit facility sanctioned (comprising term loan and / or working capital facility) within 16 days* from the end of the quarter in which the credit facility was sanctioned (subject to parameters prescribed at para no.(i) above) or renewed. *The MLI would need to furnish a Management Certificate within 10 days from the end of the quarter, after which, a Credit Guarantee Demand Advice Note [CGDAN] would be issued by NCGTC within 3 day of receipt of Management Certificate and subsequently, the guarantee fee shall be payable within 3 days from the issue of CGDAN. (iii) All cases within the batch for which the guarantee fee has been paid by MLI, would be covered under the credit guarantee scheme subject to the credit facility within the batch being eligible under the Stand Up India Scheme. (iv) Guarantee fee with respect to NPA accounts in the batch would continue to be paid till lodgment of claim for such accounts. (v) Provided further that in the event of non-payment of Guarantee Fee within the stipulated time or such extended time that may be agreed to by NCGTC on such terms, liability of the Fund to guarantee such credit facility would lapse in respect of those credit facilities against which the Guarantee Fee are due and not paid, (vi) 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, such deficiency / shortfall shall be paid by the eligible lending institution to the Fund together with interest on such amount at a rate of 4% over and above the Bank Rate. Any amount found to have been paid in excess would be refunded by the Fund. In the event of any representation made by the lending institution in this regard, NCGTC shall take a decision based on the available information with it and the clarifications received from the lending institution. Notwithstanding the same, the decision of NCGTC shall be final and binding on the lending institution. (vii) The amount equivalent to the guarantee fee payable by the Member Lending Institution may be recovered by it, in full or in part, based on the agreement between the lender and the borrower (viii) The guarantee fee once paid by the lending institution to NCGTC is non-refundable, except under certain circumstances like - a) Excess remittance, b) Remittance made more than once against the same Stand Up India credit facility, and c) Annual guarantee fee not due. CHAPTER IV GUARANTEES 10. Extent of the guarantee The Fund shall provide guarantee cover to the extent of 80% of the amount in default for credit facility above ₹ 10 lakh and upto ₹ 50 lakh, subject to a maximum of ₹ 40 lakh. For credit facility above ₹ 50 lakh and upto ₹ 100 lakh - ₹ 40 lakh plus 50% of amount in default above ₹ 50 lakh subject to overall ceiling of ₹ 65 lakh of the amount in default. The Fund reserves the right to modify the same. The guarantee cover will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the Stand Up India credit facilities. CHAPTER V CLAIMS 11. Invocation of guarantee (i) The lending institution may invoke the guarantee in respect of Stand Up India credit facilities within a maximum period of two years from the date of NPA, if NPA is after lock-in period or within two years of lockin period, if NPA is within lock-in period, after the following conditions are satisfied: - a. The guarantee in respect of that credit facility was in force at the time of account turning NPA. b. The lock-in period of 18 months from the date of commencement of guarantee cover in respect of credit facility covered, has elapsed; c. The amount due and payable to the lending institution in respect of the Stand Up India credit facility has not been paid and the dues have been classified by the lending institution as Non-Performing Asset. Provided that the lending institution shall not make or be entitled to make any claim on the Fund in respect of the said Stand Up India 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 Fund. d. The Stand Up India credit facilities has been recalled and the recovery proceedings have been initiated under due process of law against the borrower(s) / co-borrower(s). (ii) The claim should be preferred by the lending institution in such manner and within such time as may be specified by the Fund in this behalf. (iii) 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 by the lending institution. 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. (iv) In the event of default the lending institution shall exercise its rights, if any, to takeover the assets of the borrowers and the amount realised, 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. (v) The lending institution shall be liable to refund the claim released by the Trust together with penal interest at the rate of 4% 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 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. 12. Subrogation of rights and recoveries on account of claims paid (i) The lending institution shall furnish to the Trust, the details of its efforts for recovery, realisations 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 which is 4% above Bank Rate for the period for which payment remains outstanding after the expiry of the said period of 30 days. CHAPTER VI MANAGEMENT Constitution The Fund shall have a Management Committee to be appointed by the Settlor of the Fund consisting of Secretary, DFS as the ex-officio Chairperson; Chairman and Managing Director of SIDBI, Chairman of Indian Banks Association; and Chief Executive Officer, NCGTC as Member Secretary . A member appointed as above in his/her ex-officio capacity shall remain as a member only as long as he/she holds that office and upon his/her vacating that office, his/her successor shall become a member without any further act or deed. The Settlor may, if required, change the constitution of the Management Committee by incorporating a new corporate entity or otherwise and till such time the existing members of the Management Committee will continue. The member of the Fund shall be resident of India. The office of the member shall be vacated if he shall permanently leave India or if for reasons of illness of infirmity or mental incapacity he, in the opinion of the Government, becomes incompetent or incapable to act, as Member. A co-opted member may retire at any time after giving seven days notice in writing to the Government and unless he is the Chairperson of the Management Committee, a copy of the notice shall also be sent to Chairperson. Functions of Management Committee (MC) The M.C. will be responsible for reviewing the Scheme and providing necessary guidance to the Board of NCGTC on the matters related to the Fund. The Board of NCGTC would be the competent authority related to all the policy and operational matters of the Scheme. CHAPTER VII MISCELLANEOUS 13. Appropriation of amount realised by the lending institution in respect of a credit facility after the guarantee has been invoked. Where subsequent to the Fund having released a sum to the lending institution towards the amount in default in accordance with the provisions contained in 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 Fund, after adjusting towards the legal costs incurred by it for recovery of the amount. 14. Fund's liability to be terminated in certain cases (i) If the liabilities of a borrower to the lending institution on account of 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, the amount of the credit 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 credit facility under the Scheme, the liability of the Fund in respect of credit facility 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 Fund fixed under this Scheme. 15. Returns and Inspections The lending institution shall submit such statements and furnish such information as the Fund may require in connection with guarantee under this Scheme. (i) The lending institution shall also furnish to NCGTC 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 Fund 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 through the officers of the Fund or any other person appointed by the Fund 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 Fund 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 Fund 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 Fund be bound by the conditions imposed under the Scheme. 17. Modifications and exemptions (i) The Fund 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 herein contained, the Fund 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 / invoked as on the date of such alteration. (iii) In the event of the Scheme being cancelled, no claim shall lie against the Fund in respect of facilities covered by the Scheme, unless the provisions contained in 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 Fund shall be final. 19. Supplementary and general provisions In respect of any matter not specifically provided for in this Scheme, the Fund may make such supplementary or additional provisions or issue such instructions or clarifications as may be necessary for the purpose of the Scheme. Appendix Guarantee Fee Structure on Differential Rates The Guarantee Fee Structure on Differential Rates will be based on the existing database of CGTMSE and in accordance with the Circular No. 107/ 2015-16 dated January 28, 2016 issued by CGTMSE Standard Basic Rate 0.85% p.a. on the sanctioned amount (1) Risk premium on NPAs in Guaranteed Portfolio (2) Risk premium on Claim Payout Ratio NPA Percentage Risk Premium Claim Payout Percentage Risk Premium 0-5% SR 0-5% SR 5-10% 10% of SR 5-10% 10% of SR 10-15% 15% of SR 10-15% 15% of SR 15-20% 20% of SR 15-20% 20% of SR 20% 25% of SR 20% 25% of SR The above Risk premium structure would be governed by the following: 1. The rates under this mechanism will be floating and will undergo changes every year based on the NPA level and payout ratios of the concerned Bank. 2. The MLIs having NPA percentage as well as claim payout ratio more than 5%, the risk premium under both the categories shall be applicable to such MLIs. 3. The review of risk premium would be an annual exercise and the revised risk premium would be applicable from the first day of each financial year for fresh sanction. 4. For working out the percentages of NPAs/claim pay-out ratio with a view to arrive at the risk premium, the data generated by CGTMSE as on September 30 of immediately preceding financial year would form the basis of calculation. The MLIs would be advised by January every year about their respective NPA percentage and claim pay-out ratio as per the CGTMSE records and the risk premium applicable to them. 5. As regards calculation of NPA percentages and claim pay-out ratio, it may be mentioned that while NPA percentage would be worked on the basis of cumulative NPAs upto September 30 each year as marked by the MLI in CGTMSE portal (net of upgraded accounts and the accounts where the claims would not hit CGTMSE in respect of the NPAs marked) in terms of amount (i.e. Guaranteed amount of the corresponding NPA account) vis- -vis the cumulative guarantees issued by the Trust as on September 30 every year as indicated above, the claim pay-out ratio would be worked out on the basis of cumulative claims settled by the Trust and the cumulative receipts (includes Guarantee and Annual Service /Annual Guarantee Fee receipts, recoveries out of OTS and recoveries passed on by MLIs after first settlement of claim) as on September 30 each year. The cumulative claims paid upto 1.05 times of the cumulative receipts will not attract any risk premium as indicated in the table above. [F. No. 28/05/2016-CP/IF-II] PANKAJ JAIN, Jt. Secy. (IF)