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TMI BlogCredit Guarantee Fund for Micro Units (CGFMU)X X X X Extracts X X X X X X X X Extracts X X X X ..... se of guaranteeing payment against default in micro loans extended to eligible borrowers by Banks/NBFCs /MFIs / Other financial intermediaries, managed by the Board of NCGTC as the trustee of the Fund. ii. 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. iii. Portfolio means cumulative built up of quarterly outstanding balance of eligible micro loans sanctioned on or after the date of launching of PMMY; i.e. April 08, 2015, which have not been classified as a Non performing asset in the books of the lending institution. Portfolio, comprising the corresponding sanction amount, would get crystallized at the end of the financial year in which the portfolio is built up (base year). Accordingly, fresh portfolio would commence from the beginning of the subsequent financial year. iv. Base year of the portfolio means the year of inception and crystallization of the portfolio. In other words, the financial year in which the portfolio is built up. v. Date of crystallization of the portf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. ] 2 [ xii. Eligible borrower means new or existing micro unit / enterprise, including micro unit/enterprise set up under Joint Liability Group (JLG) framework, individually or jointly (irrespective of the availability of guarantee under JLG), falling under any sector covered under PMMY or as defined in the MSMED Act, 2006 (as amended from time to time), who meets eligibility criteria prescribed by the Fund and whose credit requirement does not exceed the specified limit under PMMY. Specified limit of the loan shall be Rs.20 lakh as defined above or such other amount as may be decided by the Fund from time to time. Further, Overdraft loan amount of Rs.10,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. Eligible borrower would also mean Self Help Groups who meet eligibility criteria prescribed by the Fund and whose loan amount is above Rs.10 lakh and upto Rs.20 lakh. ] xiii. Guarantee Cover means maximum cover available per portfolio, based on the amount in default, in respect of the credit facility extended by the lending institution. The first 5% of the amount in default will be borne by the eligible lending institution. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.10,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. It may be noted that micro loans under PMMY inclusive of overdraft under PMJDY, sanctioned since 8th April 2015 would qualify for guarantee cover under the scheme. The Fund may, at its discretion, approve/frame a list of Member Lending Institutions and /or their schemes, for which the guarantee cover will be available, or a negative list for which the guarantee cover shall not be available. ] 5. Micro Loans not eligible under the Scheme The following micro Loans shall not be eligible for being guaranteed under the Scheme: - i. Any micro Loan in respect of which risks are additionally covered under a scheme operated / administered by any other institution, to the extent they are so covered. ii. Any micro Loan 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 micro Loan, which does not conform to, or is in any way inconsistent with, the provisions of any law, or with any directives or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... folio as on the date of March 31 every year, by the second quarter of every financial year from the date of crystallization of the portfolio, during the currency of the portfolio. v. The lending institution shall closely monitor the borrower account and follow up for repayment. vi. 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 micro loan owed to it and initiate such necessary actions for recovery of the outstanding amount, including such action as may be advised by the Fund. vii. The lending institution shall comply with such directions as may be issued by the Fund, from time to time, for facilitating recoveries in the guaranteed account, or safeguarding its interest as a credit guarantor, as the Fund may deem fit and the lending institution shall be bound to comply with such directions. viii. The lending institution shall, in respect of any guaranteed acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such other amount on such reference dates or specified rate set by the Fund from time to time (risk based guarantee fee components given at Attachments in respect of 5 Models). The portfolio as at the end of third year from the date of crystallization will be finally settled and terminated. The outstanding balance of the terminated portfolio at the end of the third year will be deemed to be a new portfolio and could be merged with the current portfolio of that year at the discretion of the lending institution. ii. Guarantee fee shall be paid within 16 days from the end of the quarter. (The MLI would need to furnish a Management Certificate within 7 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 portfolio for which the guarantee fee has been paid by MLI, would be covered under the credit guarantee scheme subject to the loan accounts within the portfolio being eligible micro loans. iv. The Fund may at its discretion, charge risk based pricing i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt due and payable to the lending institution in respect of the micro loan 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 micro loan 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. The certificate shall also mention the percentage of the amount in default borne by the MLI towards first loss. iii. 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. iv. The Fund shall pay eligible claim amount on preferring of claims by the lending institution, within 60 days, subject to the claim being otherwise found in order and complete in all respects. The Fund shall pay to the lending institution interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 60 days. On a claim being paid, the Fund shall be deemed to have been discharged from all its liabilities on account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 1. Appropriation of amount realized 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 incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other records and information which are in his possession. 4. 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. 5. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil 0-2% Nil 0-2% Nil AA / equiv. 15% over SBR 2-3% 5% of SBR 2-3% 5% of SBR A / equiv. 30% over SBR 3-6% 10% of SBR 3-6% 10% of SBR BBB (+) / equiv. 40% over SBR 6-9% 15% of SBR 6-9% 15% of SBR BBB (-) / equiv. 50% over SBR 9-12% 20% of SBR 9-12% 20% of SBR - - 12-15% 25% of SBR 12-15% 25% of SBR 4. Regional Rural Banks (RRBs) Standard Basic Rate (SBR) of 1.00 % of sanctioned amount ; and Risk premium on NPAs in guaranteed portfolio Risk premium on Claim Payout Ratio NPA Percentage Risk Premium Claim Payout Ratio Risk Premium 0-2% Nil 0-2% Nil 2-3% 10% of SBR 2-3% 10% of SBR 3-6% 20% of SBR 3-6% 20% of SBR 6-9% 30% of SBR 6-9% 30% of SBR 9-12% 40% of SBR 9-12% 40% of SBR 12-15% 50% of SBR 12-15% 50% of SBR 5. Cooperative Banks Standard Basic Rate (SBR) of 1.00 % of sanctioned amount ; and Risk premium on NPAs in guaranteed portfolio Risk premium on Claim Payout Ratio NPA Percentage Risk Premium Claim Payout Ratio Risk Premium 0-2% Nil 0-2% Nil 2-3% 10% of SBR 2-3% 10% of SBR 3-6% 20% of SBR 3-6% 20% of SBR 6-9% 30% of SBR 6-9% 30% of SBR 9-12% 40% of SBR 9-12% 40% of SBR 12-15% 50% of SBR 12-15% 50% of SBR Note :- The Guarantee Fee for all MLIs shall be reviewed each year based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by the Fund from time to time. Further, Overdraft loan amount of ₹ 5,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. 3 . Substituted vide Notification No. S.O. 4658(E) dated 24-10-2024 before it was read as, The Fund shall cover micro loans up to the specified limit (currently ₹ 10 lakh) extended by Member Lending Institution(s) to an eligible borrower, provided that the lending institution applies for guarantee cover in respect of such loans so sanctioned within such time period and as per procedures prescribed by the Fund for the purpose. Further, Overdraft loan amount of ₹ 5,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. It may be noted that micro loans under PMMY inclusive of overdraft under PMJDY, sanctioned since 8 th April 2015 would qualify for guarantee cover under the scheme. The Fund may, at its discretion, approve/frame a list of Member Lending Institutions and /or their schemes, for which the guarantee cover will be available, or a negative list for which the guarantee cover shall not be available. - Notification Tax Management ..... 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