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July 03, 2003

The Head Offices of all the
Member Lending Institutions of CGTSI
Circular No. 11 / 2003-04
Dear Sir,
Credit Guarantee Fund Scheme for Small Industries (CGFSI)
- Procedure for invocation of guarantee and preferment of claim
After becoming the Member Lending Institution (MLI) of CGTSI, the eligible
banks / other lending institutions have been seeking guarantee cover in respect of
eligible credit facilities extended by them to the eligible SSI borrowers without taking
any collateral security / Third Party Guarantee. On receipt of guarantee fee in the
account of CGTSI, the guarantee cover commences from the date of credit. Further,
for continuance of guarantee cover issued by the Trust, the MLI has to pay annual
service fee at specified rate (currently 1% p.a.) on the outstanding balance to the
debit of the borrowers account as on March 31 of each year, by May 31 of every
2. In case of default of the credit facility extended by the MLI to the eligible
borrower and covered under CGFSI, the MLI may Invoke the Guarantee and
prefer a claim on CGTSI, if the following conditions as stipulated under Clause 10
(i), under Chapter V of CGFSI are satisfied:

The guarantee in respect of that credit facility is in force;


The lock-in period of 24 months from either the date of last disbursement
of the loan to the borrower or the date of payment of the guarantee fee in
respect of credit facility to the borrower, whichever is later, has elapsed;


The amount due and payable to the lending institution in respect of the
credit facility has not been paid and the dues have been classified by the
lending institution as Non Performing Assets. Provided that the lending
institution shall not make or be entitled to make any claim on the Trust in
respect of the said 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 Trust;


The loan facility has been recalled and the recovery proceedings have
been initiated under the due process of law.

3. The MLI should prefer / lodge the claim in the prescribed format (as per
Annexure I ) (Excel file ) latest by the end of calendar quarter subsequent to the
quarter in which all the conditions for preferment of claim, as mentioned above,
are met by the MLI. The claim form may be downloaded from the website of the
Trust ( for submission in soft copy.

The guarantee claim, complete in all respects alongwith enclosures, have to be

lodged on floppy diskette (1.44 MB) with forwarding letter (as per Annexure II )
through the Nodal officer of the respective Operating Office of the MLI.
The guarantee claims received directly from the branches or offices other than
respective Operating Offices of MLIs will not be entertained.
CGTSI is in the process of completing the second phase of development of the
software to render better service to its customers. As soon as the software is ready,
we will advise the MLIs to prefer the claims through internet. The facility of
ThinClient software would also be made available for this purpose.
Please bring the above to the notice of all your Operating Offices.
Yours faithfully,

(N. Venkatasubramanyan)
Chief Executive Officer

Annexure - II
To be given on the letter head of Operating Office of MLI
Ref. No.


The Deputy General Manager

Credit Guarantee Fund Scheme for Small Industries
12th Floor, Nariman Bhavan,
227, Vinay K. Shah Marg,
Nariman Point,
Mumbai 400 021.
Dear Sir,
Credit Guarantee Scheme (CGFSI)
Application for Invocation of Guarantee & preferment of Claim
In terms of Clause 10, Chapter V of Credit Guarantee Scheme (CGFSI), we
hereby invoke the guarantee in respect of the credit facilities extended to the SSI
borrower unit(s) against which the guarantee(s) had been issued by CGTSI. The
name(s) of borrower(s), CGPANs and the amount claimed are as under

Name of SSI borrower/Unit


Amount claimed (In Rs.)

The guarantee claim on Floppy (1.44 MB), complete in all respects alongwith
the certified copies of documents in support of the claim, are forwarded herewith for
settlement of the claim(s). The copy of Declaration & Undertaking, duly signed by
the authorized official is forwarded herewith as Annexure.
Thanking you,
Yours faithfully,
Name of the Nodal Officer:
User Id:
Member Id of Op. Office of MLI:
Encl.: As above

Declaration and Undertaking by MLI


Declaration We declare that the information given above is true and correct in every respect.
We further declare that there has been no fault or negligence on the part of the MLI or any of its
officers in conducting the account. We also declare that the officer preferring the claim on behalf
of MLI is having the authority to do so.
We hereby declare that no fault or negligence has been pointed by auditors/ inspection
Undertaking- We hereby undertake:
a) To pursue all recovery steps including legal proceedings
b) To report to CGTSI the position of outstanding dues from the borrower on half-yearly basis
as on 31st March and 30th September of each year till final settlement of guarantee claim by
c) To refund to CGTSI the claim paid amount along with interest thereof at 4%over and above the
prevailing Bank Rate, if in the view of CGTSI we have failed or neglected to take any actions for
recovery of the guaranteed debt from the borrower or any other person from whom the amount is
to be recovered
d) On payment of claim by CGTSI, to remit to CGTSI, in full, all such recoveries which
we or
our agents acting on our behalf, may make from the person or persons responsible for the
administration of debt, or otherwise, in respect of the debt due from him/them to us.
Name of the Official
MLI Name & Seal

Telephone Number
1) CGTSI reserves the right to ask for any additional information, if required.
2) CGTSI reserves the right to initiate any appropriate action/appoint any person/institution etc. to
verify the facts as mentioned above and if found contrary to the declaration, reserves the right to
treat the submission invalid.