Credit Guarantee Fund Trust for

Small Industries
CGTSI/(44)/ 1663

March 12, 2007

All Member Lending Institutions of CGTSI

Circular No. 35 / 2006-07
Dear Sir,

Differential Pricing based on slab of Coverage
Based on representations received from various quarters, it has been decided to give the MLIs a
greater extent of freedom in determining the extent of coverage actually required by them. A schedule of
differential pricing mechanism has been drawn to allow the MLIs the freedom to go in for lower guarantee
coverage as per their risk perception. The coverage structure based pro-rata on the extent of
coverage/fee structure of CGTSI is given below:
Extent

of

Guarantee

Coverage (%) of Credit
Facility Sanctioned
75
60
50
40
30

One time Guarantee Fee
(%) of Credit Facility
Sanctioned
1.50
1.20
1.00
0.80
0.60

Annual Service Fee
(%) of Credit Facility
Sanctioned
0.75
0.60
0.50
0.40
0.30

Applications under the above scheme may be lodged by the MLI in hard copy only , until a
separate module for the same is incorporated in CGTSI’s enterprise wide software. The application form
that is being filled up for lodging all other cases may be used for the purpose. The MLIs should clearly
indicate the extent of Guarantee cover required to enable us to arrive at the guarantee fee and annual
service fee. The fees should be sent to CGTSI only upon the receipt of Demand Advice Number from
CGTSI.
The relevant sections of the original scheme stand modified as per the details given below:
Section 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); provided further that the

provided further that the ‘Guarantee Cover’ would be on proportionate basis in respect of the product for ‘Differential Pricing based on slab of coverage’ as specified by the Trust ” You are requested to advise your operating offices (Zonal / Branch Offices) about the modification made to the Scheme as above.) on the amount of credit facility extended by the MLI. Sd/- (P. Section 9 (Part) 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. Yours faithfully. subject to a maximum guarantee cover of Rs.‘Guarantee Cover’ would be on proportionate basis in respect of the product for ‘Differential Pricing based on slab of coverage’ as specified by the Trust.75% p.a. which is covered under the scheme and in respect of which guarantee fee has been paid as on March 31 shall be paid by the lending institution within 60 days i.M.Radhakrishnan) Deputy General Manager . provided further that the guarantee fee would be paid on a pro-rata basis in respect of the product for ‘Differential Pricing based on slab of coverage’ as specified by the Trust. May 31 of every year. Section 8(ii)(Part) The Annual Service Fee at specified rate (currently at 0.5 per cent) of the credit facility sanctioned. provided further that the Annual Service Fee would be paid on a pro-rata basis in respect of the product for ‘Differential Pricing based on slab of coverage’ as specified by the Trust.75 lakh (Rupees eighteen lakh seventy five thousand only) per borrower. Section 8(i) A one time guarantee fee at specified rate (currently 1. (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the eligible institution availing of the guarantee within 30 days from the date of first disbursement of credit facility.e. We solicit your cooperation in covering maximum proposals under the Scheme. 18.