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 CGTSIs 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

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.
Section 8(i)
A one time guarantee fee at specified rate (currently 1.5 per cent) of the credit facility sanctioned,
(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;
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.
Section 8(ii)(Part)
The Annual Service Fee at specified rate (currently at 0.75% p.a.) on the amount of credit facility
extended by the MLI, 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.e. May 31 of every year;
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.
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, subject to a maximum guarantee cover of Rs.
18.75 lakh (Rupees eighteen lakh seventy five thousand only) per borrower; 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. We solicit your cooperation in covering maximum proposals under the
Scheme.

Yours faithfully,
Sd/-

(P.M.Radhakrishnan)
Deputy General Manager