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Invocation of guarantee
(i) The lending institution may invoke the guarantee in respect of credit facility within a maximum period of one year from date of NPA, if NPA is after lock-in period or within one year of lock-in period, if NPA is within lock-in period, if 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 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;
c. 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
d. The credit facility has been recalled and the recovery proceedings have been initiated under due process of law. Mere issuance of recall notice under SARFAESI Act2002 cannot be construed as initiation of legal proceedings for purpose of preferment of claim under CGS. MLIs are advised to take further action as contained in Section13 (4) of the above Act wherein a secured creditor can take recourse to any one or more of the recovery measures out of the four measures indicated therein before submitting claims for first installment of guaranteed amount. In case the MLI is not in a position to take any of the action indicated in Section13(4) of the aforesaid Act, they may initiate fresh recovery proceeding under any other applicable law and seek the claim for first installment from the Trust.
(ii) The claim should be preferred by the lending institution in such manner and within such time as may be specified by the Trust in this behalf.
(iii) The Trust shall pay75 per cent of the guaranteed amount on preferring of eligible claim by the lending institution, within30 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 beyond30 days. The balance25 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 remaining25 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 of4% 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.
The Guarantee Claim received directly from the branches or offices other than respective operating offices of MLIs will not be entertained.
