Collateral Security 3c4j4h

Collateral Security By collateral security is meant stocks, bonds, and other evidences of property deposited by the borrower to secure a loan made to him by the bank. Such securities are deposited as a pledge or guarantee that the loan will be repaid at maturity; if not paid the securities may be sold to reimburse the lender. Collateral loans though made generally to brokers on such security as stocks are made also to merchants and commercial houses, and all kinds of collateral are offered. They may be made on "time," running for thirty days to several months, or on "call," that is, subject to payment on demand. The various forms of collateral offered to secure bank loans may be roughly grouped into three divisions: stocks and bonds, merchandise, and real estate. Some of the more important types of collateral loans may now be briefly considered. Credit guarantees schemes: Coverage of Collateral Free Loans under Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises (CGTMSE): PURPOSE: 

To provide collateral free loans up to Rs. 100/- lacks to Micro & Small Enterprises, as defined under MSMED Act, 2006.

ELIGIBILITY: 

The coverage of the Scheme is extended to all new and existing Micro and Small Enterprises (both in the Manufacturing Sector as well as in the Service Sector) as defined under MSMED Act, 2006.

LIMIT: 

The eligible loan limit under the Scheme is Rs.100 lacs. A borrower, who has availed certain credit facilities secured by collaterals and/or third party guarantees and is sanctioned distinct/separate credit facility without collateral security/third party guarantee, can be covered under CGTMSE scheme.

SECURITY: 

"Primary security" in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended. This means if a borrower is sanctioned working capital facility only, a charge can be created on the fixed assets of the unit even though the same are not financed by the Bank and the same will not be treated as collateral security. Similarly in case of sanction of Term/Demand loan on standalone basis, charge taken on current assets will not be treated as collateral security.

MARGIN: 

The credit guarantee cover is available up to 75% of the amount in default in respect of credit facilities up to Rs. 50/- lacs extended by the Lending Institution to an eligible borrower subject to maximum guarantee cover of Rs. 37.50 lacs and 50% for the facilities over Rs. 50/- lacs and up to a limit of Rs. 100/-, i.e. maximum of Rs. 62.50 lacs. In case of following categories of borrowers, guarantee cover is available up to 80% of the amount in default. a) Loans to Micro enterprises up to Rs. 5 lacs (85%). b) Loans to Micro and Small enterprises operated and/ or owned by women. c) All loans in North East Region including the State of Sikkim.

GUARANTEE FEE: 

Guarantee fee has been reduced as under, depending on the size of the limit as against the original fee structure of 2.5% (one time fee) and 1% Annual Service Fee.

Particulars Credit facility up to Rs. 5/lacks

One time Guarantee fee 1.00%

Credit facility above Rs. 5/lacks.

1.50%

Loans in North East Region including the State of Sikkim

0.75%

Annual Service fee 0.50% 0.75% Applicable as per the borrowing limit as stated above.