Rule 279 — GFR

Rule 279 (1) Levy of Guarantee Fees. The rates of fee on guarantees would be as notified by the Budget Division, Department of Economic Affairs, Ministry of Finance from time to time. The rates of guarantee fee are given in Appendix - 12. Ministries or Departments shall levy the prescribed fee in respect of all cases. The fees are also to be levied in respect of non-fund based borrowings or credits (viz. letters of credit, Bank guarantees etc.). In case of any doubt with regard to the categorisation of any particular undertaking or organization or the nature of borrowing for the purpose of levy of fee, the matter may be referred to the Budget Division for clarification. The Ministries or Departments should also take adequate steps to ensure prompt recovery of the prescribed fees.

Rule 279 (2) The guarantee fee should be levied before the guarantee is given and thereafter on first April every year. The rate of guarantee fee is to be applied on the amount outstanding at the beginning of the guarantee year.

Rule 279 (3) Where the guarantee fee is not paid on the due date, fee should be charged at double the normal rates for the period of default.

Rule 279 (4) The Government may guarantee no more than 80% of the project loan, depending on the conditions imposed by the lender. This would incentivize the lenders to make proper analysis of the project, credit worthiness of the borrower(s), and build strategies for risk management. In such cases, bankers/ lenders may be asked to share the risk by bearing a minimum of 20% of the net loss associated with any default. The arrangement would ensure that the lenders undertake a more rigorous assessment of the risk exposure. Provided further that in certain exceptional circumstances, the Government of India may guarantee 100% of the financing where the organisation concerned is discharging some function on behalf of the Government of India.