CGF Scheme to Farmer Producer Companies

CGF Scheme to Farmer Producer Companies is a central sector scheme launched by the Small Farmers Agribusiness Consortium (SFAC) for the Eligible Lending Institutions (ELIs) to provide collateral-free loans to Farmer Producer Companies (FPC). In this article, we look at the objectives, eligibility and application procedure of the Credit Guarantee Fund Scheme in detail.

Objectives of the Scheme

The objectives of the Credit Guarantee Fund Scheme are explained below.

To give protection to Eligible Lending Institutions by increasing the credit guarantee and covering their lending risks up to Rs. 1 Crore.
To enable Farmer Producer Companies to receive a collateral-free loan by providing credit guarantee to Eligible Lending Institutions.

Eligibility Criteria for FPC

The following are the eligibility criteria of the Credit Guarantee Fund scheme.

The FPC should be duly registered under the Indian Companies Act, 1956.
The FPC should have raised equity from its members as per association or bye-laws.
The FPC should contain the number of individual shareholders not less than 500 shareholders.
The FPC should hold at least 33% of its shareholders such as small, marginal and landless tenant farmers.
The maximum shareholding of an institutional member should not be more than 5% of the total equity of the FPC.
The FPC should have duly elected or nominated Board with five members, representation from farmers and minimum one woman member.
The FPC should have a business plan and budget for the next 18 months.

Non-Eligibility Criteria

The following credit facilities are not eligible for guarantee cover under the scheme.

It does not apply to any credit facility which has been sanctioned by the ELI against collateral security or third party guarantee.
It does not apply to any credit facility in risk are additionally covered under any scheme operated by the Reserve Bank of India or any other person carrying on the business of insurance, guarantee or indemnity.
It does not apply to any credit facility, which does not undergo the provisions of any law in force, which is declared by the Central Government or the Reserve Bank of India.
It does not apply to any credit facility granted to any borrower, who has availed any other credit facility covered under this scheme mentioned as below.
- Any credit facility which is delayed for repayment.
- Any credit facility which has been restructured or rescheduled on being overdue for repayment.

Credit Guarantee Cover

ELI is eligible to seek Guarantee Cover for a credit facility sanctioned to an FPC borrower for 2 times or more over 5 years.
Maximum Guarantee Cover will be provided to the extent of 85% of the credit facility, or Rs. 85 lakhs, whichever is lower.
In case of Default, claims have to be settled up to 85% of the amount regarding the maximum cover.
Other charges such as penal interest, commitment charge, service charge, or any other expenses, debited to the account of FPC by the ELI other than the contracted interest will not be qualified for Guarantee Cover.
The Guarantee Cover will be granted after the ELI agrees with the terms and conditions decided by the SFAC from time to time.

Application Procedure

Any FPC interested in applying for the Credit Guarantee Fund Scheme can register themselves by visiting the official website. One needs to complete the application form with the necessary details, and upload the required documents along with the form while applying online.

Sanctioning Authority

SFAC verifies the proposal before sanctioning the Guarantee Cover to the ELI with the Terms and Conditions of the Scheme. It is necessary, to inspect or call for copies of the Books of Account and other records which includes any book of instructions or manual or circulars covering general instructions regarding the conduct of advances of the Lending Institution or of the Borrower from the Lending Institution. Such Inspection has to be carried out either through the officers of SFAC or any other agency appointed by SFAC for Inspection. The Investment and Claims Settlement Committee (I&CSC) will sanction the Guarantee Cover to the concerned bank. After that ELI will enter into an Agreement with SFAC at the level of the Bank. Also, read about Equity Grand Fund Scheme

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Frequently Asked Questions

Common questions about CGF Scheme for Farmer Producer Companies.

The Credit Guarantee Fund Scheme is a central sector scheme launched by the Small Farmers Agribusiness Consortium (SFAC) to enable Farmer Producer Companies (FPCs) to receive collateral-free loans from Eligible Lending Institutions (ELIs) by providing credit guarantee to the lenders, covering their lending risks up to Rs. 1 Crore.

The primary objectives of the scheme are to provide protection to Eligible Lending Institutions by increasing the credit guarantee and covering their lending risks up to Rs. 1 Crore, and to enable Farmer Producer Companies to receive collateral-free loans by providing credit guarantee to the lenders.

The key eligibility criteria for FPCs include being registered under the Indian Companies Act, having raised equity from its members, having at least 500 individual shareholders (with at least 33% being small, marginal, and landless tenant farmers), having a duly elected or nominated Board with representation from farmers and at least one woman member, and having a business plan and budget for the next 18 months.

Credit facilities sanctioned against collateral security or third-party guarantee, those additionally covered under any scheme operated by the Reserve Bank of India or any other insurance, guarantee, or indemnity provider, those that do not comply with applicable laws, and those granted to borrowers who have availed other credit facilities covered under this scheme but have defaulted or restructured their loans are not eligible for guarantee cover.

The maximum guarantee cover provided under the Credit Guarantee Fund Scheme is up to 85% of the credit facility or Rs. 85 lakhs, whichever is lower.

Interested FPCs can register and apply for the scheme by visiting the official website, completing the application form with necessary details, and uploading the required documents online.

SFAC verifies the proposals before sanctioning the Guarantee Cover to the Eligible Lending Institutions (ELIs) with the terms and conditions of the scheme. It also inspects or calls for copies of the books of account and other records of the lending institutions and borrowers as necessary.

The Investment and Claims Settlement Committee (I&CSC) is responsible for sanctioning the Guarantee Cover to the concerned bank or Eligible Lending Institution (ELI).

In case of default, claims have to be settled up to 85% of the amount regarding the maximum cover. Other charges such as penal interest, commitment charges, service charges, or any other expenses debited to the account of the FPC by the ELI, other than the contracted interest, will not be qualified for Guarantee Cover.

Eligible Lending Institutions (ELIs) can seek Guarantee Cover for credit facilities sanctioned to an FPC borrower for 2 times or more over a period of 5 years.