BTL 879 - CGTMSE - Modification in CGS – Term Loans

 

The Banking Tutor’s Lessons

BTL 879                                                                                15-03-2026

CGTMSE - Modification in CGS – Term Loans

Extension of Guarantee Expiry Period for Term Loan Accounts to ensure eligibility at the time of NPA recognition

CGTMSE vide Circular dated 31^st Dec 2025, advised the following in respect of Guarantee cover to Term Loans.

As per extant Guidelines, Annual Guarantee Fee (AGF) is charged up to the guarantee expiry date or closure of the account, whichever is earlier.

Further, the guarantee should be in force at the time the account turns NPA, which implies that the account must be within the guarantee expiry date on the NPA date for claim eligibility.

In certain cases, especially where borrowers default on the last instalment(s), the account becomes NPA after the original guarantee expiry date, rendering such accounts ineligible for guarantee claims.

For example, in respect of a loan sanctioned on April 01, 2025 with a 5-year tenure, the guarantee will expire on March 31, 2030. If the borrower defaults in the last instalment(s), the account would turn NPA during April-June 2030, i.e., after the guarantee expiry date, leading to claim ineligibility.

To avoid such instances and ensure seamless coverage at the time of NPA recognition, it has been decided as under:

For cases where guarantee is issued after the date of this Circular:

The guarantee expiry date for term loan accounts shall be original expiry date + four (4) months.

For all existing live and standard guarantee accounts:

The guarantee expiry date shall be extended by four (4) months uniformly for all live and standard CGPANs (NPA not marked in CGTMSE portal) except for cases expiring in current FY i.e. 2025 -26. The cases whose guarantee expires in the current financial year (FY 2025–26), the guarantee expiry date will remain unchanged, as the guarantee fee for FY 2025–26 has already been paid.

AGF shall be charged for the extended guarantee period [i.e., original expiry date + four(4) months] for both future cases as mentioned at Sr no. 1 and existing live and standard cases as mentioned at Sr no. 2.

Sekhar Pariti

+91 9440641014

DBC 2374 - Cryptocurrency

 

The Banking Tutor 

Daily Banking Concept -  2374 

Cryptocurrency 

Cryptocurrencies are digital assets created using blockchain technology.

DBC 2373 - Muhurat Trading

 

The Banking Tutor 

Daily Banking Concept -  2373 

Muhurat Trading 

Muhurat trading is the trading activity in the Indian stock  market on the occasion of Diwali (Deepawali). Usually, it is  held during evening hour and is announced by the stock  market exchanges notifying traders and investors of the non-scheduled trading hour.

 

DBC 2372 - Account in Trust

 

The Banking Tutor 

Daily Banking Concept -  2372 

Account in Trust 

An account in trust is a financial account where a trustee manages funds for the benefit of a third-party beneficiary, following specific rules set by the grantor.

BTL 878 - CGTMSE - Modification in CGS – TPG

 

The Banking Tutor’s Lessons

BTL 878                                                                                12-03-2026

CGTMSE - Modification in CGS – TPG

As per extant guidelines of CGTMSE, "Third Party Guarantee" means any guarantee obtained by a Member Lending Institution in connection with a credit facility extended by it to a firm which is referred as Borrower except from:

(a) a Sole-Proprietor in the case of a Sole Proprietary concern;

(b) Partners in the case of a Partnership or Limited Liability Partnership (LLP) 

(c) Trustees in the case of a Trust;

(d) Karta and Coparceners in the case of a Hindu Undivided Family (HUF);

(e) Promoter Directors in the case of a Private or Public Limited Company; or

(f) the owner of the collateral security (under a hybrid or partial collateral security model. 

Now CGTMSE, vide Circular dated 10^th February 2026 advised revised definition of TPG related to CGS as under.

The personal guarantee of following shall not be treated as a Third Party  Guarantee.

(a) a sole proprietor or individual as co-borrower or co- obligant;

(b) partners of the coborrower or co- obligant partnership or LLP;

(c) trustees of the co-borrower or co- obligant trust;

(d) Karta and Coparceners of the co-borrower or co- obligant HUF or

(e) promoter directors of the co-borrower or co- obligant company

If you see the above paras, you may find only one difference. Only para f –“the owner of the collateral security in the case of a guarantee under a hybrid or partial collateral security model” is omitted in revised definition.

From the above it is understood that “Any person not related to the Business is a Third Party”.

Sekhar Pariti

+91 9440641014

DBC 2371 - Sortino Ratio

 

The Banking Tutor 

Daily Banking Concept -  2371 

Sortino Ratio 

The Sortino ratio is a variation of the Sharpe ratio. It differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative portfolio returns or downside deviation instead of the total standard deviation of portfolio returns.

The Sortino ratio takes an asset's or portfolio's return and subtracts the risk-free rate. It then divides that amount by the asset's downside deviation.

DBC 2370 - Twin Balance Sheet Problem

 

The Banking Tutor 

Daily Banking Concept -  2370 

Twin Balance Sheet Problem 

A twin balance sheet is a scenario where banks are under severe stress and the corporates are overleveraged to the extent that they cannot repay their loans.