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CS Professional · Banking and Insurance - Laws and Practice · Various Government Schemes

A scheduled commercial bank lends Rs 50 lakh to a micro enterprise under a credit guarantee scheme with 75% guarantee cover on the defaulted amount. The unit defaults and the outstanding amount eligible for claim is Rs 40 lakh. Ignoring any fees, recoveries and cover ceilings, what is the maximum guarantee claim payable, and what is the bank's uncovered share?

The claim is Rs 30 lakh, being 75% of the Rs 40 lakh eligible outstanding, leaving Rs 10 lakh uncovered with the bank. Applying the percentage to the sanctioned Rs 50 lakh would be the wrong base, since the guarantee applies to the defaulted amount.

  1. AClaim Rs 30 lakh; uncovered Rs 10 lakhCorrect
  2. BClaim Rs 37.5 lakh; uncovered Rs 12.5 lakh
  3. CClaim Rs 10 lakh; uncovered Rs 30 lakh
  4. DClaim Rs 40 lakh; uncovered nil

Explanation

The claim is computed on the eligible outstanding in default: 75% of Rs 40 lakh = Rs 30 lakh. The uncovered share is Rs 40 lakh minus Rs 30 lakh = Rs 10 lakh. Using the sanctioned Rs 50 lakh as base (Rs 37.5 lakh) is the wrong base.

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