Question 1

NCGTC directly lends the Rs 20,000 crore to MSME exporters.

Accepted Answer

NCGTC is a trustee company that only provides credit guarantees to Member Lending Institutions (banks and NBFCs). The banks disburse the actual loans to exporters.

Question 2

A 100 percent guarantee means banks get their entire defaulted amount refunded immediately by the government.

Accepted Answer

While the coverage is 100 percent, the payout is staggered. NCGTC pays 75 percent within 30 days of the claim, but the remaining 25 percent is released only after the conclusion of recovery proceedings or legal settlement.

Question 3

Consider the following statements regarding the Credit Guarantee Scheme for Exporters (CGSE):
1. The scheme is administered directly by the Export Credit Guarantee Corporation (ECGC).
2. Indirect exporters are eligible for the scheme if they supply a minimum of 30 percent of their turnover to eligible direct exporters.
3. The interest rate on loans under this scheme is mandated to be 1 percent below the existing working capital interest rate of the borrower.
How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is incorrect: The scheme is implemented by the Department of Financial Services (DFS) through the National Credit Guarantee Trustee Company (NCGTC), not the ECGC. Statement 2 is correct: MSMEs supplying at least 30 percent of their turnover to direct exporters are eligible as indirect exporters. Statement 3 is correct: The scheme mandates an interest rate concession of 1 percent below the existing working capital rate.

Question 4

Match the parameters of the Credit Guarantee Scheme for Exporters (CGSE) in List I with their corresponding provisions in List II:

List I:
A. Maximum loan amount per borrower
B. Reference date for standard account status
C. Guarantee coverage post One-Time Settlement (OTS)
D. Mandatory maximum interest rate cap for Banks

List II:
1. 10 percent
2. Rs 50 crore
3. 90 percent
4. September 30, 2025

Accepted Answer

(a) A-2, B-4, C-3, D-1 — The maximum loan amount per borrower is Rs 50 crore (A-2). The reference date for an account to be classified as 'Standard' is September 30, 2025 (B-4). If a One-Time Settlement (OTS) is reached, the guarantee cover reduces to 90 percent (C-3). The interest rate is capped at 10 percent for Banks/FIs (D-1).

Question 5

Assertion (A): The Credit Guarantee Scheme for Exporters (CGSE) completely eliminates the credit risk for Member Lending Institutions (MLIs) on the incremental export working capital limits.
Reason (R): The CGSE mandates MLIs to charge zero processing fees and zero guarantee fees to the borrowers.

Accepted Answer

(b) Both A and R are true but R is not the correct explanation of A. — Assertion (A) is true as the scheme provides a 100 percent sovereign credit guarantee through NCGTC, de-risking the lenders on the additional limit. Reason (R) is also true, as the scheme waives all processing and guarantee fees. However, R is not the explanation for A. The credit risk is eliminated because of the sovereign guarantee (NCGTC backing), not because the fees are waived.

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