III. LOANS UNDER THE SCHEME


1)

Under the Technology Upgradation Fund Scheme, loan will be provided subject to terms and conditions given below:

 
a) Duration of Scheme:

The scheme will be in operation for the period of five years from 01-04-1999 to 31-03-2004. Loans sanctioned by the lending agency till the last date of the duration of the scheme period will be eligible under the scheme and the reimbursement would continue to be available till the same is repaid as per the normal lending period of the nodal agency.

 
b) Amount of loan:

The assistance will be need-based. There will be no minimum or maximum limit for individual loans.

 
c) Promoter's contribution:

To be decided by the lending agency on the basis of its existing normal norms.

 
d) Rate of Interest:
 
 
(i) Rupee loan:

Effective rate of interest charged to the concerned borrower will be five percentage points lower than the prevailing commercial rates of interest charged by the Financial Institutions and Banks concerned, the Ministry of Textiles will reimburse the five percentage points under the scheme.

 
 
(ii) Foreign Currency loan:

As applicable for normal Foreign Currency loan. However, cover for exchange rate fluctuation not exceeding 5% p.a. would be provided under the scheme.

 
 
(iii)
Period of interest reimbursement:
(a) 1.

Interest reimbursement of 5% and/or cover for exchange fluctuation upto 5% p.a. will be available during the period of loan as specified in the Letter of Intent or as may be specified in the loan document. Interest reimbursement under TUFS would continue to be available during any extended / rescheduled peiod of repayment of loan not exceeding a maximum period of 10 years including moratorium period, if such re-scheduling is accepted by the concerned nodal agency / co-opted agency.

2.

Interest reimbursement may be stopped if the borrower becomes defaulter in the repayment of the loan for two quarters. However, if the repayment is resumed and default also made good within six quarters from the initial default, then the 5% Interest reimbursement may be restored covering the amount and period of default.


(b)

If an account becomes a non-performing asset (NPA), the interest reimbursement would not be available. The interest reimbursement will be available from the date of coming out of the NPA category. In default free rescheduled cases, reimbursement will be as per the original repayment schedule.

 
e) Other conditions, viz., period of loan, security, conversion option, Debt-Equity-Ratio etc.

Eligible units will be of minimum economic size. Other conditions will be such as determined by the lending agency as per its existing normal norms.

 
f) Financial norms of earning continuous profit.

Nodal agencies have relaxed the norms regarding earning of continuous profit during last three years for the units with a good track record, viable and positive networth even if they had incurred losses in one or more of these three years.

 
g) Contingency provisions:

The contingency provision ( non-firmed up cost) to the extent of 5% maximum ( on actual basis) may be covered under TUFS in respect of plant and machinery and other investments eligible under TUFS

h) Assistance under TUFS for loan sanctioned by the consortium banks when some banks of the consortium are not co-opted by the Nodal Agencies:

In cases of consortium finance, the entire project is to be covered under TUFS even if some of the consortium PIs/ banks are not co-opted by the Nodal Agencies. In such cases the interest reimbursement claim to the Nodal Agencies may be routed through the co-opted bank including the claim in respect of the loan disbursed by non co-opted banks. The co-opted bank would ensure that the project was meeting the technology and other norms -prescribed- under the Scheme.,

i) Transferring the TUFS loan from one bank / FI to another bank / FI as well as closing down one term loan account under TUFS and availing of fresh term loan:

The outstanding principal amount under TUFS loan account from one bank / FI can be transferred to another bank / PI subject to the condition that portfolio (i.e. balance principal amount) remains unchanged and the overall repayment period does not exceed 10 years. However, this facility will be provided only once to a project.

j) Conversion of rupee term loan into foreign currency loan and yice-versa:

Conversion of rupee term loan (RTL) into foreign currency loan (FCL) and vice-versa on annual basis is permitted under TUFS. The base rate of exchange will be the rate prevailing on the date of conversion of rupee term loan into FCL. The tenure of the loan amount will remain the same subject to the 10 years repayment period and availability of foreign currency line of credit with the lending agency.

k) Foreign currency loan for rupee liability:

It is permitted to avail of foreign currency loan (FCL) under TUFS for rupee liability also.

l) Coverage of forward premium:

The cost of forward cover premium for Foreign Currency Loan under TUFS limited to 5% per annum on the base rate of exchange as an option, which may be exercised only once in the each financial year of the project has been covered.

m) Coverage of Non Convertible Debentures (NCDs):

The non-convertible debentures (NCDs) subscribed by NAs and co-opted PUs if they fall within TUFS norms are covered under the scheme.

n) Coverage of lease finance:

Interest portion of the lease finance taken by the manufacturers from NAs/co-opted PLIs for eligible machinery and equipments has been covered under TUFS. The coverage of lease finance will be subject to normal leasing norms but lease period will be limited to 10 years.

o) Coveragee of Hire Purchase Scheme of National Small Industries Corporation (NSIC) Ltd.

Interest portion of the Hire Purchase Scheme of NSIC are covered under TUFS subject to the units meeting the technology and other eligibility parameters laid down under the scheme.

p) Approval of nodal agency for the loan sanctioned by co-opted PLI with' their own prudential' 'norms without effecting the technology norms under TUFS:

The projects under TUFS which are sanctioned by co­opted PLIs as per their own prudential norms and in compliance with the technology norms of TUFS should be approved by Nodal Agencies.

q) Coverage of weak but potentially viable textile and jute units under TUFS:

Relaxation in norms for cash profit, promoters' margin, debt equity ratio and revaluation of assets could be considered by Financial Institutions and Banks while preparing restructuring proposals for textile and jute units

r) Co-guarantee provided by yarn supplier/master weaver:

Grant of TUFS loan to small scale powerloom units on the strength of co-guarantee provided by the yarn supplier / master weavers with sound financial position and ability to meet banking norms are to be decided by FIs / banks. However, if in such cases term loans/ finance was provided by the FIs / banks, benefits under TUFS would be available as per approved guidelines.

s)  

The banks/FIs which have advanced loans to textile units eligible for 5% interest reimbursement will accept the repayment of loan if made with in the prescribed date without the 5% interest reimbursement which it will get from the nodal agency. On the amount reimbursed, the Banks/FIs may, however, charge interest at PLR from the uniUill it is received from the nodal agency.

t) Deferred Payment Guarantee (DPG) scheme Operational Guidelines:

  1. The DPG in respect of rupee loan only covered under TUFS w.e.f. 2yd March, 2002.

  2. The assistance under DPG will cover major equipments and also cases involving both DPG and normal term loan in a single project. In all cases, however, the project per-se has to meet the technology and other eligibility norms of the TUFS.

  3. The margin money in case of equipment exclusively under DPG, shall be assumed as 20% for the purpose of interest subsidy under TUFS. However, in respect of cases involving both DPG and term loan, margin money may be taken based on project cost excluding DPG component.

  4. The period of the deferred payment will be from the date of execution of the bills/promissory notes and should not exceed 7 years including moratorium period not exceeding one year.

  5. Only rupee loan will be covered under the TUFS and buyers bank who is giving the guarantee has to be bank co-opted under TUFS.

  6. The intending purchaser-user of indigenous / imported machinery who is not in a position to offer immediately full cash payment for the required machinery will approach the machinery manufacturer / local agent of foreign supplier seeking deferred payment facility. The manufacturer - seller will prepare separate usance bill / promissory note for each installment together with interest payable on the deferred installments.

  7. The bills drawn by the seller will be accepted by the purchaser/user and guaranteed by the purchaser/ users bank. Alternatively, these bills are drawn by the purchaser/users and guaranteed by his banker.

  8. These bills/promissory notes are then delivered to the seller, who gets them discounted with his banker, thus realising the cost of the machinery; the discount payable by him to his banker is included in the amounts of the bills by way of interest for the period of deferred payment.

  9. The buyers bank will retire the bills on the respective dates by debiting the account of the buyer and for the full face value of the bill including principal amount and interest on deferred payment. After receipt. of the 5% interest reimbursement from nodal agency, the reimbursement amount will be refunded by the buyers bank to the buyer.

  10. After ensuring compliance with all the provisions of TUFS, the buyers bank will approach respective nodal agencies for interest reimbursement. The buyers bank will be required to furnish complete details i.e., invoice value of equipment, discounting rate (%), usance period (months) for each bill, periodicity and entire repayment schedule indicating break-up of principal components for the entire period of repayment.



u) CLCS- TUFS - Operational Guidelines:

  1. The proposed option would be extended to the small scale Textile and Jute industries of all the segments, which are already covered under TUFS.

  2. CLCS- TUFS will be in operation from 1 st January 2002 to March 31, 2004. The loan sanctioned by the nodal agencies / co-opted PUs till the last date of duration of the scheme will be eligible for availing of 12% capital subsidy.

  3. Technology and -other norms of TUFS are equally applicable to CLCS- TUFS cases for determining the eligibility under the scheme.

  4. Subject to the norms prescribed under TUFS, the definition of Small Scale Industry for the Textile and Jute sectors, would be as defined by the Department of Industrial Policy and promotion, Ministry of Commerce and Industry, Government of India, for such Small Scale Industries. However, SSI registration is not a pre-requisite for availing of assistance under CLCS- TUFS.

  5. Capital Subsidy under the CLCS- TUFS shall be available only for such projects where term loans have been sanctioned by the nodal agencies and its co-opted Primary Lending Institutions (PLIs).

  6. The 12% Capital subsidy will be worked out on the eligible investment amount under TUFS and would be released to the beneficiary unit on pro-rata basis along with disbursement of loan sanctioned for technology upgradation.

  7. The capital subsidy will be treated as a non-interest bearing term loan by the bank/PIs. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rata basis in terms of release of capital subsidy.

  8. It is expected that a industrial unit availing of Capital subsidy should atleast function for a minimum period of three years from the date of disbursement of capital subsidy. In case unit goes out of production prior to lock in period of three years (except in cases where the unit remains out of production for short period, not exceeding three months due to causes beyond its control such as shortage of raw material, power etc.), the industrial unit shall be liable to refund to the Government Capital Subsidy availed of along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime lending rate of PU concerned at the time of invoking this penal clause. The bank/FI will take all necessary steps to recover the capital subsidy and interest thereto from the industrial unit and refund the same to the Govt.

  9. In case it is found that Capital Subsidy from the Government has been availed of on the basis of any false information, the industrial unit shall be liable to refund the Government Capital Subsidy availed of along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime landing rate of PUs concerned at the time of invoking this penal clause. The bank/FI will take all necessary steps to recover the capital subsidy and interest thereto from the industrial unit and refund the same to the Govt.

  10. All the co-opted PUs will have to execute a General Agreement with SIDBI for availing of capital subsidy under the scheme, irrespective of the fact whether re­finance from SIDBI is availed of by them or not.

  11. After sanction of the assistance, eligible PUs will get an Agreement executed by the small scale unit concerned on behalf of Government of India.