• Objective: The primary objective of the CGSFPO is to facilitate access to credit for FPOs and promote their growth and development. By providing credit guarantees, the scheme encourages banks and financial institutions to extend financial assistance to FPOs without the need for collateral security.
• Credit Guarantee: Under this scheme, the government provides a credit guarantee cover to the lending institutions for loans sanctioned to FPOs. This cover mitigates the risk for banks and encourages them to offer loans to FPOs at reasonable terms and interest rates.
• Coverage: The scheme covers term loans and working capital loans extended to FPOs by scheduled commercial banks, regional rural banks, and cooperative banks. The loans are primarily meant for various activities such as agriculture production, post-harvest management, marketing, and infrastructure development.

• FPOs registered under the Companies Act, Producer Companies Act, or any other relevant state-level cooperative society acts are eligible to avail benefits under the CGSFPO.
• FPO should have a satisfactory track record and a viable business plan to qualify for credit support.
• If the FPO has already availed credit guarantee under any scheme of GOI or any other scheme is not eligible for application.
• FPO must be eligible for lending as per the Lendability Assessment Tool available in the NABARD’s Guidance Note on FPO financing or any other tools developed by NABARD/IBA or Ell’s( co-operative banks/NCDC) approved assessment toll.
• FPOs should have a minimum of 300 farmers.

The credit guarantee cover under the scheme is up to 85% of the sanctioned loan amount or the amount in default, whichever is lower. The maximum credit guarantee cover per FPO is ₹1.50 crores. For credit facilities up to ₹1 crore, the cover is 85% with a ceiling of ₹85 lakhs. For credit facilities above ₹1 crore, the cover is 75% with a ceiling of ₹1.5 crores.

This cover helps reduce the risk for lending institutions and encourages them to finance FPOs more readily.

The repayment period for loans extended under the CGSFPO is flexible, allowing FPOs to repay the loans as per the cash flow generated from their activities. This feature ensures that FPOs can manage their finances efficiently without undue pressure.

1. The Eligible Lending Institution (ELI) shall be required to apply for Guarantee cover to the Trust.
2. ELI appraises each loan proposal for selecting commercially viable projects and submits the Guarantee application to the trust.
3. ELI undertakes regular desk/ field monitoring of the borrowing FPOs.

The Annual Guarantee Fee (AGF) stands at 0.75% for amounts up to Rs.1.0 crore and increases to 0.85% for amounts exceeding Rs.1.0 crore.

ELI may invoke the guarantee in respect of the credit facility within 12 months from the date of NPA. The Guarantee could be invoked if the following conditions are satisfied:

• If the borrower fails to pay the due amount to the ELI and the loan account has been classified by the ELI as NPA.
• The lock-in period of 12 months has lapsed
• The claim is forwarded to the trust through ELI’s Controlling Office.
• ElI shall take all necessary precautions and take recourse to all measures to recover the entire amount of the credit facility from the borrower.

A loan guaranteed by a trust will be cancelled if the business transfers the loan or its liabilities to another entity without getting permission from the trust. The trust can grant this permission, but the new borrower must meet the same conditions and terms as the original borrower. If these conditions are not met, the guarantee ends from the date of the transfer.

Additionally, the trust's liability for any loans provided to a borrower by the financial institution is limited to the amount the borrower owed to the financial institution on the date they became eligible for the loan program. This limit is subject to specific rules set in the scheme.

• Enhanced Access to Credit: FPOs, especially those comprising small and marginal farmers, can access credit facilities without providing collateral security.
• Financial Stability: The scheme promotes the financial stability of FPOs by facilitating access to timely credit, enabling them to undertake various agricultural and allied activities.
• Promotion of FPOs: By supporting FPOs, the scheme contributes to the overall development of the agricultural sector, leading to better market linkages, improved infrastructure, and increased income for farmers.

The Credit Guarantee Fund Scheme for FPOs is a significant step towards strengthening the financial backbone of FPOs, ultimately benefiting the farming community and fostering rural development.