Restrictions on Government Guarantees

Notwithstanding anything contained in any other acts:

1. (1) Government guarantee shall ordinarily be extended by the Government on behalf of Departmental Undertakings, Public Sector Undertakings, Local Authorities, Statutory Boards & Corporations, Co-operative Institutions, Other Authorities and Agencies under the Government. Provided that no Government guarantees shall be extended to co-operative sector unless the Share Capital Contribution from non-governmental sources is not less than ten percent of the Total equity proposed.
2. (2) Guarantees shall be given only for the Principal amount and Normal interest component of the underlying loan.
3. (3) No Government guarantees shall be extended for external commercial borrowings.
4. (4) State Government shall not extend guarantee for more than 80 per cent of the project loan, depending on the conditions imposed by the lender.
5. (5) Guarantees once approved, shall not be transferred to any other agency without the prior approval of the Finance Department.
6. (6) No Government guarantees shall be given in respect of any loan of any Individual, Private Institutions or Private Companies.
7. (7) Government Guarantees should not be used to obtain finances through State owned entities, which substitutes budgetary resources of the State Government.