Procedure, conditions and restrictions to meet losses out of the Guarantee Fund

The losses on account of loans advanced by a State Co-operative Bank on the security of mortgages not being fully recovered because of the following circumstances shall be met out of the Guarantee Fund constituted under Section 161:- (a) Where the whole or substantial portion of the property of the mortgagor is destroyed or damaged or the rights in respect of his property are wholly or substantially extinguished because of natural calamities or any other reason beyond his control rendering him incapable of repaying the loan to the Bank. (b) Where despite due care and caution taken by the State Co-operative Bank the mortgagor's title duly verified by an officer not below the rank of an Assistant Registrar appointed by the Registrar is subsequently found to be defective: Provided that no such loss shall be met unless the proposal is scrutinized and recommended by a committee of not more than five persons including the Chairman of the State Co-operative Bank and the Trustee Constituted by the State Government for the purpose and the State Government is satisfied that the Bank is not in a position to meet the loss wholly or in part out of its own resources and that it is necessary for the stability of the Bank to meet such losses out of the Guarantee Fund.