(1) Guarantee Fee is an essential and pre-requisite condition for availing Government Guarantee. Therefore, wherever guarantee is to be given by the Government, the borrower shall enter into an agreement with the Government for payment of Guarantee Fee on the Principal amount of the loan drawn and loan outstanding from time to time. The Departments must ensure before recommending a proposal of Guarantee to Finance Department that the cost of applicable Guarantee Fee has been taken into consideration while calculating the total cost of the loan.
(2) The Government shall charge a minimum Guarantee fee of 1 (one) percent of the total guaranteed amount for the first year, which shall not be waived under any circumstances. The fee shall be deposited in the Treasury in advance, via Treasury Challan under the Head of Account "0075- Miscellaneous General Services-108-Guarantee Fees (1) Receipts relating to Guarantees given by the Government, before the execution of the Guarantee Deed.
(3) For the subsequent financial years, Guarantee Fee shall be fixed at 0.5 percent per annum on the Outstanding amount of the Principal and Interest and the same should be deposited in the Treasury on or before 31st March every year.
(4) Depending on the default risk of the project the Government may, by notification, specify commission at an enhanced rate.
Explanation: For the purpose of this section 'default risk' means the probability of default by the borrower on whose behalf the Government Guarantee is given, depending on the amount borrowed, the type of industry and the economic situations.