(1) The obligations of the borrower to service the loan and the guarantee fee, and monitoring the utilization of the guaranteed loans and adherence to the terms and conditions of the guarantee shall fall on the Administrative Department. For this purpose, the Administrative Department shall develop a proper database for capturing all guarantees extended by the State Government. A Monitoring Unit (MU) shall be designated at the State level which shall be responsible for tracking all the guarantees viz., compilation, consolidation, maintenance of the data base on guarantees and monitoring the same on a continuous basis.
(2) The Administrative Department shall classify the projects/activities as high risk, medium risk and low risk and assign appropriate risk weights before extending guarantees.
(3) The Administrative Departments shall instruct the State Undertakings, whose borrowings are guaranteed, to set up an arrangement for provisions for meeting possible shortfalls in project earnings. The borrowing State Enterprises, with the approval of Finance Department, should set up escrow accounts with predetermined and regular contributions from project earnings. In case revenue of the project suffers for any reason, repayments could be made out of these accounts before resorting to State Government guarantees.
(4) To improve the credibility of the data on State Government guarantees, Departments shall ensure that all Government guarantees is reviewed every year. A copy of the Review Report disclosing data relating to guarantees approved by the Financial Adviser of the concerned Department shall be forwarded to Finance Department by 30th April every year for the previous financial year.