(1)

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GOVERNMENT OF KARNATAKA

No. FD 08 INV 2022 (R)

Karnataka Government Secretariat,

Vidhana Soudha,

Bengaluru, dated: 24.11.2022.

NOTIFICATION

In accordance with instructions contained in Reserve Bank of India’s D.O.IDMD No.

1417/10.03.13/2013-14, dated 6^th November 2013, and in partial modification of the Notification of

the Government of Karnataka, No. FD 08 INV 2022, dated 26.09.2022, the Government of Karnataka

hereby notifies the revised model scheme for constitution and administration of the Guarantee

Redemption Fund of Government of Karnataka as below:

Title of the Scheme

1

The Scheme shall be called 'Guarantee Redemption Fund

Scheme’ (hereinafter referred to as “the Fund”)

Constitution

of

the

Fund

2

A 'Guarantee Redemption Fund' shall be constituted by

the Government of Karnataka (hereinafter called the

Government) for meeting its obligations arising out of the

guarantees issued on behalf of State level bodies.

The Fund shall be constituted in the Public Account and

classified under the head “8235- General and Other Reserve

Funds -117- Guarantee Redemption Fund” in the accounts of

the Government.

Objective

of

the

Scheme

3

The Fund shall be utilised for meeting the payment

obligations arising out of the guarantees issued by the

Government in respect of bonds issued and other

borrowings by the State Level Undertakings or other

bodies and invoked by the 'beneficiaries'.

Explanation:

(a) The accumulations in the Fund shall be utilised only

towards the payment of the guarantees issued by the

¨sÁUÀ – 4ಎ

Part – IVA

, 24

2022(

03

1944)

BENGALURU, THURSDAY, 24, NOVEMBER, 2022(MARGASHIRA , 03, SHAKAVARSHA, 1944)

. 586

No. 586

2

Government and invoked by the beneficiary and not paid

by the institution on whose behalf guarantee was issued.

Provided that the net incremental annual investment of

the State (i.e. outstanding balance over and above the

level in the corresponding period of the previous

year) shall be eligible for availing Special Drawing

Facility (SDF) from the Reserve Bank of India

(hereinafter referred to as the Bank)

Commencement of the

operation

of

the

Scheme

4

It shall come into force with effect from the financial year

2022-23.

Contributions to the

Fund

5

(a) The Fund shall be set up by the Government with an

initial contribution of minimum one per cent of

outstanding guarantees at the end of the previous year

and thereafter minimum 0.50 per cent every year to

achieve a minimum level of three per cent in next five

years. The Fund shall be gradually increased to a

desirable level of five per cent. If guarantees have been

invoked or are likely to be invoked, additional funds

(over and above 5%) shall be maintained.

(b) It is open to the Government to increase the contributions

to the Fund (beyond 0.5 per cent annual) at its discretion

and also based on its assessment of likely invocation of

guarantees. The balance in the Fund shall be increased

with contributions made annually or at lesser intervals.

(c) In order to enable transfer of the total amount of

contribution to the Fund, the Government would make

suitable Budget provision on the expenditure side

of their budget under the head “2075- Miscellaneous

General Services-797- Transfer to/from Reserve Funds

and Deposit Accounts - Guarantee Redemption Fund-

261-Contributions.”

(d) The Government shall not fund its contribution to the

Fund out of borrowings from the Bank.

Relationship

of

the

Fund

with

General

Revenues/

Public

Account

6

(a) The corpus of the Fund would comprise an initial

amount demarcated by the Government, annual or

other contributions made by the Government thereto

as also periodic accretions by way of guarantee

commission collected from the institutions in respect

of whose bonds / obligations, the Government had issued

the guarantee, in addition to the income accruing to the

Fund.

3

(b) The Fund shall be kept outside the General Revenues

of the Government and shall be utilised only in the

manner prescribed in this Scheme.

Administration of the

Fund

7

The Fund shall be administered by Central Accounts Section

of the Bank subject to such directions/instructions as the

Government may issue from time to time.

Investment

of

the

corpus of the Fund

8

(a) The accretions to the Fund shall be invested in

Government of India Dated Securities, Treasury Bills,

Special Securities of the Government of India and State

Government Securities of other States of such maturities

as the Bank may determine from time to time in

consultation with the Government.

(b) The Bank shall make available the securities for

investment by acquiring the securities from the

secondary market, without loading any charge other than

that indicated in paragraph 11.

Accounting

of

transactions

9

(a) The responsibility for the administration of the Fund will

rest with the Government. The Government will decide

all matters connected with the investment of the corpus

of the Fund, reinvestment/ dis-investment, obligations

and application of the Fund, etc.

(b) The Government will, from time to time, issue

instructions to the Bank. The Bank will immediately

arrange to make the necessary investment. The Bank

would scroll to the Government the debit on account of

the investment and other incidental charges like

brokerage, commission etc. in the usual course.

However, in order to ensure that the investment

transactions of the Fund do not get mixed up with other

transactions, these may be indicated distinctly in separate

scrolls.

(c) On receipt of the scrolls the investment transactions

would be accounted for under the head "8235-General

and Other Reserve Funds-120 Guarantees Redemption

Fund Investment Account". However, the incidental

charges like brokerage, commission etc., shall be

accounted for as a charge on the Fund.

(d) The Bank will arrange to collect interest on these

securities and credit the same to the Fund on due date.

Further, these would require to be invested as in the case

of contributions by the Government i.e., in accordance

with the investment norms prescribed in para 8 above.

4

On maturity of the securities, the proceeds will be

collected and credited to the account of the Government

or reinvested on the basis of instructions received from

the Government, i.e., in accordance with the pattern

outlined in para 8 above. As in the case of the debit

scrolls, the Bank shall use separate scrolls, for the

receipts.

(e) On receipt of instructions from the Government, the

Bank will arrange to sell the securities at the ruling price

through its Mumbai office and credit the amount realised,

less incidental charges, to the account of the

Government.

(f) The receipts on account of maturity or sale of the

securities would be taken to the account of the

"Guarantees Redemption Fund Investment Account".

The incidental charges on sale would be charged on the

Fund.

(g) The provision for expenditure on account of the

Guarantees Redemption will be made in the budget of the

Government under the relevant heads. Only the actual

amount of guarantee redemption expenditure shall be

brought in account under the head “8235-General and

Other Reserve Fund-120- Guarantees Redemption Fund-

Investment Account-Relief on account of Guarantees

invoked- Guarantees Redemption Fund”

(h) The Bank shall arrange to redeem the securities on

maturity. In case of premature disinvestment to meet

the liability on account of the claims to be paid, the

Bank shall decide on the securities to be encashed in

consultation with the Government and sell the

securities at the ruling price and credit the amount

realised, less incidental charges to the Fund.

(i) The Government will pay the Bank, a commission at the

rate determined by the Bank in consultation with the

Government. These charges shall also be borne by the

Fund as in the case of the charges indicated in paras 9(c)

and 9(f). The loss or gain on the sale of securities shall

also be taken to the Account of the Fund.

5

Explanation:

(a) The debit to Government on account of such withdrawal

will be accounted under the major head “8235- General

and Other Reserve Fund-120- Guarantees Redemption

Fund-Investment Account”. On the maturity of the loan,

the balance outstanding under the head 8235 (Sub-head

Guarantees Redemption Fund) is credited to the head

8680 (Miscellaneous Government Account) Ledger

Balance Adjustment Account.

(b) The Bank would scroll to the Government the debit on

account of investment less the incidental charges in the

usual course. However, in order to ensure that the

investment transactions of the Fund do not get mixed

up with other transactions, these will be indicated

distinctly in separate scrolls.

(c) The Bank will arrange to collect interest on the

investments and credit the same to the Fund on the due

dates.

(d) On the maturity of the securities, the Bank will arrange

to redeem the securities and in case of premature

disinvestment, to sell the securities at the ruling price and

credit the amount realised, less incidental charges, to the

Guarantees Redemption Fund Investment Account. As

in the case of debit scrolls, the Bank shall use separate

scrolls for the receipts.

(e) The provision for expenditure on account of the periodic

contributions will be made in the Budget of the

Government under the relevant head. The extent of

expenditure to be financed from the Fund shall be

withdrawn from the Fund by the disposal of the

investment.

Functions of the Bank

managing the Fund

10

(a) The Bank will be guided by the directions of the

Government in all matters concerning the investment/

reinvestment/ dis-investment/ reallocation/ withdrawals

time to time of the Fund and will act accordingly.

(b) The Bank would arrange to raise a debit to the account

of the Government maintained with it as per the

schedule of contributions set out in paragraph 5.

(c) The contributions to the Fund shall be invested by the

Bank as indicated in paragraph 8. The periodic accretion

to the Fund by way of guarantee commission,

contributions by the Government and interest income

shall also be invested by the Bank in a similar manner.

6

(d) The withdrawals may be made from out of the

balance accumulated in the Fund up to the date

towards the redemption of the guarantees invoked

and to be paid by the Government, as per its

directions or Government shall have the option to

withdraw excess fund over 5 per cent of outstanding

guarantees of the previous year.

(e) The Bank will submit periodical statement of

balances/advices regarding the changes therein in

consultation with the Government.

Services charges for

administration of the

Fund

11

The Government will pay to Bank a commission at the

rate of 1/8 per cent of one per cent of the turnover of the

Fund or at the rate to be mutually decided from time to

time.

Account and Audit

12

The accounts of the Fund and the investments shall be

maintained by the Accountant General of the State in the

normal course. The concerned Department of the

Government will maintain subsidiary accounts in such

manner and detail as may be considered by the

Government in consultation with the Accountant General.

Savings

13

The Government shall issue instructions relating to the

provisions of the Scheme as may be considered from time

to time to enable smooth functioning of the Scheme. In

case of any difficulty in the operation of any provision of

the Scheme, the Government may, if satisfied, relax the

provisions.

NITISH. K

Deputy Secretary (B&R),

Finance Department.

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SUNIL GARDE

Digitally signed by SUNIL GARDE

Date: 2022.11.24 18:00:57 +05'30'