The Meghalaya Ceiling on Government Guarantees Act, 2025 (Act No. 5 of 2025)

 

The Gazette of Meghalaya 
EXTRAORDINARY 

PUBLISHED BY AUTHORITY 
  No. 65                          Shillong,  Monday,  March  24,  2025                                   3rd  Chaitra,  1947  (S. E.) 

PART-IV 
GOVERNMENT OF MEGHALAYA 

LAW (B) DEPARTMENT 
------- 

NOTIFICATION 

The 24th March, 2025 

No.LL(B).33/2024/2. – The Meghalaya Ceiling on Government Guarantees Act, 

2025 (Act No. 5 of 2025) is hereby published for general information. 

 

MEGHALAYA ACT NO. 5  OF 2025 
 

(As passed by the Meghalaya Legislative Assembly) 

Received the assent of the Governor on the 20th March, 2025. 

Published in the Gazette of Meghalaya Extra-Ordinary issue dated 24th March, 2025. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART-IV]               THE GAZETTE OF MEGHALAYA, (EXTRAORDINARY) MARCH 24, 2025                272 
 

THE MEGHALAYA CEILING ON GOVERNMENT GUARANTEES ACT, 2025 

An 

Act 

An Act to provide for regulation of Government guarantees and other matters connected therewith or 
incidental thereto. 

Preamble: WHEREAS it is expedient to provide for regulation of Government guarantees issued on behalf of 
the Government Departments, Public Sector Undertakings, Local Authorities, Statutory Boards & Corporations 
and Cooperative Institutions and for promoting fiscal discipline of the State; 

Be it enacted by the Meghalaya State Legislative Assembly in the Seventy Sixth years of the Republic of 
India, as follows: 

1. Short title and Commencement.— 

(1) This Act may be called "The Meghalaya Ceiling on Government Guarantees Act, 2025". 

(2) It shall come into force on such date as the Government may, by notification in the Official Gazette, 
appoint. 

2. Definition: In this Act, unless the context otherwise, requires.— 

(a) 'Government' means the Government of Meghalaya. 

(b) 'Government Guarantee' includes the guarantee given by the State Government on behalf of 
Departmental Undertakings, Public Sector Undertakings, Local Authorities, Statutory Boards & 
Corporations, Cooperative Institutions and Other Authorities and Agencies under the Government of 
Meghalaya. 

(c) 'prescribed' means prescribed by rules made under this Act. 

(d) 'State' means the State of Meghalaya. 

3. Ceiling on Government Guarantees.— 

(1) The Total Outstanding government guarantees as on the first day of April of any year shall not 
exceed 10 percent of the Gross State Domestic Product (GSDP) estimated for the year. 

(2) The Total fresh government guarantees issued in a year shall not exceed 5 percent of the Revenue 
Receipts or 0.5 per cent of Gross State Domestic Product (GSDP) estimated for the year, 
whichever is less. 

Provided that under extreme exigencies and occurrence of natural calamities of the order which require 
the Government to take immediate fiscal policy measures, the Government may exceed the ceilings 
prescribed under sub-section (1) and (2). 

4. Restrictions on Government Guarantees.— 

Notwithstanding   anything contained in any other acts: 

(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. 



PART-IV]               THE GAZETTE OF MEGHALAYA, (EXTRAORDINARY) MARCH 24, 2025                273 
 

(2) Guarantees shall be given only for the Principal amount and Normal interest component of the 
underlying loan. 

(3) No Government guarantees shall be extended for external commercial borrowings. 

(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) Guarantees once approved, shall not be transferred to any other agency without the prior approval 
of the Finance Department. 

(6) No Government guarantees shall be given in respect of any loan of any Individual, Private 
Institutions or Private Companies. 

(7) Government Guarantees should not be used to obtain finances through State owned entities, which 
substitutes budgetary resources of the State Government. Government Guarantees should not be 
allowed for creating direct liability / de-facto liability on the State. 

5. Risk Categorization.— 

(1) The Departments should classify the projects / activities as high risk, medium risk and low risk and 
assign appropriate risk weights before extending guarantees. 

(2) Risk categorization should also take into consideration past record of defaults. 

(3) Risk associated with guarantee proposal including the probability of future payouts should be 
thoroughly assessed by concerned Departments. 

6. Guarantee Fee.— 

(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. 

 

 



PART-IV]               THE GAZETTE OF MEGHALAYA, (EXTRAORDINARY) MARCH 24, 2025                274 
 
7. Guarantee Redemption Fund.— 

(1) The Government, shall, by notification in the Gazette, constitute a fund called the 'Guarantee 
Redemption Fund (GRF)'. 

(2) The Guarantee Fee charged under section 6 shall form the corpus of the Guarantee Redemption 
Fund and it shall be remitted in the Public Accounts of the State. 

(3) The administration of Guarantee Redemption Fund shall be in such manner as may be prescribed. 

8. Responsibility of the Administrative Department.— 

(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. 

9. Power of Government to make rules.— 

(1) The Government may, by notification in the Meghalaya Gazette, make rules for the purpose of 
carrying into effect the provisions of this Act. 

(2) Every rule made under this Act shall be laid, as soon as may be after it is made, before the 
Legislative Assembly of Meghalaya, while it is in session, for a total period of fourteen days, which 
may be comprised in one session or in two successive sessions, and if, before the expiry of the 
session in which it is so laid or the sessions immediately following, the Legislative Assembly of 
Meghalaya makes any modification in the rule, or decides that the rule should not be made, the rule 
shall thereafter have effect only in such modified form or be of no effect, as the case may be. 
However, that any such modification or annulment shall be without prejudice to the validity of 
anything previously done under that rule. 

D. LYNGDOH, 
Joint Secretary to the Govt. of Meghalaya, 

Law (B) Department.  
 

SHILLONG: Printed and Published by the Director, Printing and Stationery, Meghalaya, Shillong. 
(Extraordinary Gazette of Meghalaya) No. 129 - 680 + 50 – 24 – 3 - 2025. 

website:- http://megpns.gov.in/gazette/gazette.asp.