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Home Legal India SBI opts for credit guarantee cover for MSE loans

SBI opts for credit guarantee cover for MSE loans

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India's biggest lender the State Bank of India (SBI) has decided to buy credit guarantee cover for its loans below Rs 1 crore to micro and small enterprises (MSE). The MSE industry has been under a lot of stress and is more prone to default. This will help the bank to recover loan amount in case any borrower stops repaying.

"All loans up to Rs 1 crore will be mandatorily covered by the gurantee. All new loans upto Rs 1 crore will be covered under this. So far in FY13, we have sanctioned around Rs 900 crore in this category. For the full year, it is going to be around Rs 3000 crore. The pace will pick up in the second half of the financial year. MSE contributes around 18% of our total loan book size," he said.

The ministry of micro, small & medium enterprises (MSME) launched the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to ensure collateral free flow of credit to the MSE sector. The Government of India and SIDBI are the two stake holders. The pact of taking credit insurance was singed between CGTMSE and SBI back in December, 2009. 

 

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