Small Industries Development Bank of India today signed a memorandum of understanding with Indian Overseas Bank to launch the scheme of risk sharing facility-II for guaranteeing collateral-free credit facilities to micro and small enterprises (MSEs).
Under the scheme, collateral free and /or third party guarantee free credit facilities over Rs 100 lakh and up to Rs 200 lakh sanctioned to eligible MSEs are proposed to be guaranteed through select member lending institutions of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
CGTMSE, set up by Government of India and SIDBI, offers collateral-and-third party guarantee free credit facilities to enable enhanced flow of credit to the MSE sector.
The scheme will enable banks to take up MSEs financing as a viable and profitable business proposition, by sharing the credit risk of participating banks, while at the same time, making participation contingent on better credit assessment and risk identification by banks, SIDBI said in a statement.
M. Narendra, Chairman and Managing Director, IOB, said, “The bank is focusing on lending to the MSME and the agricultural sectors.”