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CGTMSE partners IOB to launch Risk Sharing Facility for MSEs

A Memorandum of Understanding in this regard was signed between CGTMSE and Indian Overseas Bank

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for Micro and Small Enterprises (CGTMSE) has launched the Scheme of Risk Sharing Facility-II (RSF-II) for guaranteeing collateral free credit facilities to eligible Micro and Small Enterprises.

A Memorandum of Understanding (MoU) in this regard was signed between CGTMSE and Indian Overseas Bank (IOB).

CGTMSE was set up by Government of India and SIDBI with the objective of guaranteeing collateral and third party guarantee free credit facilities so as to enable enhanced flow of credit to the MSE sector.

The launch of the Scheme of RSF-II is an initiative with a view to enable banks to take up MSE 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.

M Narendra, CMD, IOB said that the bank is focusing on lending to the and the agriculture as priority sectors. He mentioned that IOB has over the last two years increased manifold its portfolio under the Credit Guarantee Scheme.
RSF-II will help the participating banks to build-up a track record of good MSE lending and is expected to encourage banks to scale-up lending to MSEs and to price these loans more appropriately.

The RSF-II is being launched on a pilot basis with funding from a multilateral consortium led by the World Bank under the project for SME Financing and Development being implemented by Small Industries Development Bank of India (SIDBI), with the Department of Financial Services, Ministry of Finance as the Nodal Agency for the project.
Under the Scheme, collateral free and / or third party guarantee free credit facilities over Rs 1 crore and upto Rs 2 crore is sanctioned to eligible Micro and Small Enterprises are proposed to be guaranteed through select Member Lending Institutions (MLIs) of CGTMSE. The Scheme has a sub-component for coverage of specific categories such as MSEs adopting clean technology, Women, NER, SC/ST, Minorities, etc.

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