No Longer A Cakewalk

However, from the view point of the banks, opting out of the schemes gradually emerged as a better commercial proposition. Consider the event of a Rs 2 crore loan advanced to the SSI sector that has gone bad. The guarantee fees paid on this is 2.5 per cent of the loan i.e. Rs 5 lakhs, or Rs 15 lakhs for three years because of the lock in period. On the other hand irrespective of the size of the loan, the maximum that the banks receive from DICGC is 60 per cent of the outstanding amount or Rs 60,000 which ever is less. So, compared to the guarantee fees paid by the bank the amount that it receives is a paltry sum.