Sidbi To Contribute Rs 25 Cr For Dic

The government of India will be taking up the balance Rs 100 crore making the stakeholding pattern 4:1.

The draft scheme came up for discussion at a management meeting of the Indian Banks Association (IBA) in New Delhi on Saturday. IBA will soon forward its view on the scheme.

According to the draft scheme circulated among banks, the scheme will cover only the incremental assets and the banks will have the option of not taking cover for any loans they want. The risk-cover premium can be absorbed by the bank or passed on to the borrowers.

However, after factoring in the premium, the banks will not be able to charge more than 4 per cent over their prime lending rates (PLR) on such loans.

 

The loans covered under the scheme will also not be allowed to have a third-party guarantee or other collateral except for the assets created out of the loans which can be charged to the bank.

If the banks have an existing loan base which is not insured and want an insurance cover for their deposits, they can extend fresh loans to the borrowers for enabling them to pay up the old loans. The new loans will then come under the insurance umbrella.

At the initial stage, most bank chairmen opposed the high premiums that DIC plans to charge on the cover. The new outfit has decided to charge premiums at a risk-based rate instead of the flat rate that it was charging. This means that the weaker the bank, the higher the premium it will have to pay. This has caused most banks to protest.

According to the plan, the weakest bank would pay a premium of 24 paise on every Rs 100 insured and the lowest premium would be 5 paise on every Rs 100. The estimated corpus to be collected is Rs 9,400 crore.

Bank chairmen, at a recently held conference in Pune, expressed their concern over the fact that the premiums would be decided on the basis of the CAMELS rating put out by the Reserve Bank of India.

Vepa Kamesan, managing director, State Bank of India (SBI), said, "SBI and its associates will have to be considered separately while deciding the premiums."

Previously it was voluntary for banks to undertake the credit guarantee scheme so most banks opted out of this scheme with only 7 members, of which 6 are co-operative banks and 1 regional rural bank. Also, the members would have to take all the options that were being offered by the DICGC.