Digital lending norms: NBFC loans to MSMEs likely to get dearer

Mostly loans to micro, small, and medium enterprises (MSMEs) are covered under credit guarantee schemes. Loans to these sectors that are extended by the NBFCs, as a result, could become dearer

Loans to micro, small, and medium enterprises (MSMEs) may get dearer as non-banking financial companies (NBFCs) are likely to make higher provisions for loans extended under credit guarantee scheme following the Reserve Bank of India’s (RBI) digital lending norms released earlier this month, according to NBFC officials. Most loans to MSMEs are covered under credit guarantee schemes.

 

According to the latest RBI guidelines, regulated entities (RE) cannot enter into default loss guarantee (DLG) arrangements on the loans covered by the credit guarantee schemes. Currently, zero risk weight is applicable to these loans which are sanctioned under credit guarantee schemes.

 

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