Give benefit of differential rate to micro and small enterprises sector: RBI to banks

The Reserve Bank of India (RBI) on Tuesday asked banks to give the benefit of differential rate of interest to micro and small enterprises (MSE) on the basis of credit guarantee cover.

"We advise that while pricing their loans to MSE borrowers, banks should take into account the incentives available to them in the form of the credit guarantee cover of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)," the apex bank said in a notification.

The cover provided by CGTMSE help banks to protect risk arising out of default as the loans are insured by the guarantee fund trust.

However, banks should note that such differential rate of interest should not be below the base rate of the bank, it added.

In its first bi-monthly monetary policy statement for 2014-15, the RBI had proposed that banks should adopt these measures in order to give a fillip to the flow of credit to micro and small enterprises (MSEs) borrowers.