RBI/2013-14/564
DBOD.Dir.BC.No.106/13.03.00/2013-14
DBOD.Dir.BC.No.106/13.03.00/2013-14
April 15, 2014
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir / Madam
Differential Rate of Interest for Micro and Small Enterprises (MSEs)
A reference is invited to part ‘B’ of the First Bi-monthly Monetary Policy Statement, 2014-15
announced on April 1, 2014 wherein certain measures have been proposed to be
adopted by banks in order to give a fillip to the flow of credit to micro and
small enterprises (MSEs) borrowers.
2. In this regard 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) and the zero risk weight for capital
adequacy purpose for the portion of the loan guaranteed by the CGTMSE and
provide differential interest rate for such MSE borrowers, than the other
borrowers. However, banks should note that such differential rate of interest
is not below the Base Rate of the bank.
3. Further, banks are advised to undertake a review of their loan policy
governing extension of credit facilities to the MSE sector, with a view to
using Board approved credit scoring models in their evaluation of the loan
proposals of MSE borrowers.
Yours faithfully
(Prakash Chandra Sahoo)
Chief General Manager