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NBFC Loans to MSMEs May Get Dearer
Business Standard
|May 28, 2025
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 schemes 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.
A DLG is a contractual arrangement between the regulated entity and another entity, under which the latter guarantees to compensate the regulated entity for the loss due to default up to a certain percentage of the loan portfolio of the RE.
This story is from the May 28, 2025 edition of Business Standard.
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