The State Bank of India (SBI) has announced a waiver of guarantees and annual service fees for the loans disbursed to small and medium-sized businesses (SMEs) under the Credit Guarantee Fund Trust Scheme for Micro and Small Enterprises (CGTMSE), according to a PTI news report published in The Times of India.
CGTMSE came into existence 4 years ago, to improve the flow of credit to the SME sector. It acts as guarantor for loans up to Rs. 1 crore, charging from its borrowers a guarantee fee ranging from 1-1.5% per cent of the loan amount and an annual service fee ranging from 0.50-0.75%. These twin fees will now be paid to the Trust by SBI.
Managing Director for National Banking, SBI, A Krishna Kumar, stated that this was a long-term move, and not a short-term measure to attract customers. The fees have been waived off to avoid ‘good borrowers’ from getting dissuaded by them, Kumar stated.