Loans to MSME & Large Corporate

MSME financing is the latest buzzword in the financial sector in India. Financing to MSMEs is on high priority, it is also highly risky. Banks face difficulties in extending credit to MSMEs mainly due to asymmetric information system and lack of reliable credit history. As a result, banks rely heavily on collateral-based lending rather than cash-flow analysis while dealing with small-scale sector borrowers.
As loans to MSMEs are priced relatively higher when compared with large corporates, the average account profitability (%) from the MSME segment is higher than banks’ large corporate portfolio. Moreover, considering the average small ticket size, MSME financing offers possibility of diversification of asset base, which will minimize the impact of possibility of poor quality of assets while minimizing sectoral client concentration.
Banks may explore the possibility to incentivize their large corporate clients for procuring products from MSMEs, financed by them. This would facilitate ready market to MSMEs thereby mitigating risks associated with MSMEs financing. Further, it will help in effective monitoring of their accounts.

LOAN FOR LARGE CORPORATES

Corporate lending is essentially the same thing as a personal loan, except instead of being made from a bank to an individual, it is made from a bank to a company. As a result, the amounts of money being dealt with tend to be substantially larger, and some of the protections are a bit different. There are a number of different forms of corporate lending, including asset-based lending, structured finance, and cash flow lending.
Asset-based lending is when the loan given is secured by means of some sort of asset. In personal loans, mortgages are probably the most well-known form of asset-based lending, but companies are more likely to use real-estate, intellectual property, or expensive equipment. Asset-based lending is one of the more secure forms of lending, since the bank lending the money has protected itself by balancing the value of the assets with the amount of the loan.

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