United Bank of India (UBI), which has recently eased loans for the MSME (micro, small and medium enterprises) sector, has now signed a memorandum of understanding with the Small Industries Development Bank of India (SIDBI) to ensure smooth credit flow to the MSME sector under the programme Collaboration for facilitating Enterprise Loans (COFEL).

By this scheme, both the institutions will work to leverage each others’ strengths. SIDBI, as a facilitator of the small and medium enterprises, will work with the MSMEs by sponsoring investment-grade proposals to United Bank and the latter will look at the credit linkage part under its various products.

UBI Executive Director Deepak Narang said that UBI has made it mandatory to do away with collateral security and third-party guarantees for all MSME loans which are eligible for Central Government MSME guarantee cover. This is another initiative taken by the bank in addition to providing 50 basis points concessions to the accounts availing the MSME cover.

He welcomed the announcement made by the Finance Minister in the budget 2013-14 on continuance of non-tax benefits available to an MSME unit for three years after it graduates to a large enterprise. This will allay the fear of the MSMEs of losing the benefits it used to get after it grows.