GUARANTEE INSURANCE FOR BANK LOANS

It must be a new concept. While the government announce various schemes and plans for the new entrepreneurs to start industries, qualified and skilled youth and other experienced people, in most cases are not able to avail those. When they approach the banks with excellent project reports, banks ask for suitable collateral security towards the financial assistance. In most cases these new comers are not able to provide the required collateral security as such are compelled to leave the project. We must find a solution for this if we want to bring more and more youth to the industrial sector.

It should be like this: An entrepreneur approach the bank for financial assistance for his project. If the project is acceptable to the bank they can refer this to the Insurance Company who in turn will examine the project and if found fit they can give guarantee to the bank for hundred percent of loan. For the security of the loan, the Insurance Company will act as a joint signatory for every withdrawal of money from the bank by the entrepreneur. This will provide opportunity for the Insurance Company to watch every financial activity of the entrepreneur. They also will have the right to inspect the books of accounts of the firm as and when required. This arrangement will ensure that the fund is not diverted for anything else. Insurance Company can also Levy a nominal charge from the entrepreneur for the service. If Government of India can approve this system and effectively implement it Indian economy can make a quantum leap in a short span of time. Neither the bank nor the Insurance Company will lose any money with this arrangement. On the other hand the normal tendency of the entrepreneurs to divert the loan amount for other purposes can also be prevented.

KV George

kvgeorgein@gmail.com