Often businesses, especially the small and first generation start ups are not in a position to avail LC or PCL facility from banks simply because they cannot offer any collateral to the banks. It is a common enough experience that when you approach your banker for a Letter of Credit or a Packing Credit, his one of the first questions to you is what collateral can you offer. Even for increasing the existing credit lines the banks more often than not ask for additional collaterals. This becomes a huge hindrance in arranging for arranging for working capital limits or enhancements of existing limits.
We can arrange for facilities like Packing Credit/Letter of Credit/Bank Guarantees from banks without asking for collaterals. This is a very useful tool for first generation businesses who can avail of overdraft without any collateral. This will be backed by a cash margin, which anyway even regular banks ask for in addition to the collaterals. The limits will be based on last year's performance. These facility will be backed by a guarantees from the central government.
Any MSME registered business having turnover of more than 100 lacs and having profits for last 2 years can avail of this facility.