Under the Cluster Based Approach in Financing MSMEs, what is the key benefit for a bank in adopting this strategy?

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Banking · MSME Financing

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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It simplifies the creation of specialized Credit Rating Models (CRMs) and enhances risk appraisal efficiency.

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Answer 1

It ensures all MSMEs in the cluster are compulsorily members of the TReDS platform for invoice discounting.

Answer 2

It guarantees a 100% coverage under the CGTMSE for all loans sanctioned within the cluster.

Answer 3

It allows banks to exceed the exposure limits mandated by the Reserve Bank of India (RBI) for the MSME sector.

Answer 4

It simplifies the creation of specialized Credit Rating Models (CRMs) and enhances risk appraisal efficiency.

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