U.S. Loan Guarantee to Yes Bank to Promote Lending to Small and Medium Enterprises in India

April 18, 2005

NEW DELHI -- A U.S. Government loan guarantee with a cumulative value of $20 million (Rs. 87 crore) was signed with India 's YES BANK, Ltd. today. It will spark private lending to small- and medium-sized enterprises that aim to commercialize renewable, efficient energy and water technologies, products and services.

The United States Agency for International Development (USAID) loan guarantee attracts private and public resources to finance underserved segments of the marketplace in target sectors such as clean energy and water.

U.S. Embassy Charge d'Affaires Robert Blake presided at the official launch, where USAID India Mission Director George Deikun and YES BANK, Ltd. Chief Executive Officer Rana Kapoor signed the guarantee agreement.

The U.S. guarantee--which covers up to 50 percent of net principal loss in case of default--lowers the risk for YES BANK to invest in small- and medium-scale enterprises. Loans to such businesses are often passed over due to their riskier, nascent nature, according to U.S. Mission Charge d'Affaires Robert Blake.

"This facility unleashes the vitality and creativity of small and medium entrepreneurs to place new products and services in the marketplace that will help secure India 's energy future," said Blake.

Cooperation on energy security is a key part of the U.S.-India relationship. "Today's ceremony is another mark of progress in transforming the U.S.-India strategic partnership into a broader, more comprehensive relationship," said Blake.

The public sector is not in a position to provide necessary finances for India 's power and other infrastructure needs. Private sources must be attracted to finance sector development, according to Blake.

Technical assistance from USAID India to promising loan candidates will help generate "bankable" proposals for renewable energy, energy efficiency and water conservation projects. The financially backed enterprises will reduce the severe power shortage in India.