What is Surrogate Banking scheme?

Surrogate banking scheme is to provide Personal or Unsecured Business loan, for self employed individuals who own a property (house) in their name and are not filing any Income tax returns but with their good banking transcation and healthy bank balance

Personal loans and Unsecured loans are being provided to the customers without knowing the income proof of the customer. Surrogates are loan against Property owned by them, loan against loan track record etc. in these cases, the loan is provided to the customer without their income proof..

Surrogate banking scheme helps people who are not filing ITR buy have house in their name.

The programs under which Loan can be extended are as follows:

  • Under Banking Surrogate
  • Under Auto Loan Surrogate*
  • Under Business Loan Surrogate
  • Under LAP Surrogate
  • Under Rental Surrogate
  • Under Fixed Deposit
  • Under PAN/No Income Program

Surrogate banking or banking surrogates is one so the best ways come up to help people getting small loan amounts. It can be used not only for loans but for multiple purposes.

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Features and Benefits of Loan

Most of the NBFCs and banks in the race of capturing market shares gave loans to customers based on surrogates which resulted in over leveraging. This is where customer takes undue advantage. Under this the customer approaches not only to one bank and takes money on the basis of surrogates thus defaulting in many cases.

But the scenario is changed completely. Surrogates would be helpful to a customer only once and if multiple applications of a customer will be seen then it may result into rejection of their accounts.

Loan provided on basis of other Loan Track

If the borrower has taken other big loans viz., Equipment loan, Mortgage, Commercial vehicle loan etc., which are large in size and repaid the loan with a clean track record without any default, then the new lender can extend the same or a little lesser percentage of Home loan to the borrower..

Funding depends on Bank Balance

For an industry where the turnover is very high but the profit margin is always low(certain trading business), the lenders do approve of the calculation basis the gross profit and not the net.Bank statements for the last 3-6 months are compulsory for ascertaining the credit worthiness of any customer. Therefore majority of the banks have started asking for it.

Gross Profit method

For an industry where the turnover is very high but the profit margin is always low(certain trading business), the lenders do approve of the calculation basis the gross profit and not the net.

Turnover based on Industry Margin

If the borrower is in a manufacturing or trading business then a standard profit margin has been internally set by the borrower. For example, a manufacturing unit having 2 crores of turnover is expected to make a 10% profit and thus the income can be considered as 20 Lacs and basis this the loan application can be granted, even if it is not shown. Similarly, for a trading business, it could have been set at 5% as there's no machinery etc. like a manufacturing unit as an asset, and been flagged at a little higher risk grade. At the same time, a service industry may not be considered for this type of surrogate funding at all..

Eligibility Criteria for Loan

Business loan eligibility depends upon various factors which differ from bank to bank. The main factor of course, is your ability to repay the loan. Banks that offer business loans will run extensive checks on your business, profits, financial statements and scope of success. For example banks will assess your repayment capacity with the kind of organisation you have built.

For your benefit, we have put down some of the main things to take care of to ensure you are eligible for a business loan. Keep the following points in mind to ensure your application goes through. Age


Business owners that are typically between the ages of : 24 to 65 years


Minimum Net Monthly Income: Rs 40,000

Credit Rating

Applicant should have the bank specified credit score.

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The following documents are required along with your Personal Loan application:

  • Personal Identity proof (copy of passport/voter ID card/driving license/Aadhaar)
  • Home Address proof (copy of passport/voter ID card/driving license/Aadhaar)
  • Bank statement of previous 6 months (Passbook of previous 6 months)
  • Latest 2 years Income tax return filing

Fees and charges

The lending institution will assess the risk of every loan application against a set of guidelines:

  • Types of fees

    Charges applicable

  • Rate of interest
    Up to 20% -26%
  • Processing fees
    Up to 2.5%
  • Loan statement charges
  • Interest & principle statement charges
  • EMI bounce charges
    Rs 1500 for every bounce
  • Secure fee

*Service Tax and other Government taxes, levies etc. applicable as per prevailing rate will be charged over and above the Fees and Charges

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Frequently Asked Questions

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The bank will levy certain ECS bounce charges or penalties. Additionally, that will also get reported in your credit report. Depending upon the severity and the regularity of the miss, it may have a serious impact on your future credit possibilities like in obtaining a home loan, car loan, etc. Additionally, banks may also take legal action against the borrower.

My Business Loan will work with the concerned bank and get you the loan within 5-7 working days of your submitting the completed documents.

Business Loan eligibility depends on the following factors: Credit score of the loan applicant/co-applicant The last two years financials of the borrowing entity Information about the Debt Service Coverage Ratio: This information tells the lender whether the borrower will be able to service the EMI for the current loan.

The minimum turnover requirement is INR 4 million and the maximum turnover requirement is INR 300 million for the business loan.

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