Credit and Finance for MSMEs: The 59-minute loan approval scheme for MSMEs launched by Prime Minister Narendra Modi in November 2018 has enabled the disbursement of 2,03,120 loans involving Rs 56,773 crores as of November 30, 2020, according to the data sourced from the MSME Ministry. The loan disbursement stood at 93.8 per cent of the 2,16,503 numbers of loans involving Rs 68,742 crores sanctioned by the end of last month. Moreover, in comparison to the previously available data as of August 31, 2020, the loan disbursement increased 3.38 per cent. Public sector banks had disbursed 1,96,473 loan applications involving Rs 54,545 crores out of 2,12,091 loan applications involving Rs 66,991 crore sanctioned as of August 31, 2020.
The loan approval scheme for MSMEs was launched to offer in-principle approval to a term loan or working capital loan from Rs 1 lakh to Rs 1 crore. However, leading banks including State Bank of India, Andhra Bank, Corporation Bank, Oriental Bank of Commerce, and Union Bank of India had increased the credit limit to Rs 5 crore in July 2019. The interest rate levied is 8.5 per cent onwards while the platform is integrated with the government’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to check the eligibility of borrowers. MSMEs need to provide their GST identification number, IT returns, six-month bank statement, owner’s details, on the loan portal to seek approval to their loan request in 59 minutes. The updated data was shared on the MSME dashboard portal by MSME Ministry.
“This is an added bureaucracy in bank lending. Earlier banks used to deal directly with customers but now they ask to come via the 59-minute portal. So what value addition they are offering? For getting in-principle approval, MSMEs are required to pay Rs 1,000. Banks have been able to reach out to only 7 per cent of the MSME sector so far while the rest remain outside banking system with no credit from banks,” Anil Bhardwaj, Secretary-General, Federation of Indian Micro and Small & Medium Enterprises had told Financial Express Online.
Meanwhile, the gross bank credit to micro and small enterprises (MSEs) year-on-year continued to grow steadily in September. The deployment increased 6.7 per cent from Rs 10.56 lakh crore as of September 27, 2019, to Rs 11.27 lakh crore as of September 25, 2020, according to the Reserve Bank of India’s November bulletin. However, the September 2020 credit growth was contracted by 1.9 per cent in the financial year 2020-21 from Rs 11.49 lakh crore deployed to MSEs as of March 27, 2020.