Indian banks supporting the economy through online loan portal

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A report was released by Credit Suisse on March 1, 2019, which states that within 3 months (https://www.psbloansin59minutes.com), an online portal has become the largest platform for providing loans to micro, small and medium enterprises (MSMEs).

At present, 21 lenders including the State Bank of India are
providing loans to MSME sector through this portal. Most importantly, the loan
of 30,000 crore has been approved with the help of this online portal.

At present, the credit size of MSME is about Rs 22 lakh
crore, while the estimated number of MSME is 6.5 crore in the country. So far
40,000 MSME entrepreneurs have received in principal approvals of loans.
However, all in principal approved loan proposals are not finally approved by
banks. The problem is usually associated with the project’s practicality or
non-submission of the required documents.

The advantage of this facility is being taken by both new and
old MSMEs. The average approved loan of new MSME is Rs 27 lakh, while the old
MSMEs is Rs 34 lakh. Under this scheme, 36 per cent of loans were sanctioned in
November 2018, which increased to 60 per cent in December, 2018. Under the
scheme, 100 per cent loan is being sanctioned to old borrowers, whereas in the
case of new proposed borrowers the bank is adopting vigilant approach. From November
2018 to January 2019, 92000 loan proposals were processed, in which 24000 loan
proposals were new to banks.

At present, more than 6.5 million MSME units are working in
the country, in which 11.1 crore people are employed. MSME sector contributes
about 30 per cent of GDP in the country. Prime Minister Narendra Modi believes
that if this sector is strengthened then employment generation in the country,
economic self-reliance, inclusive growth, speeding up in manufacturing etc. can
be made possible. In this case, entrepreneurs are not getting loans due to be
unawareness. Those businessmen who want to do business in true ways can avail
loans by fulfilling the necessary requirements, but such entrepreneurs were not
getting the all required information in one place. In order to solve such
problems, Prime Minister Narendra Modi launched a portal for MSME entrepreneurs
in November 2018, through which, in principal, approval of 1 crore rupees loan
is being given within 59 minutes. 

However, for getting Rs 1 crore loan, the entrepreneurs have
to fulfill all the conditions of the bank. The government has promised to
distribute loan amount within one week, but in reality, loan amount
distribution cannot be possible in this period. Approximately 4 months have
passed since the scheme started, but in most cases the loan could not be
distributed to the bank within 1 week. 

On the basis of this, it can be said that the requisite
information sought by the bank is not easy to make available by the proposed
borrowers in a week. MSME entrepreneurs can get in principal approval up to Rs 1
crore loan after successful entry of 10 steps on the designated web portal, but
final approval of loan and its distribution is done only when entrepreneurs
meet all the conditions of the bank. In fact, after the information provided
through this portal, the bank can seek some other documents for clarification.
If necessary, they can also demand collateral security or even guarantee, but
it depends entirely on the applicant’s profile and their financial condition.

However, on the basis of banks’ cumbersome formalities, it
cannot be said that this online portal is redundant or does not have its
relevance, because in order to get theoretical clearance, the information of
loan applicants who have to share in the online portal is part of the terms of
getting the loan. If the proposed applicant will fill all the details in the
proposed applicant’s portal, then fewer cases will come in which the bank will
have to ask for additional documents from the applicants.

Though, it is not easy to distribute loan within one week as
per the declaration made by the government. Applicants may take some time to
complete the conditions of the bank or to bring the required documents. When
the loan accounts turn as a non-performing asset (NPA), the bankers are treated
as culprits and they are also punished for this. Therefore, it is natural to
take care by them, while they approve loans.

In the first quarter of the year 2019, the NPA in the public
sector banks (PSUs) was 15.2 per cent in MSME sector, while private sector
banks’ NPA was 3.9 per cent and NBFCs had 5 per cent. Credit Suisse’s report
says that with the help of a 59-minutes online portal, market share of public
sector banks is increasing in the MSME sector. It is believed that this will
help PSUs to reduce their level of NPA. It is noteworthy that according to the
Reserve Bank, banks had an outstanding of Rs.3.6 lakh crore in the MSME sector
till December 21, 2018, whereas in the medium enterprises sector, it was Rs.1
lakh crore.

However, there are many entrepreneurs who don’t want to repay
loans. This portal, may be used by such entrepreneurs also. The government will
have to make some tough arrangements for them, so that more and more needy
businessmen can take advantage of this scheme. Apart from this, entrepreneurs
need to be computer-friendly and technology savvy to take advantage of this
scheme. Otherwise they will not be able to enter all the information related to
the loan in the portal. The problem is also a major challenge for the
government to deliver this facility to MSMEs operating in far-flung areas.

In spite of the above omissions which are present in the
scheme, it can be said that this scheme will play very important role in
increasing the business of MSME sectors. Now, this is turn of such
entrepreneurs to do their business honestly. At the same time, the bank also
has to discharge its responsibilities in the case with sincerity and honesty. 

The main business of the bank is to take deposit and lend
them to needy borrowers, but most of the entrepreneurs nowadays understand the
easiest way to make money from cheating the bank. If the honest MSME
entrepreneurs take advantage of this scheme, it will definitely benefit the bank
and the common man, and the economy will also move forward faster.

About the author: Satish Singh is currently working as Chief Manager in
State Bank of India’s Economic Research Department, Corporate Centre, Mumbai, and
has been writing mainly on financial and banking topics for the last 10 years.

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