Collateral-free MSME loans: Punjab National Bank (PNB), Bank of Maharashtra and Union Bank of India have emerged as the leading public sector banks (PSBs) with the maximum number of collateral-free MSME loans up to Rs 10 lakh and Rs 10 lakh to Rs 25 lakh as of March 2023.
According to the data shared by Bhanu Pratap Singh Verma, Minister of State in the MSME Ministry in a written reply to a question in the Lok Sabha on Thursday, PNB led the tally of 12 PSBs with 18 lakh loans amounting to Rs 27,124 crore followed by 15.20 lakh loans involving Rs 22,783 crore by Bank of Maharashtra and 14.64 lakh loans involving Rs 20,351 crore by Union Bank of India as of March 2023 under the up to Rs 10 lakh collateral-free loan category.
Within the Rs 10 lakh loan vertical, loans from State Bank of India stood at 9.92 lakh involving Rs 17,406 crore while another leading PSB Bank of Baroda had 13.66 lakh loans amounting to Rs 21,543 crore outstanding as of March 2023.
Also read: MSME loans: Credit outstanding by banks jumps 12% in FY23; 49% growth in 5 years
Likewise, in the Rs 10 lakh to Rs 25 lakh collateral-free MSME loan segment, PNB had 1.07 lakh loans involving Rs 13,247 crore outstanding as of March 2023 followed by Bank of Maharashtra with 82,389 loans involving Rs 11,206 crore and Union Bank of India with 72,296 loans amounting to Rs 18,570 crore.
SBI and Bank of Baroda had 54,753 and 44,062 loans amounting to Rs 6,869 crore and Rs 5,372 crore outstanding as of March 2023 respectively.
This is in contrast to their positions as of March 2022 with SBI dominating the two loan categories by size with 18.61 lakh loans (up to Rs 10 lakh loan segment) amounting to Rs 28,297 crore and 88,247 loans amounting to Rs 11,357 crore (Rs 10 lakh – Rs 25 lakh segment) outstanding.
Canara Bank had 15.56 lakh loans amounting to Rs 20,165 crore in the up to Rs 10 lakh loan segment and 70,696 loans involving Rs 9,663 in the Rs 10 lakh – Rs 25 lakh segment outstanding as of March 2022.
“All scheduled commercial banks (excluding Regional Rural Banks) are mandated not to accept collateral security in the case of loans up to Rs 10 lakh extended to units in the MSE sector. Banks are also advised to extend collateral-free loans up to Rs 10 lakh to all units financed under the Prime Minister’s Employment Generation Programme (PMEGP) administered by KVIC,” said Verma in his response.
He added that banks may, on the basis of good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to Rs. 25 lakh (with the approval of the appropriate authority).
Importantly, the credit outstanding to the MSME sector by scheduled commercial banks in FY23 jumped by 12.3 per cent to Rs 22.6 lakh crore from Rs 20.11 lakh crore in FY22, according to the data shared by Verma in the Parliament recently. The amount outstanding in FY21 and FY20 stood at Rs 17.83 lakh crore and Rs 16.13 lakh crore respectively. During the five-year period, the credit outstanding to the MSME sector grew by 49.6 per cent from Rs 15.10 lakh crore during FY19.