Less than 9% of the roughly four lakh applicants under the Prime Minister’s Employment Generation Programme (PMEGP) have been granted loans so far in the 11 months to February. Data from the ministry of micro, small and medium enterprises (MSME) show that banks have disbursed loans to only 36,109 applicants.
The reasons range from the projects being unviable, not in service area of the bank or past defaults by the promoter. In 2016-17, the share of loans disbursed was better at 11.39%, while in 2015-16 it was even higher at 14%.
Even before lenders reject proposals, the District Level Task Force Committee (DLTFC) finds that a good number of applications are incomplete. Giriraj Singh, minister of state (independent charge) for MSME recently said “about 50% of the applications are rejected at the DLTFC level due to non-completion of various documents, vague information in the applications, lack of knowledge etc”.
Singh added that around 30-40% of the applications are rejected by the banks which take a decision based on the viability of the project.
The minister also said the Khadi and Village Industries Commission (KVIC) and DLTFC were scrutinising the applications to make sure the criteria were being fulfilled.
While no loans have been disbursed in Lakshadweep in 2017-18, only 0.52% of applicants in Delhi have managed to get a loan. Interestingly, the highest percentage of disbursals have taken place in Nagaland at 54.76% while the highest number of applicants —72,457 — originated in Uttar Pradesh.
An amount of Rs 1,170 crore has been allocated under the scheme for 2017-18; in 2016-17, the amount allocated was RS 1,083 crore.
According to data from the PMEGP website, 122 lenders including public-sector banks, private sector banks, cooperative banks and regional rural banks have rejected 1.9 lakh applications. However, over what period of time these rejections took place is not clear.
As per RBI guidelines, projects of up to Rs 10 lakh under PMEGP are free from collateral security and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTSME) provides collateral guarantee for the project beyond `5 lakh and up to `25 lakh under the scheme.
PMEGP is a central sector scheme administered by the ministry of micro, small and medium enterprises (MoMSME) and implemented by the Khadi and Village Industries Commission (KVIC), a statutory organisation under the administrative control of the ministry of MSME as the single nodal agency at the national level.
Under the scheme, entrepreneurs can avail loans of up to Rs 25 lakh with 10% equity contribution for general category and 5% for other categories like SC/ST/OBC and others. The loan is subsidised by the government and ranges between 15-35% depending on the location of the project (urban or rural) and the category of the promoter.
Icra said in a report on Monday that the overall credit to micro, small and medium enterprises (MSMEs) which stood at `16 lakh crore as in March 2017 is expected to grow at 12-14% annually over the next five years. “There is large unmet credit demand in this segment, which we estimate to be about Rs 25 lakh crore in FY17. Notwithstanding the estimated growth, the unmet credit demand quantum is likely to increase further, going forward,” the report noted.