Exclusive: SIDBI’s 59-min loan scheme to onboard NBFCs, white label platforms; eyes cash flow-based lending

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Updated: September 09, 2021 6:48 PM

Credit and Finance for MSMEs: According to the latest official data, loans sanctioned in August under the 59-minute loan scheme to MSMEs grew marginally to 2,33,845 from 2,32,677 as of August 2, 2021. Likewise, loans disbursed also moved up slightly from 2,16,841 to 2,17,828 by the end of August.

59 minute loan approval scheme enables term loans and working capital loans, and Mudra loans for MSMEs to purchase plant and machinery, technology upgrade, product expansion, purchase of raw materials, infrastructure development, etc.

Credit and Finance for MSMEs: SIDBI’s initiative of online loan marketplace — PSB Loans in 59 Minutes — launched by Prime Minister Narendra Modi in November 2018 to provide in-principle loan approval to applications in 59 minutes, will be onboarding white label platforms by this Diwali or December this year and non-banking financial companies (NBFCs) by January next year in order to boost credit access for more MSMEs applying through the 59-minute portal, Jinand Shah, Chief Executive Officer, Online PSB Loans told Financial Express Online. Online PSB Loans manages the 59 minutes loan approval programme by SIDBI.

“Once white label platforms and NBFCs are onboarded, the conversion ratio from application submission to its sanction will change. Let’s say if only 60 applications out of 100 were getting sanctioned so far based on banks’ criteria, the remaining 40 would also be sanctioned who could match the NBFCs’ criteria if they were earlier rejected by banks. However, we would look at ensuring NBFCs and others don’t charge exorbitant interest rates that might push MSMEs into the debt trap,” Shah added.

The marketplace would also be looking to enable cash flow-based lending for MSMEs as a separate initiative in the current financial year. The cash flow-based approach lets a business to raise credit based on its projected future cash flows in contrast to asset-based lending. “Cash flow-based lending is what we are expecting in this financial year. We are focusing on building the required infrastructure for it and that should be up in around three-four months from now. We are working closely with few banks including the largest ones that are already on the 59-minute portal. You need few segments of the ecosystem to be connected digitally and it should work end-to-end so that MSMEs don’t have to visit banks’ branches.” said Shah.

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According to the latest official data, loans sanctioned in August under the 59-minute loan scheme to MSMEs grew marginally to 2,33,845 from 2,32,677 as of August 2, 2021. The loan amount involved stood at Rs 77,811 crore, up from Rs 77,343 crore. Likewise, loans disbursed also moved up slightly from 2,16,841 involving Rs 63,157 crore to 2,17,828 involving Rs 63,553 as of August 31, 2021.

The scheme enables term loans and working capital loans, and Mudra loans for MSMEs to purchase plant and machinery, technology upgrade, product expansion, purchase of raw materials, infrastructure development, etc. The in-principle approval for term loans and working capital loans ranges from Rs 1 lakh to Rs 5 crore, while the credit limit under Mudra loans is up to Rs 10 lakh. Mudra loans offered up to Rs 50,000 are called Shishu loans, between above Rs 50,000 and up to Rs 5 lakh are Kishore loans, and above Rs 5 lakh and up to Rs 10 lakh are Tarun loans.

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