Credit and Finance for MSMEs: The 59 minutes in-principle loan approval scheme for MSMEs by SIDBI, launched by Prime Minister Narendra Modi in November 2018, has sanctioned 2,35,511 loans involving Rs 78,738 crore as of November 1, 2021, official data from the MSME Ministry showed. Out of the total loan amount sanctioned, 81 per cent — Rs 64,326 crores loans have been disbursed so far to 2,19,526 borrowers. The share of loan applications disbursed stayed at 93 per cent in the total applications sanctioned. The growth in loans sanctioned from 2.12 lakh applications as of August 31, 2020, was 11 per cent so far while loans disbursed were up 11.7 per cent from 1.96 lakh applications in August last year.
“From October till March, the growth in loans sanctioned is higher with the festive season running till January. MSMEs need more funding during this period as compared to other months. On the other hand, from March onwards, the growth is lower and lending is normally low as the period is more of audits in the banking industry,” Jinand Shah, Chief Executive Officer, Online PSB Loans had told Financial Express Online.
MSMEs can apply for business loans ranging from Rs 1 lakh to Rs 5 crore through the scheme’s portal. The in-principle approval to the application, according to the portal, is provided in 59 minutes following which the lender selected by the borrower carries out due diligence for sanctioning and disbursement of the amount. According to the scheme, the loan is expected to be sanctioned or disbursed in seven-eight working days. Currently, there are over 21 banks including SBI, Bank of Baroda, ICICI Bank, Kotak Mahindra Bank, Punjab National Bank, etc., partnered with the scheme.
“It took over two weeks for us to get the loan sanctioned while the disbursement happened in the following week. The bank had initially rejected our application citing a lack of the right documents even though we submitted the same as per the requirements. Based on the suggestions from the bank, we tried applying again and could get through it. We would want the sanctioning process to be reduced to two-three days so that credit could be accessed faster in case there are any challenges,” a supplier of pharma products and head of a local association of pharma companies told Financial Express Online.
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Online PSB Loans is also looking for tie-with white label platforms by this Diwali or December this year and non-banking financial companies (NBFCs) by January 2022 for MSMEs and others to have access to wide pool of lenders. The portal is also exploring cash-flow based lending to small businesses as a separate programme in the current financial year
“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.” Shah had said in an interaction.
Importantly, Rs 64,326 crore disbursement so far under the 59-minute loan approval scheme was 4.87 per cent of Rs 109.56 lakh crore in total gross bank credit deployed by lenders across major sectors in September 2021. As per the RBI’s latest data on sectoral deployment, micro and small enterprises were deployed Rs 11 lakh crore while Rs 2.19 lakh crore was deployed to medium enterprises.