Govt wants 59-minute loan sanction sped up; PSU banks say documentation is time-consuming
As the 59-minute loan scheme for micro, small and medium enterprises (MSMEs) faces criticism, the Ministry of Finance is urging state-run banks to bridge the gap between proposals that get preliminary approval and their final sanction, reported The Times of India.
The loan scheme was launched over two months ago, and 60 percent of the preliminary approvals done online have been converted into formal sanctions. One of the reasons cited for the fall in conversion rates is the absence of documents. The effectiveness of schemes has thus been brought into question, where loans of upto Rs 1 crore can be availed by MSMEs that have a credit history, pay income tax and are enrolled into the GST network.
A banking source told The Times of India, “Basic documents are available, but banks undertake due diligence since everyone is accountable if something goes wrong. The process also requires documents like cash flow statement. A lot of times, the loan applicants take a lot of time to furnish all the necessary documents.”
Other sources said that in such cases, banks are advised to reach out to these applicants and follow up with them. Lenders have also been told that rejecting a loan proposal requires a valid reason. “This will require a change in mindset, which will not happen overnight,” said one of the sources. There is also some confusion regarding loan processing, which the government was going to take up, but said that processing doesn’t guarantee a loan.
The 59-minute scheme was part of the government’s MSME outreach programme, and intended to address the liquidity shortage in the sector due to the policies of the Reserve Bank of India (RBI), the impact of demonetisation and the GST. The MSME sector is a major contributor to the country’s GDP, and is also the second biggest employer in India after agriculture.
The initial response to the 59-minute loan appeared satisfactory to the government, and some private lenders are now trying to join the loan sanction scheme.