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Indian banks supporting the economy through online loan portal
A report was released by Credit Suisse on March 1, 2019, which states that within 3 months (, an online portal has become the largest platform for providing loans to micro, small and medium enterprises (MSMEs).

At present, 21 lenders including the State Bank of India are providing loans to MSME sector through this portal. Most importantly, the loan of 30,000 crore has been approved with the help of this online portal.

At present, the credit size of MSME is about Rs 22 lakh crore, while the estimated number of MSME is 6.5 crore in the country. So far 40,000 MSME entrepreneurs have received in principal approvals of loans. However, all in principal approved loan proposals are not finally approved by banks. The problem is usually associated with the project's practicality or non-submission of the required documents.

The advantage of this facility is being taken by both new and old MSMEs. The average approved loan of new MSME is Rs 27 lakh, while the old MSMEs is Rs 34 lakh. Under this scheme, 36 per cent of loans were sanctioned in November 2018, which increased to 60 per cent in December, 2018. Under the scheme, 100 per cent loan is being sanctioned to old borrowers, whereas in the case of new proposed borrowers the bank is adopting vigilant approach. From November 2018 to January 2019, 92000 loan proposals were processed, in which 24000 loan proposals were new to banks.

At present, more than 6.5 million MSME units are working in the country, in which 11.1 crore people are employed. MSME sector contributes about 30 per cent of GDP in the country. Prime Minister Narendra Modi believes that if this sector is strengthened then employment generation in the country, economic self-reliance, inclusive growth, speeding up in manufacturing etc. can be made possible. In this case, entrepreneurs are not getting loans due to be unawareness. Those businessmen who want to do business in true ways can avail loans by fulfilling the necessary requirements, but such entrepreneurs were not getting the all required information in one place. In order to solve such problems, Prime Minister Narendra Modi launched a portal for MSME entrepreneurs in November 2018, through which, in principal, approval of 1 crore rupees loan is being given within 59 minutes. 

However, for getting Rs 1 crore loan, the entrepreneurs have to fulfill all the conditions of the bank. The government has promised to distribute loan amount within one week, but in reality, loan amount distribution cannot be possible in this period. Approximately 4 months have passed since the scheme started, but in most cases the loan could not be distributed to the bank within 1 week. 

On the basis of this, it can be said that the requisite information sought by the bank is not easy to make available by the proposed borrowers in a week. MSME entrepreneurs can get in principal approval up to Rs 1 crore loan after successful entry of 10 steps on the designated web portal, but final approval of loan and its distribution is done only when entrepreneurs meet all the conditions of the bank. In fact, after the information provided through this portal, the bank can seek some other documents for clarification. If necessary, they can also demand collateral security or even guarantee, but it depends entirely on the applicant's profile and their financial condition.

However, on the basis of banks' cumbersome formalities, it cannot be said that this online portal is redundant or does not have its relevance, because in order to get theoretical clearance, the information of loan applicants who have to share in the online portal is part of the terms of getting the loan. If the proposed applicant will fill all the details in the proposed applicant's portal, then fewer cases will come in which the bank will have to ask for additional documents from the applicants.

Though, it is not easy to distribute loan within one week as per the declaration made by the government. Applicants may take some time to complete the conditions of the bank or to bring the required documents. When the loan accounts turn as a non-performing asset (NPA), the bankers are treated as culprits and they are also punished for this. Therefore, it is natural to take care by them, while they approve loans.

In the first quarter of the year 2019, the NPA in the public sector banks (PSUs) was 15.2 per cent in MSME sector, while private sector banks' NPA was 3.9 per cent and NBFCs had 5 per cent. Credit Suisse's report says that with the help of a 59-minutes online portal, market share of public sector banks is increasing in the MSME sector. It is believed that this will help PSUs to reduce their level of NPA. It is noteworthy that according to the Reserve Bank, banks had an outstanding of Rs.3.6 lakh crore in the MSME sector till December 21, 2018, whereas in the medium enterprises sector, it was Rs.1 lakh crore.

However, there are many entrepreneurs who don't want to repay loans. This portal, may be used by such entrepreneurs also. The government will have to make some tough arrangements for them, so that more and more needy businessmen can take advantage of this scheme. Apart from this, entrepreneurs need to be computer-friendly and technology savvy to take advantage of this scheme. Otherwise they will not be able to enter all the information related to the loan in the portal. The problem is also a major challenge for the government to deliver this facility to MSMEs operating in far-flung areas.

In spite of the above omissions which are present in the scheme, it can be said that this scheme will play very important role in increasing the business of MSME sectors. Now, this is turn of such entrepreneurs to do their business honestly. At the same time, the bank also has to discharge its responsibilities in the case with sincerity and honesty. 

The main business of the bank is to take deposit and lend them to needy borrowers, but most of the entrepreneurs nowadays understand the easiest way to make money from cheating the bank. If the honest MSME entrepreneurs take advantage of this scheme, it will definitely benefit the bank and the common man, and the economy will also move forward faster.

About the author: Satish Singh is currently working as Chief Manager in State Bank of India's Economic Research Department, Corporate Centre, Mumbai, and has been writing mainly on financial and banking topics for the last 10 years.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
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