BackBanks, NBFCs line up to woo MSMEs
Guaranteed loan scheme proves a big draw for lendersLoans requests from MSMEs have started to rise, say banks
PremiumMUMBAI : Banks, non-banking financial companies and fintech companies are looking at the government’s ₹3 trillion automatic collateral-free loans to micro, small and medium enterprises (MSMEs) as an opportunity to protect their books more than a business opportunity.
Several have started to reach out to their clients and expect to begin loan disbursements by mid-June, which could lead to higher credit growth in the first quarter.
On Tuesday, State Bank of India chairman Rajnish Kumar said the bank has released ₹2,300 crore to 22,000 MSME loan accounts on a single day. SBI’s SME loan book stood at ₹2.78 trillion or 14% of its total loan book as on 31 December.
“We are bullish on the ₹3 lakh crore scheme as risk weight is zero and we don’t have to provide capital. This is a good scheme for supporting MSME sector," said Kumar.
Arvind Kapil, country head, retail lending, HDFC Bank, said loan requests from MSMEs have started to rise since the easing of strict lockdown measures that were imposed in late March.
“Banks have pre-approved customers, who are eligible for the ₹3 lakh croreguarantee scheme. These customers have been sent SMSes, emails to avail of the scheme. Our bank’s relationship managers are meeting up with customers to attain the documentation. Post checking the documents, ad hoc scheme will be disbursed," Kapil said.
Under this scheme, guarantee will be provided by the National Credit Guarantee Trust Co. Ltd (NCGTC) in the form of a guaranteed emergency credit line facility. The guarantee cover will be available for additional working capital and term loan facilities up to 20% of the outstanding credit limit up to ₹25 crore as on 29 February.
For instance, if a business has a loan outstanding of ₹1 crore, it can borrow an additional ₹20 lakh. Only existing borrowers with revenue of up to ₹100 crore and those with up to 60 days past dues can avail of this scheme targeted at businesses hit by the coronavirus-induced lockdown.
NBFCs and fintech players too are keenly looking at the scheme as an opportunity to protect their portfolio. While many NBFCs have begun to reach out to customers, they said that while they are interested in the scheme, they would require funding from banks to on-lend to the small business borrowers.
“I don’t see this as a business opportunity but as an opportunity where I can help my customers," said Y.S. Chakravarti, managing director and chief executive officer, Shriram City Union Finance, which has an exposure of 57% to small business loans.
“If we are able to register under NCGTC and able to raise funds from banks, specifically for this purpose, then I will definitely be interested. I need funding from banks specifically earmarked for the scheme, with the similar structure on tenor as the scheme. I cannot lend from my normal banking funds as I will have to service interest and principal on a monthly or quarterly basis," Chakravarti added.
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