After finance minister Nirmala Sitharaman met heads of public sector banks on Friday, lenders said they plan to zealously implement the government’s plan for credit push to small businesses.
At least four state-owned banks -- Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India-- pledged their support to economic relie package, including the ₹3 trillion of government-backed loans for micro, small and medium enterprises (MSMEs). Banks, led by their lobby body Indian Banks’ Association (IBA) had sought a loan guarantee scheme from the government to push credit to small businesses, hit hard by the lockdown.
Padmaja Chunduru, chief executive of Indian Bank said that the finance minister emphasised on the quick disbursal of additional loans to MSMEs, to simplify process, formats and documentation.
“During deliberations, the banks decided to focus also on tier II and tier III towns in all states to ensure needy MSMEs get the succour. Head of public sector banks welcomed the ₹3 trillion fully-guaranteed loan component to MSMEs and assured the FM that all eligible units will get these loans promptly," said Chunduru.
Last week, Sitharaman announced support measures including 20% extra working capital finance for small businesses with an outstanding debt of up to ₹25 crore and sales of up to ₹100 crore, provided they have not defaulted on loan repayments.
According to Sanjiv Chadha, chief executive, Bank of Baroda, the bank will ensure that the assistance, guaranteed by the government, is made available to all borrowers in the target group. The bank’s MSME loan book for borrowers with turnover of up to ₹100 crore and loans up to ₹25 crore is about ₹60,000 crore. Considering 20% additional funds can be provided, the bank can give loans of about ₹10,000-12,000 crore.
“At the end of the day there are very few clients who would have the strength to survive this crisis without assistance at this juncture, particularly the MSMEs," said Chadha.
PSBs have been at the forefront of covid-19-related loans and have, since the lockdown, been providing emergency credit lines to small businesses, retail borrowers and even corporates.
“The pickup of these covid-19 emergency credit lines has been good. The number of sanctions is in hundreds of thousands and the actual disbursements in in tens of thousands. Understandably, during the lockdown not everybody has been able to come to banks and execute documents which are required," said Chadha.
Another public sector lender Canara Bank said in a statement that it has sanctioned nearly 6 lakh loans amounting to ₹4,300 crore to agriculture, self-help groups (SHGs) and retail borrowers. L V Prabhakar, chief executive, Canara Bank said, “We are sure that once the lockdown is completely lifted, our customers would be able to avail the sanctioned facilities to the full extent and improve their business."
Meanwhile Central Bank of India chief executive Pallav Mohapatra was quoted by PTI as saying that the finance minister took stock of the situation and reviewed the progress of various schemes. "All the banks are very-very optimistic about the schemes that have been announced in the recent past by the government to support the economy. State-run banks’ sanction in the covid-19 period is more than the corresponding period last year, which was a normal year," said Mohapatra.