Chennai: Union Finance Minister Nirmala Sitharaman had announced recently Rs 3 lakh crore scheme for collateral-free loans for MSMEs to provide emergency credit from banks and NBFCs to overcome economic crisis post Covid-19 outbreak.
However, many allege that banks, both government and private, are reluctant to lend despite government guarantee under collateral-free loan scheme.
While the Finance Minister said she would personally monitor this loan distribution on a weekly basis, the banks are yet to gear up to follow it in letter and spirit.
The bankers are inclined to look at proposals that have strong merits and good credit history, feels management expert Jayaraman.
He adds, “MSMEs were demanding immediate financial support to pay salaries and other payments.The government has offered a loan scheme without collateral. The scheme entails little expenditure for government- it will only help create a Credit Guarantee Fund, which will enhance the comfort level of bankers to lend. Good, but not enough for MSMEs.”
“Unless the loans are disbursed, old policies will continue to exist and it would be really difficult for struggling MSMEs post corona virus outbreak. The measures may seem big on numbers, but many are skeptical if this can translate into meaningful gains,” he says.
Says K E Raghunathan, former national president of All India Manufacturers Organisation (AIMO), “the loans are extended mostly to those accounts which have given already collateral security (having a value of two times the present loan taken). As per the existing government rule, banks shall not insist on any collateral security for loans upto Rs two crore. But in reality most of the lenders do not follow this norm and they always extend loans against collateral security, normally a property.”
“While extending the additional 20 per cent, the banks insist and execute all as usual loan documentations including charging your present security mortgaged, for the fresh enhancement and MOD is to that extent done. This is not a simplified and automatic enhancement and many have complained that in fact documentations were tedious before availing this loan.”
Raghunathan says, “Before disbursal, the banks insist on Utilisation Letter with clear details as to how you will use the funds taken in terms of – towards government payments such as GST/PF/ESI/CUSTOMS DUTY/ EB Bills etc, towards staff salary dues and towards payments to suppliers (to increase your fully paid up stock value). In many cases, the banks directly make the payments online to these expenses and if any balance available only is given”.
“Many MSME owners are turned back by banks from offering the additional loans if they had not given any security for their existing loan”, says Rajagopal, an small scale entrepreneur.