Public sector banks told to fix 1-hour loan products for MSMEs

  • 1
    Share

New Delhi, Oct 11: The finance ministry has asked the 21 staterun banks to standardise loan processes and products for micro, small and medium enterprises (MSMEs) that will be hawked online with the promise of approving them within an hour.
At a meeting on Monday, the ministry has said all banks, which are now on board, will have at least one common product with the option to offer variations, enabling small businesses to meet their term loan and working capital needs through an online platform that will be contactless.
Sources said, given the difference in loan products, the new loan sanction portal put in place last month has seen over 1 lakh hits but the number of approvals was not high, at least for now. Nearly two-thirds of the visitors are under 35 years. “There were issues related to debt-equity ratio and the number of years for which tax returns had to be submitted. The government has now asked us to have fixed norms for a lot of things,” said a banker.
Sources said banks have been told to offer loans to companies with a debt-equity ratio of 4:1, given that MSMEs typically have a lower equity base. Similarly, these borrowers will need a credit ratio or debt-to-income-ratio of 1:1.
With two private lenders, HDFC Bank and ICICI Bank, also showing interest in the new portal, sources indicated that the platform may be opened to those outside the public sector too.
Last month, the government had announced funding of up to Rs 1 crore in 59 minutes flat for MSMEs. The facility is available for businesses that submit GST and income tax details, along with their bank statements, for speedier loan sanctions.

Leave a Reply

Your email address will not be published.