Govt may approve setting up Rs 5,000-crore stressed asset fund for MSMEs

The government may approve setting up a Rs 5,000-crore stressed asset fund for small businesses, as suggested by a Reserve Bank of India committee. But the tight financial condition of the Centre may mean existing schemes for micro, small and medium enterprises (MSMEs) will face a funding cut, sources said.
The U K Sinha Committee for MSMEs had in June suggested the fund along with a broad range of MSME reforms for small firms still reeling under the after effects of demonetisation and a liquidity crisis. But a lack of available ways to finance it has delayed the implementation. Case in point, MSME Minister Nitin Gadkari had in early September said the government will seek to implement the recommendations within 15 days.

“Talks are ongoing and the government will take a call on how the fund will be used and the parameters on which firms will be categorised as stressed,” a senior government official said. He added that the Prime Minister’s Office has repeatedly asked the MSME ministry to assess the viability of the scheme.
But the PMO hasn’t promised the requisite additional funding for rolling out the initiative and has instead asked how existing schemes can be ‘rationalised’, MSME ministry sources clarified. Now, the ministry believes cutting the scope of existing schemes including its largest — the Prime Minister Employment Generation Programme (PMEGP) — may be the only option left.
Possible cutbacks
According to ministry data reviewed by Business Standard, the number of new MSMEs being registered through the PMEGP doubled to 73,427 in 2018-19, from 48,398 in 2017-18. Direct employment generated as a result was 570,000, up from 387,000 the year before.
“These are sustainable employment generation, with relatively low level of exposure to business shock and high potential for growth, mostly in the rural areas,” the official said.
According to a ministry study, Rs 96,000 is the mean investment currently entering a unit. On average, a unit employs 7.62 people.
Aimed at setting up micro enterprises in the non-farm sector, the PMEGP allows manufacturing units to get a loan up to Rs 25 lakh from the Centre. The Cabinet has since approved a second dose of loan up to Rs 1 crore, on a maximum interest rate of 15 per cent a year, for units paying back in time, senior sources confirmed.
The new rules are under implementation, they added.
The ministry is also targeting the setting up of 400 MSME clusters, in both manufacturing and services, up from 98 last year. According to official statistics, the overall sector comprises nearly 63.39 million units, according to the 73rd round of the National Sample Survey (2015-16). It had created 111 million jobs (49.8 million in rural areas and 61.2 million in urban areas).

State-owned banks to give home, auto loans online 'in 59 minutes'

Public sector banks are gearing up to introduce retail products, including housing and auto loans, on 'psbloansin59minutes' portal with a view to expand their retail loan business.
Currently, the portal gives in-principle approval for loans of up to Rs 1 crore to micro, small and medium enterprises (MSMEs) in just 59 minutes or less than an hour.

However, some of the banks including State Bank of India, Union Bank of India, and Corporation Bank decided to extend in-principle approval to loans of up to Rs 5 crore through the portal.
Bank of India is now planning to onboard some of the retail products on the portal for easier access to loan products.
The bank is working on this and home and auto loan will be onboarded on the portal going forward, Bank of India General Manager Salil Kumar Swain told PTI.
Another state-owned lender Indian Overseas Bank (IOB) also plans to offer retail loan products on the portal.
IOB has been actively participating on the portal for sanction of MSME loans and the bank has achieved a remarkable improvement in sanctioning of loans, as the number of cases and amount sanctioned shows a manifold increase since its inception, the bank said in a statement last week.
"As the scheme has drawn healthy response from the borrowers, bank is in the process of extending in-principle sanction for loans up to Rs 5 crores under MSME. In due course of time, bank will also offer retail products (housing loan & personal loan) under this platform," it said.
The platform has helped in expediting loan disbursement and bringing ease in banking process by saving time for both bankers and customers, a senior official of another public sector bank said.
If other products are introduced on the platform, it will help expand the retail business of the bank and also bring down the transaction cost, the officer said.
The platform has helped reduce turnaround time for loan processes in such a way that MSMEs get an eligibility letter and in-principle approval in 59 minutes and can choose the bank of their choice.
After the approval letter is received, the loan is expected to be disbursed in 7-8 working days.
Touted as country's largest online lending platform, the portal was launched by Prime Minister Narendra Modi in November 2018 with an aim to make credit access and banking for MSMEs transparent and hassle-free.
The portal sanctioned loans worth over Rs 35,000 crore in less than four months from its launch.
As on March 31, 2019, more than 50,706 proposals had got in-principle approval and 27,893 proposals had been sanctioned.