59-minute loan scheme hasn’t really taken off: SBI Chairman

New Delhi: State Bank of India (SBI) Chairman Rajnish Kumar has said that the Modi government’s flagship 59-minute loan scheme has not really had small business owners enthused. He added that despite the tepid response, SBI is planning to extend the scheme to auto buyers, especially car loans.

‘Awareness about the scheme yet to reach target group’

“The platform should have been very successful, but I think the awareness about it is yet to reach the targeted audience, that is MSMEs,” Kumar said at the annual banking conference Fibac.

Kumar said that up to 90 percent of India’s MSMEs, which form the backbone of the economy because they employ the maximum number of people, can get loans under the scheme. “It can become a very powerful platform, the only thing is lack of awareness,” he asserted.

‘Algorithm is responsible for awarding loans’

In order to dispel concerns amid banking officials for being held accountable for the loans sanctioned through the website, Kumar said he has assured bankers that they will not be held accountable for decisions taken by the algorithm. The algorithm analyses inputs like GST payments, income tax payments and the cash-flow statements while making a decision on the amount of loans a borrower is eligible for.
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He, however, added that bank staff are expected to do post-sanction monitoring, documentation and disbursal.

The plan now is to extend the scheme to car and auto loans because all the loans in this category are in the same quantum, Kumar said.

‘No fresh lending in SME loan growth’

Amitabh Chaudhry, the managing director and chief executive of the third-largest lender Axis Bank who was also present at the event, said that the so-called growth in MSME loans is not happening because the incremental lending is not actual lending but banks buying out stressed assets.

“What constitutes as SME loan growth for banks is coming from the buyout of portfolios from stressed financiers and must not be construed as a sign of the economy benefitting as this is not fresh lending,” he said.

The backdrop

According to official figures, since the launch of the 59-minute loan scheme by public sector banks, 50,706 loan proposals were given in-principle approvals of which 27,893 loans were sanctioned as of end-March 2019.