Private Banks to Catch Up Soon On Credit Guarantee Scheme for MSMEs, Says CII Chief Uday Kotak

Complimenting public sector banks for moving fast on Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSME sector, CII president Uday Kotak on Saturday expressed hope that the scheme will gather further traction in coming weeks from private banks side.

The scheme is the biggest fiscal component of the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package announced by Finance Minister Nirmala Sitharaman last month.

“Private sector banks in the case of the guaranteed loan scheme have taken a little longer than the public sector banks. I must compliment SBI Chairman Rajnish Kumar and his team for moving at a great speed. So, I do accept that,” Kotak, who is also managing director of Kotak Mahindra Bank, said.

On May 21, the Cabinet had approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through ECLGS for the MSME sector, hit hard by economic slowdown triggered by outbreak of COVID-19 pandemic. The scheme became operational from June 1.

“Private sector banks started a few days later, but you will see catch up happen.

“Three-four weeks from now, the MSME sector will be surprised at how both the private and the public sector have responded to this scheme of Rs 3 lakh crore and a very significant amount of money will be disbursed within the guidelines…you will see the significant growth happen in terms of the sanctions and disbursements,” he said.

Under the 100 per cent ECLGS, the loan amounts sanctioned by public sector banks increased to Rs 42,739.12 crore, of which Rs 22,197.54 crore has been disbursed at the end of June 20. Meanwhile, private sector banks sanctioned Rs 32,687.27 crore while disbursed Rs 10,697.33 crore.

Kotak said that for private sector banks conservatism arises as they need to safeguard the interest of the depositors, whose trust in the private sector is critical for their functioning.

On the issue of eligibility under the scheme, he said that in view of the revision in turnover limit for MSMEs from Rs 100 crore to Rs 250 crore, the eligibility conditions should also be relaxed similarly, and CII would be taking this suggestion to the government.

Kotak advised MSMEs that they should not only depend on banks for accessing credit but also look at other avenues like raising private equity or risk capital.

He also said that MSMEs are not only the backbone of the economy but are a critical part of CII theme for 2020-21 ‘Building India for a New World: Lives, Livelihood, Growth’.

MSMEs need risk capital to grow and CII would help them in strengthening their internal housekeeping so that they can get better access to credit at competitive rates, he added.