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<keyword id="6354743" type="COMPANY" weightage="100" keywordseo="Amazon-India">Amazon India</keyword> has planned to offer loans to the key vendors that sell on its portal so that they don’t shift loyalties to its rivals Flipkart and Snapdeal. 
 <keyword id="18635" type="CITY" weightage="100" keywordseo="Amazon">Amazon</keyword> India is inviting its qualified merchants to join its lending programme under which a seller can apply for short-term working capital loans so that he can be able to buy more inventories and increase his sales. 
 
"Access to working capital is the biggest hurdle for sellers. With this we are minimising the fiction and barriers for the sellers to gloans and helping them focus on growing their business on our platform," Gopal Pillai, general manager, seller services at Amazon India, told ET. 
 
The pilot programme was launched by Amazon in September last year, when it disbursed loans of crores of rupees to hundreds of SMEs. The loans were given through its third-party seller financing platform, Capital First, an NBFC based in Mumbai. 
 
The loans, which range between Rs 5 lakh and Rs 2 crore at 13 to 15% ROI, are given for a period of four to six months. Rival companies like Paytm, Snapdeal and Flipkart have also launched similar loan schemes. 
 
"This is a way in which the ecommerce firms are addressing a pain point of low inventory. Now that sellers will keep good stock, their sales will increase and bring them growth," Harminder Sahini, founder and managing director of Wazir Advisors, told ET. 
 
"Since these are giant companies, the chances of financial risks are low as SMEs would not want to lose a big business partner," he said. 
 
<a href="http://cdn.ndtv.com/tech/images/gadgets/amazon_box_reuters.jpg">Image source</a>

Amazon India would be offering loans to its small and medium sized sellers

<ul><li>Digital lenders should push for raising limits on small loans using <keyword id="6355118" type="UNKNOWN" weightage="20" keywordseo="technology">technology</keyword>.</li><li>After digital payments, fintech players are rushing to offer small ticket consumer loans. </li><li>Technology has made it possible for them to undertake different - often more efficient -modes of credit assessment. </li></ul><keyword id="3658" type="COUNTRY" weightage="20" keywordseo="India">India</keyword> is a credit-starved country - at least for most ordinary Indians. But a slew of digital lenders promising instant or short-term loans is hoping to change that by filling the gap left by the onerous requirements of traditional banks. However, the government wants even the relatively flexible digital lenders to step up their game. On Tuesday, Niti Aayog chief executive <keyword id="6358887" type="PERSON" weightage="20" keywordseo="amitabh-kant">Amitabh Kant</keyword> <a href="https://www.livemint.com/Politics/7FwClNXWhg2yaOz3jQUkkL/Raise-limits-on-loans-granted-through-OTPbased-eKYC-Niti.html">urged </a>digital lenders to better use technology to raise the current caps on small-ticket loans. According to Kant, digital lenders should push for raising these limits on small loans using efficient e-vetting systems like the one time password-based electronic know your customer (KYC) verification. Relying on biometric Aadhaar-authentication alone results in higher operating expenses for these lenders, he added. “Currently, lending through OTP-based e-KYC is capped at ₹60,000 whereas the loan size through online digital mode, as per market data points, is approximately around ₹350,000,” Kant <a href="https://www.livemint.com/Politics/7FwClNXWhg2yaOz3jQUkkL/Raise-limits-on-loans-granted-through-OTPbased-eKYC-Niti.html">reportedly </a>said at an event in Mumbai. Earlier this year, the Indian government said it would <a href="https://economictimes.indiatimes.com/small-biz/policy-trends/government-sets-up-panel-on-fintech-to-make-regulations-more-flexible/articleshow/63170535.cms">bring</a> in a more flexible regulatory environment for fintech players in order to increase <keyword id="107911" type="ORGANIZATION" weightage="20" keywordseo="Financial-inclusion">financial inclusion</keyword>. India has a vast unbanked population with an unmet demand for loans of roughly $200 billion from individuals and small to medium-sized enterprises, <a href="https://www.pwc.in/assets/pdfs/publications/2017/fintech-india-report-2017.pdf">according</a> to PWC. The changing face of consumer lending After digital payments, fintech players are rushing to offer small ticket consumer loans to serve the underserved market. Recently even search <a href="https://www.livemint.com/Companies/283dgHufJo9XzKleq3Kh4K/Google-Tez-Google-Pay-bank-loans-paytm.html">giant</a> Google has also entered the fray, partnering with HDFC Bank Ltd., ICICI Bank Ltd., Kotak Mahindra Bank Ltd. and Federal Bank to provide instant, pre-approved loans. Using data analytics and proprietary algorithms, digital lenders can <a href="https://www.livemint.com/Industry/mHyfNNXEbFRxtF8DqZ8wRP/Benefits-of-taking-instant-loans-through-digital-lenders.html">provide</a> instant loans ranging from ₹10,000 ($137) to ₹700,000 while saving consumers the hassle of long waiting times and extensive paperwork of traditional banks. Many of them have teamed up with NBFCs to facilitate these digital loans while some others are using the <keyword id="2814950" type="PERSON" weightage="20" keywordseo="peer-to-peer-lending">peer-to-peer lending</keyword> models. Technology has made it possible for them to <a href="https://yourstory.com/2018/08/ai-powered-tech-rupeelend-can-get-loan-even-low-cibil-score/">undertake</a> different modes of credit assessment - evaluating whether a borrower is credit-worthy - and lend where traditional banks would hesitate. For instance, P2P lenders use as many as 1,000 data points including data gleaned from social media, Aadhar, where a person lives, credit scores in order to minimise risk and often bypass physical paper-based vetting. That enables many of these digital lenders to lend to people who are new to credit or who lack the requisite credit history. Lending times have also come down significantly from weeks to just hours. Overall, <keyword id="59794" type="PERSON" weightage="20" keywordseo="Digital-lending">digital lending</keyword> represents a huge opportunity for both borrowers and lenders. It’s <a href="https://www.livemint.com/Opinion/MgTU086kNbuc6lbpgmdgsI/The-changing-face-of-Indian-retail-borrowing.html">estimated</a> that in India, out of 220 million credit-eligible people, just 70 million have actively taken out loans despite having eligible credit scores.

Why the government wants more from India's booming digital lending market

<ul><li>Prime Minister <keyword id="6354477" type="PERSON" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword> eased the loan application process for micro, small and medium enterprises (MSMEs) by launching a ‘59-minute portal’ on Friday. </li><li>The digital initiative will allow the owners of MSMEs to get approval for a loan in less than an hour instead of the 20-25 days that it took earlier. </li><li>The pilot experiment of the project has already sanctioned 72,000 loan applications.</li></ul>Micro, small and medium enterprises (MSMEs) in India have been under pressure since demonetisation stagnated economic activity due to the sudden liquidity crunch followed by India’s indirect tax reform, when the Good and Services Tax (GST) was implemented. In order to energise businesses in this segment and provide the necessary capital, India’s Prime Minister, Narendra Modi, <a href="https://www.pscp.tv/w/1BdGYOlmQXDxX">unveiled</a> a digital platform which will prevent small enterprises from going through a lengthy procedure for credit requirements. The launch of the <a href="https://www.psbloansin59minutes.com/aboutUs">59-minute</a> portal to support small <keyword id="34606" type="DOMAIN" weightage="20" keywordseo="industries">industries</keyword> was a part of the Indian Government’s ‘<a href="https://www.pscp.tv/w/1BdGYOlmQXDxX">support and outreach initiative</a>’ for MSMEs. While addressing the programme, Modi <a href="https://www.bloombergquint.com/business/modi-government-portal-loans-msmes-59-minutes#gs.p04tWmU">claimed</a> that the project has already crossed its target of approving 72,000 loan applications in its pilot stage. As of now, loans worth ₹230 billion have been approved through the digital portal. 
 
 
 
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 The digital initiative will substitute the processing time of 20-25 days to just 59 minutes making it easy for owners of MSMEs to get there loans sanctioned without visiting banks. In fact, the users of 59-minute portal can apply for loan of upto ₹10 million and expect it to be dispersed in 7-8 working days after the in-Principle approval letter is issued. So, how do you get your loan approved? All the small enterprises which are registered under the GST policy are eligible for a loan by registering on the portal. Although, there is no fee for registration but ₹1,000 along with taxes are charged once the loan applicant finds a lender on the portal. <a href="https://www.livemint.com/Politics/cXSzAPcFJyyU5PZnSbn5PO/How-to-get-Rs-1-crore-MSME-loan-in-59-minutes-A-stepbyste.html">In order to apply</a> for a loan the applicant has to submit a six month bank statement, e-KYC documents, income tax returns for the past three years, GST ID, and business owner’s details. Small industries can avail a loan between ₹1 million to ₹10 million against an interest starting from 8%. Union Government has already asked Reserve Bank of India to relax the norm for weaker banks thereby allowing the MSMEs to resume borrowing from them but the 59-minute portal has been set up by the Small Industries Development Bank of India (SIDBI). The Government of India has been taking initiatives to protect MSMEs in India which went through cash-crunch issue due to demonetisation and taxation reforms.The outreach program is supposed to run for next 100 years aiming to cover each and every corner of India.

Indian MSMEs can now get a loan approved in just 59 minutes

<ul><li>The Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) released guidelines for a restructuring scheme for the stressed accounts of micro, small and medium-sized enterprises (<keyword id="6358354" type="UNKNOWN" weightage="20" keywordseo="MSME">MSME</keyword>). </li><li>The scheme will only be applied to accounts with an outstanding value of ₹250 million or less. In addition, a loan, whether it is in default or not, has to remain classified as “standard” as of 1 January 2019 to be eligible for restructuring. </li><li>The program was a key demand of the central government, which has been looking to give a boost to the country’s small businesses. </li><li>Separately, the RBI announced earlier this week that the overall non-performing asset ratio, which is a proportion of <keyword id="142154" type="PERSON" weightage="20" keywordseo="bad-loans">bad loans</keyword> to all loans, in the banking sector declined for the first time since 2015.</li></ul>In a move that has been in the works for a while, the Reserve Bank of India (RBI) released <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11445&amp;Mode=0">guidelines </a>for a restructuring scheme for the stressed accounts of micro, small and medium-sized enterprises (MSME). The scheme will prevent the restructured loans from being classified as “non-performing”. The scheme will only be applied to accounts with an outstanding value of ₹250 million or less. In addition, a loan, whether it is in default or not, has to remain classified as “standard” as of 1 January 2019 to be eligible for restructuring. If the account has been downgraded, then it won’t fall into the scheme. Under the one-time scheme, banks and non-banking financial entities will have until the end of the 2019-2010 financial year to restructure the eligible accounts. They will also have to incur a 5% provision charge on each restructured loan in addition to existing provisions. Finally, to avail the program, borrowers need to be GST-compliant. The program was a key demand of the central government, which has been looking to give a boost to the country’s small businesses. The issue of credit to MSMEs became a sticking point in the <a href="https://www.businessinsider.in/a-compromise-between-the-rbi-and-the-central-government-could-be-in-the-offing-as-the-board-to-central-bank-prepares-to-meet-next-week/articleshow/66619722.cms">spat between the central government and the RBI</a> towards the end of last year. Despite some hesitation at what the scheme might mean for the banking sector’s bad loan crisis, the central bank eventually relented. At <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">the end of November</a>, it announced that it would formulate a scheme to help small businesses restructure their bad loans. The program will not only provide some relief to India’s small businesses from loans they’ve defaulted on, but will allow them further access to financing. In addition to forming the backbone of the Indian economy with regards to employment and manufacturing, small businesses are also an important vote bank. All that means is catering to the needs of small business owners will be crucial in an election year. The central government is also said to be mulling a plan to raise the minimum sales requirement for small businesses in regards to GST registration. The sales threshold, which is currently ₹2 million could be reportedly raised to <a href="https://www.livemint.com/Companies/rGAwnMFrEDmJAYpRkNqw5N/SMEs-set-to-get-GST-relief-ahead-of-2019-Lok-Sabha-elections.html">as much ₹7.5 million</a>, which will spare smaller businesses from having to comply with the requirements of the taxation policy. Separately, the RBI announced earlier this week that the overall non-performing asset ratio, which is a proportion of bad loans to all loans, in the banking sector declined for the first time since 2015, falling from 11.5% in March 2018 to 10.8% by September 2018. In its <a href="https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSRDECEMBER2018DAFEDD89C01C432786925639A4864F96.PDF">Financial Stability Report</a>, which was released on 31 December, the central bank also predicted that the bad loan ratio would decline to 10.3% by the end of March 2019. SEE ALSO: <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence</a> <a href="https://www.businessinsider.in/indias-central-bank-chooses-to-keep-interest-rates-on-hold-unveils-a-new-pricing-policy-for-retail-and-small-business-loans/articleshow/66968094.cms">India’s central bank chooses to keep interest rates on hold, unveils a new pricing policy for retail and small business loans</a> <a href="https://www.businessinsider.in/indias-central-bank-is-moving-ahead-with-plans-to-set-up-the-countrys-first-public-credit-registry/articleshow/67226406.cms">India’s central bank is moving ahead with plans to set up the country’s first public credit registry</a>

India’s central bank just gave the country’s small businesses a one-time breather from some of their bad loans — but with a few conditions

The <keyword id="20018890" type="General" weightage="20" keywordseo="digital-infrastructure" source="keywords">digital infrastructure</keyword> has made the <keyword id="20572901" type="General" weightage="20" keywordseo="loan-sanctioning" source="keywords">loan sanctioning</keyword> system adopt an online mode, but the <keyword id="21614839" type="General" weightage="20" keywordseo="loan-recovery" source="keywords">loan recovery</keyword> still requires a 'feet on the street' approach, says <keyword id="20506781" type="General" weightage="20" keywordseo="swaminathan-j" source="keywords">Swaminathan J</keyword>, Deputy Governor of Reserve Bank of India (RBI). Speaking at a media event in Mumbai, the deputy Governor of RBI noted that with the digital infrastructure at place, many <keyword id="22721545" type="General" weightage="20" keywordseo="fintech-players" source="keywords">fintech players</keyword> are giving loans to customers with poor credit profiles, and up on default, use aggressive recovery tactics. "While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending <keyword id="22791879" type="General" weightage="20" keywordseo="small-value-loans" source="keywords">small-value loans</keyword> to customers who often have a poor credit profiles" said the deputy governor. He emphasized that the business model of many fintech platforms involves offering small-value loans to customers who often have poor credit profiles. This has led to the adoption of aggressive recovery strategies, which on many occasions also crosses ethical boundaries. He also highlighted one particularly concerning practice that involves the invasion of customers' privacy, where recovery agents access the personal data and contacts of borrowers and use that as a threat practice. Swaminathan cautioned that such tactics not only infringe on individuals right to privacy, but also risk damaging the reputation of regulated lenders associated with these fintech platforms. He also highlighted RBI's regulations on outsourcing, that even though regulated financial entities delegate certain activities to third parties, they remain ultimately accountable for the actions of their outsourced agents. The deputy governor also noted that the digitisation allows banks and NBFCs to leverage data for greater insights into their customers' requirements and behaviour, which can be used for developing bespoke products apart from facilitating better risk management and compliance. He stated that the role of RBI as a regulator is to establish guardrails or a balanced framework that encourages innovation while ensuring that risks are managed prudently. The deputy governor also indicated the primary goal of RBI is to ensure the stability and integrity of the financial system and not to hinder business operations.

Loan sanctioning has gone digital, but recovery still needs a 'feet on the street' approach, says RBI Deputy Governor

<ul><li>As of December 2017, public sector banks accounted for 55.4% of all loans to micro-small-and-medium sized enterprises. </li><li>However, half of the country’s public sector banks are on the RBI's <keyword id="6417074" type="ORGANIZATION" weightage="20" keywordseo="prompt-corrective-action">Prompt Corrective Action</keyword> (PCA) watchlist, which involves the imposition of credit limits. </li><li>As a result, funding for small businesses is harder to come by. They will have to the turn to the private banks and non-banking financial companies in the meantime.</li></ul> Following the twin hits of demonetisation and the GST, India’s small businesses have another problem to contend with: a dearth of credit options. This is largely due to the credit limits that the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> has placed on half of the country’s public sector banks through its Prompt Corrective Action (PCA) framework. As of December 2017, public sector banks accounted for 55.4% of all loans to micro-small-and-medium sized enterprises (MSME), according to a report by <a href="https://udyamimitra.in/Default/DownloadFile/MSME_Pulse_Report.pdf">Transunion CIBIL</a>, a credit information firm, as well as 79% of all loans less than ₹1 million to new borrowers. State-owned banks are an important source of cheap financing for these businesses, especially since the MSME segment is a priority sector under government guidelines. However, funding is harder to come by for this segment. As a result of a pileup in non-performing loans, 11 of India’s public sector banks are currently placed under the Reserve Bank of India’s PCA programme. Banks are added to the watchlist once they cross a certain risk threshold for bad loans, return on assets or capital adequacy. All the banks on the watchlist, which includes the likes of IDBI Bank, UCO Bank and Oriental Bank of Commerce, have non-performing loan ratios in excess of 15%, which means more than 15% of their outstanding loans are unlikely to be recovered. Under the <a href="https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&amp;Id=10921">PCA framework</a>, which was revised in April 2017, the major activities of banks are curtailed by the RBI. The programme imposes restrictions on lending, risk-weighted assets, branch expansion, capital expenditure and compensation of senior managers as well as higher provisions for loan losses. The restrictions are meant to discourage profligacy, encourage tighter lending standards and restore the financial health of a bank. However, being sanctioned under the framework does not necessarily translate into an improvement in performance. India Overseas Bank was put on the watchlist in October 2015. It’s non-performing ratio has swelled from 12.6% at the end of 2015 to 22% at the end of 2017. The bank’s net loss also widened to ₹34.2 bilion at the end of fiscal 2017, from ₹29 billion the previous year, partly on account of higher loan provisions. Hence, it’s quite likely that some of the banks on the PCA watchlist will have to deal with credit limits for a long time. An additional 5 public sector banks are expected to be added to the PCA watchlist soon, according to ICRA, a ratings agency.This is unfortunate. Small businesses reportedly account for 40% of India’s GDP and are a major engine of job creation. Their growth, and consequently, India’s growth depends upon access to a sufficient amount of financing from state-owned lenders. To make matters worse, they’re often perceived as a riskier bet than larger businesses, which don’t rely on banks for funds as much their smaller counterparts owing to their access to bond markets. The Indian government’s ₹2.11 trillion recapitalisation plan, which was announced in October last year, is envisioned as a solution to this problem. The first round of the plan involves the allocation of ₹523 billion to the 11 banks on the PCA watchlist. While this is a step in the right direction, it will likely be a while before small businesses benefit from the increased liquidity at these banks. The bulk of the invested funds will primarily be used to plug the holes caused by large non-performing accounts in these banks’ balance sheets. Additionally, as part of a complementary set of reforms, smaller public sector banks have been asked to reduce their <a href="http://indianexpress.com/article/business/banking-and-finance/cut-loans-to-firms-focus-on-retail-govt-to-smaller-banks-5040722/">lending to corporate clients</a>, which includes small businesses, and increase their retail lending. The private sector is looking to fill the void in the meantime. According to CIBIL, private banks have increased their share of loans to the MSME sector from 25.4% to 28.4% from December 2015 to December 2017, while non-banking financial companies (<keyword id="6354598" type="ORGANIZATION" weightage="20" keywordseo="NBFCs">NBFCs</keyword>) have increased their share from 7.9% to 10.4%. There are also a growing number of startups that are focusing on lending to SMEs such as Instamojo, Namaste Credit and Lendingkart. However, in turning to the private sources, the MSME segment has to deal with higher rates of interest and stricter norms. While this might reduce the rate of defaults, a lot of small businesses will be left behind.

India’s small businesses are suffering from a shortage of credit options

Mumbai, Apr 7 () The Small Industries Development Bank of India (SIDBI) on Tuesday said it will provide emergency working capital of up to Rs 1 crore to small and medium enterprises against their confirmed government orders. The new loan product, SIDBI Assistance to Facilitate Emergency response against coronavirus (SAFE) plus will be offered collateral free and disbursed within 48 hours, a release said. The loans will be offered at an interest rate of 5 per cent. SIDBI further said it has enhanced the loan limit for MSMEs to Rs 2 crore under its SAFE initiative. "The limit of SAFE loans, which was launched a few days back, has been enhanced from Rs 50 lakh to Rs 2 crore for executing government orders by those MSMEs which are eligible under the respective state government's special policy package for interest subsidy/subvention or capital subsidy," the release said.The scheme was launched to provide financial assistance to MSMEs engaged in manufacturing of hand sanitizers, masks, gloves, head gear, bodysuits, shoe-covers, ventilators and goggles used in dealing with COVID-19. SIDBI has also opened an additional financial window for the healthcare sector under its flagship scheme called SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises (Smile). HV MKJ

SIDBI offers emergency credit facility of up to Rs 1 cr to SMEs

<ul><li><keyword id="6355222" type="PERSON" weightage="20" keywordseo="piyush-goyal">Piyush Goyal</keyword>, India's interim Finance Minister, is planning to ask the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> to ease the restrictions it has imposed on 11 public sector banks. </li><li>Goyal met the top management of these 11 public sector banks in Delhi yesterday. </li><li>If he succeeds, micro, small and medium enterprises in India will benefit.</li></ul>Piyush Goyal, who has been given temporary charge of the finance ministry until Arun Jaitley recovers from a kidney transplant surgery, has swung into action. Yesterday, Goyal met the heads of 11 public sector banks in Delhi. If Goyal has his way, the small and medium enterprises in India could get a respite from<a href="https://www.businessinsider.in/indias-small-businesses-are-suffering-from-a-shortage-of-credit-options/articleshow/63683278.cms"> their credit shortage</a> in the near future. The finance ministry is reportedly planning to ask the Reserve Bank of India (RBI) to ease lending restrictions imposed on the public sector banks under its Prompt Corrective Action (<keyword id="6383105" type="UNKNOWN" weightage="20" keywordseo="pca">PCA</keyword>) framework. Goyal is said to have instructed the top management of these 11 banks to formulate a recovery plan, one that is expected to include<a href="https://economictimes.indiatimes.com/news/economy/policy/deadlines-likely-for-turnaround-of-psu-banks-under-rbi-watch/articleshow/64195708.cms"> deadlines and targets</a> for loan recoveries, asset sales and risk reduction. After meeting the heads of Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra, Goyal told media outlets that the central government would extend all the support to strengthen the banks placed under RBI’s PCA framework so they could revive their lending operations. What is RBI’s Prompt Corrective Action framework? The RBI introduced the PCA framework to impose restrictions on lending, as the earnings of banks declined and their <keyword id="142154" type="PERSON" weightage="20" keywordseo="bad-loans">bad loans</keyword> piled up. The public sector banks had nearly ₹7.8 trillion worth of bad loans at the end of 2017, over 90% of all total bad loans among India’s banks. Eleven out of India’s 21 government-owned banks, including IDBI Bank, Indian Overseas Bank and Oriental Bank of Commerce, are on the central bank’s watchlist due to their high level of non-performing loans and declining earnings. The PCA framework not only imposes restrictions on credit, but also on capital expenditure, salaries for senior managers and mandates higher provisioning for defaulted loans. In a worst case scenario, the RBI may even ask a weak bank to merge with others. How the PCA framework affects small businesses The restrictions imposed on the public sector banks directly affect the flow of credit to small businesses, which are estimated<a href="http://www.dnb.co.in/Publications/LeadingSMEOfIndia2017/Leading-SMEs-of-India-2017.pdf"> to account for 38% of India’s GDP</a>. Micro, small and medium enterprises derive<a href="https://udyamimitra.in/Default/DownloadFile/MSME_Pulse_Report.pdf"> a little over 55%</a> of their financing from public sector banks, which are mandated to provide cheap financing to them under the government’s priority sector lending guidelines. However, the credit options for these firms have dried up, not only due to<a href="https://economictimes.indiatimes.com/small-biz/sme-sector/indias-small-businesses-find-credit-in-short-supply-after-mega-fraud/articleshow/64188001.cms"> a series of banking frauds</a>, but also as more lenders have been placed under the PCA framework. Last week, the RBI imposed<a href="https://www.thehindubusinessline.com/money-and-banking/rbi-puts-dena-bank-under-prompt-corrective-action/article23862585.ece"> further restrictions on Dena Bank,</a> which was already on its watchlist. This included a total ban on all lending and hiring. The move followed the release of Dena’s financial results for the year ended March 2018. Its net loss widened to ₹19.2 billion while its bad loans reached a staggering ₹163.6 billion. If the bank’s financial situation deteriorates, it could be liquidated. A few days earlier, the RBI imposed similar restrictions<a href="https://timesofindia.indiatimes.com/business/india-business/rbi-puts-deposit-lending-restrictions-on-allahabad-bank/articleshow/64163095.cms"> on Allahabad Bank</a>. In order for banks to be taken off the watchlist, they need to be profitable for a period of two years. Goyal is likely to ask the RBI to amend the conditions for removal of these 11 banks from the list or at least to ease the lending restrictions currently in place. The government and RBI have slightly conflicting interests here. While the former wants to make sure small businesses meet their financing needs, the latter does not want to encourage further lending, the very purpose of their existence. While a shortage in lending to <keyword id="44779" type="COMPANY" weightage="20" keywordseo="SMEs">SMEs</keyword> will jeopardise India’s economic growth, the premature easing of restrictions on India’s public sector banks could send their balance sheets into a further tailspin. However, India’s GDP growth in the short term might just be worth a delay in the revival of these banks. It is election year, after all.

India’s small businesses could escape their short term financing issues

<ul><li>The Reserve Bank of India has taken additional steps to bring India's shadow banks back on their feet.</li><li>In the process, some lending caps have been eased both for agriculture investment, small and medium businesses and home loans.</li><li>Home loans of up ₹20 lakhs will be considered 'priority' and these loans can be routed through non-banking financial companies (NBFCs).</li></ul>The Reserve Bank of India has cut interest rates by 35 basis points on August 7 to take advantage of the tepid inflation and revive economic growth. Aside from the broad move to reduce the policy rate, governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> also eased some lending caps to bring the country's shadow banks back on their feet. ""Rural demand in form two wheelers and tractors and the urban demand has slowed down as signalled by passenger vehicles. With measures undertaken by both the government and the RBI, we expect some recovery," Das said. The NBFCs -- firms that do not take deposits but make loans-- are an important part of the economy to ensure money flow reaches unbanked areas and to meet the demand from people who cannot avail loans from banks. Business for these NBFCs had recently come to a grinding halt after the crash of infrastructure lending giant IL&amp;FS. The spike in unpaid loans since then meant that the banks could not give the NBFCs more money to recover from the crisis. But the RBI has taken the following steps today to help them out. Overall, banks have allowed to lend 20% of their tier-1 capital to any one NBFC. The cap was so far at 15%. The regulator has also cut the risk weight for consumer loans except credit cards. This will allow banks to lend more to individual borrowers. Priority sectors A set portion of all loans by banks must be made to certain sections of the economy, at a cheaper rate, because they need the affordable loans more than others. These are called 'priority sector' loans and were routed through the banks. However, now the RBI has allowed the banks to route such loans via NBFCs too. The new limits for 'priority sector' loans are as follows: <ul><li>₹10 lakh for agricultural investments</li><li>₹20 lakh for loans to micro, small, and medium enterprises</li><li>₹20 lakh for home loans</li></ul>Simply put, if an NBFC borrows money from a bank and then lends it further to a home buyer within the ₹20 lakh threshold, it will be considered as a 'priority sector' loan. The central bank is hoping that these measure would revive demand for homes, cars and motorbikes, as well as for investment into small businesses. SEE ALSO: <a href="https://www.businessinsider.in/business/rbi-cut-interest-rates-by-35-basis-points-as-growth-sputters-and-inflation-cools/articleshow/70565859.cms" data-type="tilCustomLink" target="_blank">RBI cut interest rates by 35 basis points as growth sputters and inflation cools</a> <a href="https://www.businessinsider.in/sensex-and-nifty-react-little-to-rbi-decision-to-cut-interest-rate/articleshow/70566279.cms" data-type="tilCustomLink" target="_blank">Here's why Indian markets aren't excited by the RBI move to cut interest rates</a>

Home loans up to ₹20 lakh may get cheaper and easier

<ul><li>Many of the working capital loans made to India's small entrepreneurs may be turning bad.</li><li>RBI Deputy Governor MK Jain raised an alarm in a speech yesterday but former governor Raghuram Rajan had already warned of 'credit risk' in September 2018.</li><li>Indian banks have given over ₹7 lakh crore worth loans under the Pradhan Mantri Mudra Yojana. </li><li>This will be added burden for Indian banks that are already saddled with bad loans worth over ₹9 lakh crore.</li></ul>Many of the working capital loans made to India's small entrepreneurs may be turning bad. MK Jain, the deputy governor of the Reserve Bank of India (RBI) raised an alarm in a speech yesterday but former governor Raghuram Rajan had already warned of the potential 'credit risk' in September 2018. In his report to the Lok Sabha (the lower house of Indian Parliament) Committee on Estimates in September 2018, Rajan highlighted that the "government should focus on sources of the next crisis, not just the last one. In particular, government should refrain from setting ambitious credit targets or waiving loans." At the end of March 2019, the total defaults since inception of the scheme was ₹17,650 crore (over $2.5 billion), roughly 2% of all the money lent under the programme. Rajan told you so... Rajan, who famously predicted the global financial crisis of 2008, specifically highlighted the rising quantum of contingent liability on account of Pradhan Mantri Mudra Yojana, which gives collateral-free loans to small entrepreneurs to meet their day-to-day business needs. A contingent liability is a possible future burden that cannot be quantified right now. In this case, banks giving these easy loans should have kept aside some money in case the borrowers become unable to repay the money. As it seems, the chickens have come home to roost. “The Mudra is a case in point-…while such a massive push would have lifted many beneficiaries out of poverty, there has been some concern at the growing level of non-performing assets among these borrowers,” the current RBI deputy governor Jain said on Tuesday (November 26). Over ₹7 lakh crore worth loans have been given under the Mudra scheme since its inception in 2015. Just as Rajan had warned, the amount of loans defaulted more than doubled in just one year, according to a <a href="https://www.business-standard.com/article/economy-policy/npas-under-modi-s-mudra-scheme-doubled-to-rs-9-204-cr-in-just-1-year-rti-119062400108_1.html" data-type="tilCustomLink" target="_blank">report</a> earlier this year. What's worse, another report showed that <a href="https://www.businesstoday.in/current/economy-politics/only-20-percent-mudra-loans-utilised-start-new-businesses/story/377353.html" data-type="tilCustomLink" target="_blank">only 20% of the money borrowed</a> went into starting a new business. Earlier this year, RBI had announced one-time restructuring of loan for small business owners who have borrowed less than ₹25 crore or if the loan default happened after January 1 of 2019. This has helped the MSMEs whose cash flows were adversely impacted due to transition under Goods and Services Tax (GST) and demonetisation. "Inefficiencies in lending practices, poor credit appraisal, willful default by borrowers and impaired cash flows due to slowdown also contribute to higher default rate," a Citi report this week said. Though the number of defaulters, and the amount of unpaid loans, is <a href="https://www.livemint.com/politics/policy/why-bad-loans-are-low-under-mudra-scheme-1563730565534.html" data-type="tilCustomLink" target="_blank">significantly lesser among smaller borrowers</a>, this is an added burden for Indian banks, particularly the state-owned ones, who are already saddled with unpaid loans to the tune of over ₹9 lakh crore at the end of March 2019. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/raghuram-rajan-gave-ideas-on-how-to-revive-economic-growth-in-india/articleshow/71573594.cms" data-type="tilCustomLink" target="_blank">Raghuram Rajan’s recipe to revive India's economic growth</a>

Raghuram Rajan's warning about Mudra loans last year may be coming true— and now a Citi report confirms it

<ul><li><keyword id="4241330" type="PERSON" weightage="20" keywordseo="suryoday-small-finance-bank">Suryoday Small Finance Bank</keyword> initial public offer (IPO) worth ₹581 crore has gone live today, and it will be open for subscription till March 19.</li><li>The price band is fixed at ₹303-305, and each lot consists of 49 equity shares.</li><li>Analysts are bullish on the bank, pointing to its strong credit processes, strong financial performance and cost-efficient operations.</li><li>The bank has proposed to use the proceeds of the IPO towards boosting its Tier-1 capital base to meet future capital requirements.</li></ul>Suryoday Small Finance Bank (SSFB) has kicked off its initial public offer (IPO) worth ₹581 crore today, March 17. It joins companies like Anupam Rasayan, Craftsman Automation, EaseMyTrip, MTAR Technologies among others that went public this year. The <keyword id="10539050" type="UNKNOWN" weightage="20" keywordseo="Suryoday-Small-Finance-Bank-ipo">Suryoday Small Finance Bank IPO</keyword> is now open and will be live till March 19, with a price band of ₹303-305. Each lot consists of 49 shares. A total of 1.9 crore shares are available for subscription in the IPO. 50% of the issue is reserved for qualified institutional buyers (QIB), 15% for non-institutional bidders and the remaining 35% for retail investors. The proceeds of the IPO are proposed to be used for boosting the bank’s Tier-1 capital base to meet future capital requirements. Tier-1 capital refers to the core capital of a bank that consists of equity shares and retained earnings. It is used to measure the bank’s financial strength and its capital adequacy. Analysts are mostly bullish on the IPO. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Brokerage/analyst </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Recommendation </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">LKP Securities </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Subscribe </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Dilip Davda </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Subscribe at own risk </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Anand Rathi </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Subscribe for long term </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Marwadi Shares and Finance </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Subscribe </td></tr></tbody></table> “Suryoday Small Finance Bank is among the leading SFBs in India in terms of net interest margins, return on assets, yields and deposit growth and had the lowest cost-to-income ratio among SFBs in India in fiscal 2020,” a report by Axis Capital said. One of the measures to evaluate SSFB’s performance is yield to gross loan portfolio. This measures the bank’s ability to generate income such as interest, fees, and commissions from the loans it has issued. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Yield on Gross Loan Portfolio </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Mar-18 </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">21.41% </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Mar-19 </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">21.78% </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Mar-20 </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">20.93% </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Dec-20* </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">19.76% </td></tr></tbody></table> Source: Axis Capital Note: *Data up to December 31, 2020. “SSFB has been growing tremendously since the conversion as an SFB and is currently in a robust financial position that will enable them to expand their business quickly,” stated a report by Anand Rathi Research. <cmsannotation type="cmsannotation" annotationid="What is the business of Suryoday Small Finance Bank?" comment="subhead" text="What is the business of Suryoday Small Finance Bank?">What is the business of Suryoday Small Finance Bank?</cmsannotation> SSFB currently provides a wide range of products and services, including housing loans, commercial vehicle loans, micro business loans, unsecured micro and small enterprise loans, among others. Explaining the extent of SSFB’s operations, a HDFC Securities reported states, “As of December 31, 2020, SSFBL’s customer base was 1.44 million and its employee base comprised 4,770 employees and it operated 554 Banking Outlets including 153 Unbanked Rural Centres.” SSFB commenced its microfinance operations in 2009. It received the small finance bank (SFB) licence from the Reserve Bank of India (RBI) in 2016. Prior to getting approval to operate as a small finance bank from the Reserve Bank of India, SSFB operated as a non-banking finance corporation and offered small ticket-size loans to women from weaker sections of the society. SSFB serves customers in the unbanked and underbanked categories. It has been serving these segments for over a decade now. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/laxmi-organic-kicks-off-its-600-crore-ipo-should-you-subscribe/articleshow/81509655.cms">Laxmi Organic kicks off its ₹600 crore IPO – should you subscribe?</a> <a href="https://www.businessinsider.in/stock-market/news/craftsman-automation-has-launched-its-824-crore-initial-public-offer-ipo-in-stock-market-in-india/articleshow/81506486.cms">The ₹824-crore Craftsman Automation IPO opens today – should you subscribe?</a> <a href="https://www.businessinsider.in/stock-market/news/nazara-technologies-ipo-opens-today-should-you-subscribe/articleshow/81542657.cms">Nazara Technologies will be the first pure-play gaming company to debut on the Indian public markets – analysts are all in for it</a>

You Searched For "small loans india" and got 11 results

Amazon India would be offering loans to its small and medium sized sellers

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Indian MSMEs can now get a loan approved in just 59 minutes

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India’s central bank just gave the country’s small businesses a one-time breather from some of their bad loans — but with a few conditions

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Loan sanctioning has gone digital, but recovery still needs a 'feet on the street' approach, says RBI Deputy Governor

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India’s small businesses are suffering from a shortage of credit options

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PTI

India’s small businesses could escape their short term financing issues

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Home loans up to ₹20 lakh may get cheaper and easier

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Raghuram Rajan's warning about Mudra loans last year may be coming true— and now a Citi report confirms it

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Suryoday Small Finance Bank IPO worth ₹581 crore opens today – should you subscribe?

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