Private banks plan to catch up on loans to MSMEs


While public sector banks so far are the primary lenders to medium, small and micro enterprises (MSMEs) under the guaranteed emergency credit line (GECL) scheme, Uday Kotak, CII president, has said that, soon private sector banks will increase their presence in the scheme.

Complimenting public sector banks for moving fast on Rs 3 lakh crore GECL scheme, Kotak expressed hope that the scheme will gather further traction in coming weeks from private banks.

“‘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 for moving at a great speed. So, I do accept that,” said Kotak, who is also managing director of Kotak Mahindra Bank.

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 ECLG 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 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


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 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.

Meanwhile in Goa total of Rs 66 crore of loans have been disbursed so far to local MSMEs under the GECL scheme, according to information revealed by the state level bankers committee. SBI, HDFC Bank, Syndicate Bank, Bank of Baroda and South India Bank are some of the top lenders. PTI