The highpoint of the 12-point charter that Prime Minister Narendra Modi unveiled on 2 November as a Diwali gift to the Micro, Small and Medium Enterprises (MSME) sector was undoubtedly the announcement of the availability of loans up to Rs 1 crore within just 59 minutes of filing an online application.
Billed as a “transformative initiative in the MSME credit space”, this measure enables the MSME applicant to secure an “in-principle approval” for loans from Rs1 lakh to Rs1 crore within 59 minutes from a consortium of Lucknow-headquartered Small Industries Development Bank of India (SIDBI) and five Public Sector Banks (PSBs), namely, State Bank of India, Bank of Baroda, Punjab National Bank, Vijaya Bank and Indian Bank.
“The web portal www.psbloansin59minutes.com…..is a strategic initiative of SIBDI-led PSB consortium incubated under the aegis of Department of Financial Services (DFS), Ministry of Finance,” notes an official statement. “The portal sets a new benchmark in loan processing and reduces the turnaround time from 20-25 days to 59 minutes; subsequent to this in-principle approval, the loan will be disbursed in 7-8 working days.”
The scheme appears to be in the same league as the ground-breaking Housing for All Mission, and ‘24×7 Power for All’, both to be targeted by 2022, when India marks its 75th year of Independence. The initiative aims to promote automation, and reduce the interminable loan approval process and repeated visits to the banks.
The rate of interest starts from 8 per cent, and the four-step procedure is delineated as the submission of the “GST Identification Number, Income-Tax returns in XML format, bank statement for the last six months in pdf format, and Directors/Owners details: basic, personal, educational and ownership details”. The applicant can select the branch of the concerned bank from which he seeks the loan. It is mentioned that the loans are processed without human intervention till sanction and/or disbursement stage. While it is clarified that “on this platform, the MSME borrower is not required to submit any physical document for in-principle approval”, the platform obliges the borrower to upload his e-KYC paper, and submit I-T returns of three years, alongside the I-T codes and e-filing details.
Applicants are also asked to provide their GST ID usernames and passwords.
Collateral is not required to be furnished as the online portal is integrated with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, CGTMSE being a subsidiary of SIDBI. No payment is required for registration, but the borrower has to submit a fee of Rs1,000, plus applicable taxes, when his loan proposal, upon application, confirms with the lenders’ loan products that are in line with the scoring models and assessment methods within their approved credit policy.
“The solution uses advanced algorithms to analyse data points from various sources such as I-T returns, GST data, bank statements etc.,” indicates another official statement. “The initiative aims at automation of various processes to loan appraisal in such a way that you get an eligibility letter, in-principle approval in less than 60 minutes and chooses the bank that you may prefer to ease access to credit to smaller and micro enterprises.”
It additionally mentions that for applying for these “contactless business loans”, an MSME can apply for a business loan with multiple banks at one go, that the applicant is using a platform that is fully compatible with existing banking processes, that the application process is secure as it is equipped with the highest levels of information security, that the user banks can create customised loan products as per their credit policy, and that the platform’s technological integrations ease credit decision-making based on the submitted GST number, I-T returns, and bank statements, and through fraud checks, bureau checks etc.
While the primary responsibility for the promotion and development of the MSME sector vests with the state governments, the Centre advocates an all-India framework for policies and measures for the sector’s development and promotion, thereby supplementing the efforts of the state governments in various ways. The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act in 2006 was followed by the formation the next year of a separate Ministry of Micro, Small and Medium Enterprises through the merger of the erstwhile ministries of Small-Scale Industry (SSI) and Agro & Rural Industries (ARI). Among the steps the MSME ministry has taken are facilitating credit through schemes like MUDRA, Stand Up India, Credit Guarantee Fund and higher credit limits, technological upgradation, quality improvement, and marketing support.
As per the National Sample Survey 73rd Round, India’s MSME sector comprised 633.88 lakh units and gave rise to 11.10 crore jobs as of 2015-16.
While the launch of the portal www.psbloansin59minutes.com should doubtlessly have been a “transformative initiative in the MSME credit space”, it does not inspire confidence, primarily because of the induction of a private Ahmedabad-based company into this scheme with which the applicants would have to share critical and highly sensitive data like their GST login ID and password, and I-T, bank and a range of personal details, and also make the payment of the application fees to.
Instead of deploying its own existing digital platform – www.udyamimitra.in – or enlisting established private companies like TCS or Infosys that have for long been handling government programmes, SIDBI has roped in CapitaWorld Platform Pvt Ltd, a fintech company formed in 2015 by venture capitalist Vinod Modha, chartered accountant and chartered financial analyst Jinand Shah and Aviruk Chakraborty, who has a background in manufacturing. Branding itself as the “Gateway to Technology”, CapitaWorld affirms on its website, “We believe in collaboration for Transformation of existing Banking and Lending processes using innovative technologies be it Alternative Scoring, Smart Contracts, Process Automation, KYC and many others.”
While CapitaWorld recorded a loss of Rs38,888 in its first year and revenue of Rs15,680 in 2016-17, SIDBI and eight other PSBs invested Rs22.5 crore into it in July for a 54 per cent stake in the company. This move was based on an evaluation of Rs119.39 per share and guided by the company’s potential earning capacity rather than on its past earnings.
Each application payment of Rs1,000, plus applicable taxes that make it a total Rs1,180, goes to CapitaWorld as it provides the in-principle approval, emailed from “email@example.com”. Once the loan is approved by the banks after they undertake their due diligence, CapitaWorld also gains 0.35 per cent of the loan amount. Besides, a loan application is normally not charged as “application fee”, but only a “processing fee” once the loan is approved. For a newfound company with no experience in the field, the government’s www.psbloansin59minutes.com facility promises it a windfall.
On its own website, SIDBI introduces SIDBI Udyamimitra [www.udyamimitra.in] as an “enabling platform which leverages IT architecture of Stand-Up Mitra portal and aims at instilling ease of access to MSMEs’ financial and non-financial service needs”. It adds that the portal would be ideal for “Any type of enterprise loans – MUDRA (upto Rs10 lakh) Stand-Up India Scheme for SC/ST and Women (Rs10 lakh to Rs100 lakh), SME loans (presently upto Rs10 crore)”. It also claimed that SIDBI Udyamimitra will have a “Credible Connect” via access to 1.25 lakh bank branches and over 17,000 handholding agencies for application filing, financial training, skill training, access to margin money/subsidy and so on.
Forget about 59 minutes, this writer tried for over two days just to “Sign Up”. For signing up, one has to fill in his or her name and email ID, following which is mentioned “Get OTP” (one time password), implying that the OTP would be SMSed to the applicant’s mobile number. There was an instant message on the screen that mentioned “Successfully sent OTP to your mobile number”, but no OTP was forthcoming, even after clicking on “Resend OTP”.
It was thus not possible to go further on the online application, but curiously there were subsequent SMSes and emails mentioning, “We noticed that you have not verified the OTP” (yes, the same OTP that had remained unsent). It seemed the site was completely switched off. Once, an OTP was SMSed, but despite filling that in immediately, there was the message, “Invalid or Expired OTP. Please Try Again”.
The email said: “Thank you for showing interest in PSBLOANSIN59MINUTES.
“We have noticed that you did not proceed further after entering your details on Sign-up page. Please Complete the Sign-Up process by verifying OTP number sent on the Mobile number provided to us.
“You are just 3 steps away from IN-PRINCIPLE APPROVAL.
Step 1: Enter your Basic details
Step 2: Select branch of concerned bank
Step 3: Instant in-principle approval
“Enter the same Sign-up details and complete the sign-up process for faster processing of your application.” But without the OTP, none of this could be done.
By Sarosh Bana,
Executive Editor | Business India