Govt’s 100% sovereign guarantee for uncollateralised MSME loans will encourage borrowers to never pay back, discourage banks from lending to them in future.
Industry stakeholders say they are willing to pay for actual consumption but not the fixed charges for the lockdown period when there was no production.
RBI governor Shaktikanta Das says with inflation falling, there is more policy space available to address growth and financial stability amid Covid-19 concerns.
The Union Budget 2020 should focus on creating a coherent and viable policy framework for lending to MSMEs, including making it a core business activity for banks.
Years are quietly being stripped off my lifespan, and somehow that doesn’t ruin my day. But getting scolded for one careless word in an email? That can send me spiralling.
ThePrint had previously reported that India & Russia are talking about 5 more regiments of the S-400, but no contracts are to be signed during the Russian president's visit.
The India-South Africa series-defining fact is the catastrophic decline of Indian red ball cricket where a visiting team can mock us with the 'grovel' word.
I have a question. How do banks finance large industries? Do they insist on collateral security for a part or complete loan amount? The Author is quite correct in the matter of MSMEs. But what about big borrowers?
The money could flow back to the ruling dispensation through the political donation bonds. A % leak there and no pay back – even if it is 10% of borrowers is huge. And total lack of who donates what in the political donation bonds is definitely an issue.
Second, a totally gov guaranteed loan is not even necessary. If has to be done, the gov could have said atleast 50% of monies can be used only or salary and thus put money in the hands of consumers (and multiplier effect) rather than all go to capital expenditure; and the other investments have to come from promoters pockets. Or give a equity to the employees of such MSME in some way or fashion to get them a skin in the game and incentivise the workers to strive.
Whats the definition of the capital/turnover – over what time frame? Invest 1 c over 2 years? in 6 months? 1Q? The devil is in details.
How do you prevent a big corporation – Reliance or TVS group of Bajajss from floating multip,le MSME and pocketing money?? What are the checks and balances to ensure that it is genuine MSME and not multiple MSMEs of a big holding corporation?
For traceability of the money is a concern and definitely a concern because of wilful transfer, personal expenditures masquerading as investments (foreign travel as partner visit for example), etc. make it all a app based – each MSME to install an app – if ArogyaSetu can be mandated, why no this – and remove any f2f interactions for favoritism etc. Then mandate that all disbursals of this money should be electronic via UPI. Trace each and every rupee . Go digital completely for this quantum of money.
Mandate that they should go to private or public equity marker in 2-3 years to prove to market and generate equity to pay back the loacan. If not some other alternative.
Mandate that one of the core family member of the MSME promoters always have to be India till loans are repaid?
But Ila, I am sure if the Government wants it will have enough elbow room to recover the loans from those MSMEs who can pay….MSMEs still file annual reports, GST returns…etc…… a going concern can’t vanish into thin air. Ii is another matters if some MAMEs just want to eat away the loan and wind up….
I think you are missing a point here..
Govt’s 100% sovereign guarantee for uncollateralised MSME loans will encourage borrowers to never pay back, … this is not new, already happens in Agriculture (aka Loan mela)
More importantly proprietors of MSME’s will just use the loan for consumption
It would be very unfortunate if small businesses – which often pay high rates of interest while borrowing from informal sources – treat this three trillion as a giveaway. Conditions in the economy are tough, something they are aware of while taking the loan. For their part, having an inventory of honest, credit worthy borrowers is part of any bank’s normal functioning. With or without government guarantee and even if the lending is directed in the form of MUDRA, the branch should conduct its due diligence.
I want business loan from my small shop
Sir, mai bank mai gaya tha lekin muje bola ki 20 lakh ka sabhi tak kuch nhi aya hai to kab tha sir ……Kya kare hm log kuch nhi path raha bank nhi lon
I am the poor and migrated people…now i want to some money…due to family maintanance
sir mere paas bhi paise nhi hai
Where is the dislike icon?
I have a question. How do banks finance large industries? Do they insist on collateral security for a part or complete loan amount? The Author is quite correct in the matter of MSMEs. But what about big borrowers?
There are few more issues & ways around that too.
The money could flow back to the ruling dispensation through the political donation bonds. A % leak there and no pay back – even if it is 10% of borrowers is huge. And total lack of who donates what in the political donation bonds is definitely an issue.
Second, a totally gov guaranteed loan is not even necessary. If has to be done, the gov could have said atleast 50% of monies can be used only or salary and thus put money in the hands of consumers (and multiplier effect) rather than all go to capital expenditure; and the other investments have to come from promoters pockets. Or give a equity to the employees of such MSME in some way or fashion to get them a skin in the game and incentivise the workers to strive.
Whats the definition of the capital/turnover – over what time frame? Invest 1 c over 2 years? in 6 months? 1Q? The devil is in details.
How do you prevent a big corporation – Reliance or TVS group of Bajajss from floating multip,le MSME and pocketing money?? What are the checks and balances to ensure that it is genuine MSME and not multiple MSMEs of a big holding corporation?
For traceability of the money is a concern and definitely a concern because of wilful transfer, personal expenditures masquerading as investments (foreign travel as partner visit for example), etc. make it all a app based – each MSME to install an app – if ArogyaSetu can be mandated, why no this – and remove any f2f interactions for favoritism etc. Then mandate that all disbursals of this money should be electronic via UPI. Trace each and every rupee . Go digital completely for this quantum of money.
Mandate that they should go to private or public equity marker in 2-3 years to prove to market and generate equity to pay back the loacan. If not some other alternative.
Mandate that one of the core family member of the MSME promoters always have to be India till loans are repaid?
But Ila, I am sure if the Government wants it will have enough elbow room to recover the loans from those MSMEs who can pay….MSMEs still file annual reports, GST returns…etc…… a going concern can’t vanish into thin air. Ii is another matters if some MAMEs just want to eat away the loan and wind up….
I think you are missing a point here..
Govt’s 100% sovereign guarantee for uncollateralised MSME loans will encourage borrowers to never pay back, … this is not new, already happens in Agriculture (aka Loan mela)
More importantly proprietors of MSME’s will just use the loan for consumption
MSMES are not undocumented farmer….MSMES are going concerns filing regular returns with the Government.
Ii is another matters if some MAMEs just want to eat away the loan and wind up….
I think you are missing a point here..
Only thing that will work is what Rahul Said last elections. Give 6000 every month to the bottom 50% for two years. That is how demand will grow.
It would be very unfortunate if small businesses – which often pay high rates of interest while borrowing from informal sources – treat this three trillion as a giveaway. Conditions in the economy are tough, something they are aware of while taking the loan. For their part, having an inventory of honest, credit worthy borrowers is part of any bank’s normal functioning. With or without government guarantee and even if the lending is directed in the form of MUDRA, the branch should conduct its due diligence.