Government of India has recently announced a
scheme for MSME companies. As per scheme government has setup a public sector
company to do initial credit appraisal of MSME companies in just 59 minutes. This
company will provide in-principle loan approval upto INR 1 Cr. Loan processing
time and transparency has been major roadblock for MSME Companies in obtaining
formal funding.1The scheme effectively aims to reduce loan processing
time and bring transparency to MSME credits.
This blogs gives counter-view and reality
checks to confusing and misleading claims of Video of HW News Channel featuring
Mr. Sujit Nair, Managing Editor of HW News
Network and Mr. Akhilesh Bhargava Business Editor of HW Business and Finance.
Link to Video: https://www.youtube.com/watch?v=K7WnItuQOX4
Misleading Claim-1: Bank asked for collateral for INR 85 Lac
loan.
Reality 1: The 59 minute scheme is to efficient
way of credit appraisal of MSME, i.e. those who have good financial health can
get loan as per their requirement. This scheme is neither free money allotment
in 59 minutes nor irresponsible lending; it is an efficient and transparent way
of money lending. A banking loan is provided against Collateral and prime
securities. Collateral is security for a lender that it can get back its money
if borrower defaults. It is prudent for any bank to ask for collateral. this is
scheme just target that well deserved MSME can be connected to formal financing
and can save 8-10% of interest cost.
Misleading Claim 2: In principal approval given in 47 minutes
not money!
Reality 2: This public company does initial
credit appraisal of borrower and estimates amount of loan can be given, hence
the term in-principal approval. As discussed earlier as company targets
efficient way of lending not providing free money. Loan must be given after
proper due diligence, this company does initial due diligence and provides
opportunity to MSME to get loan faster. Sometimes, Bank can deny the loan if
further due diligence indicates that risk attached to lending are more than
bank want to take.
Misleading Claim 3: Amount charged INR 1,180 paid to private
company.
Reality 3: Capital world is Public Sector
Company as it is owned by SIDBI and other PSU banks. PSB owns nearly 56% of
stack, hence clearly it is government entity. The video try spread wrong information
and make false claim.
Misleading Claim 4: MSME need to share financial data with
Private Company.
Reality 4: Again false information, it is public company
owned by same banks, which will finally provide the loan. In simple terms, these
banks have created a subsidiary to initial financial appraisal of prospective
MSME borrower. Moreover, how anyone can do the due diligence without actual
financial numbers.
Misleading Claim 5: Company does not full-fill SIDBI tender
criteria
Reality 5: Conditions the video is talking are condition for
hiring independent consultant. Then try to confuse the viewer that current
company does not full-fill the criteria. It is note-worthy that no contract is
given to capita-world. In current case, SIDBI and PSBs have acquired a company
and enhanced it with necessary domain know-how and funding. It is clear case of
acquisition and enhancing internal capability. Just like Bansals brother no
longer runs flipkart and all decision are taken by its new owner wall-mart.
Similarly, Capitaworld now owned by SIDBI and PSBs, hence it is also a public
sector company. SIDBI and PSBs has majority in Board also. Hence, no decision
can be taken by company without the approval of SIDBI and PSBs. Moreover,
take-over was done by investment arm of SIDBI after proper due diligence. SIDBI
DMD Manoj Mittal said “We had invested in an existing company because they had
invested in technology and developed the algorithms for credit appraisal"
Misleading Claim 6: Why pay INR 1180, if loan does not get
sanctioned.
Reality 6: Amount is only charged, who are get in-principal
approval. So if some-one is not eligible for loan, need not to pay a single
penny. If your eligible for in-principal approval but you don't want to use
this service, need not to pay single penny. Amount only paid by eligible MSME
to get loan. In general banking loan banks charges close to 1% as processing
fees, so for a loan of INR 1 Cr, 1 lac need to be paid to lending banks as
processing fees. Here, charges are just INR 1000, which just 0.01% for INR 1 Cr
loan and just 0.1% for 10 lac loan. Anyone remotely aware about cost of
credit appraisals will tell you that INR 1180 is very small amount and will not
cover cost of due diligence process. Company has to check CIBIL scores of all
the directors, a single CIBIL score costs INR 800. Clearly, this service fees
of INR 1180 just token fees for process.
At last, this blog just want to share light on banking modalities and
perspective on scheme so that viewer/readers do not get mislead by
confusing/incorrect representation by anyone.
Reference:
