Private sector banks, which are seen to be lagging in the rollout of the ₹3 lakh crore 100 per cent Emergency Credit Line Guarantee Scheme (ECLGS) focused on supporting MSMEs in these tough Covid-19 times, will soon catch up with the public sector banks (PSBs) on this front, Uday Kotak, CII President, has said.

“I do see that private sector banks in the case of the guaranteed scheme have taken a little longer than PSBs. They started a bit later. I do compliment the SBI Chairman and his team for moving at great speed. Having said that, just watch over the next 2-4 weeks, there will be a pick up in momentum from both private banks and PSBs in terms of sanctions and disbursements. It is about getting the house in better shape, and you will see the private banks catch up with PSBs,“ Kotak said at CII Virtual Dialogue on ‘ Strategising the Rollout of Economic Stimulus Package’ on the occasion of International MSME Day.

Kotak, who is also MD & CEO of Kotak Mahindra Bank, was responding to a question from a CII member on why private sector banks are taking longer to sanction the MSME loans under the ECLGS and why the rate of interest charged are higher than PSBs.

As for interest rates, Kotak highlighted that interest rates are with a cap as per specified government guidelines and there is no question of interest rates being higher than the capped rates (9.5 per cent for banks and 14 per cent for NBFCs).

“In a month from now you will see a very large part of the ₹3 lakh crore having been disbursed both by PSBs and Private banks”, he said.

SBI Chairman Rajnish Kumar revealed that SBI has till date sanctioned 4 lakh loans worth ₹19,000 crore under the ECLGS. The disbursements have been over ₹10,000 crore as on date.

Kumar said that SBI is fully committed to supporting MSMEs and pointed out that they play a critical role in the economy by being an integral part of the supply chain of large corporates. “Today, because of digitisation, there is a huge change in the way banks are supporting MSMEs. With the recent change in the definition of MSME, there will be enhanced flow of credit to this sector, and it will also help banks meet their priority sector targets,” he said.

It is not that there is a dearth in the number of financial products. The fact is that vulnerability of MSMEs are higher in these trying Covid-19 times.

Kotak also said that private banks are not risk-averse when it came to supporting MSMEs. “Unlike public sector banks which have the State backing them, we (private sector banks) are fundamentally in business keeping in mind the need to protect our depositors’ interests”, he said.

So far, under the ECLGS scheme, PSBs and private banks have in aggregate sanctioned loans worth ₹75,426.39 crore and disbursed ₹32,894.86 crore, official data released a few days back showed. Of this, private sector banks have approved loans worth ₹32,687.27 crore to MSMEs and disbursed ₹10,697.33 crore under the scheme.

Published on June 27, 2020

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