New Delhi, Sept 10 (KNN)  Small businesses will find it even more difficult to get credit from banks because lenders have started to name and shame even the guarantors in the case of defaulters. 
 
Small and medium enterprises are upset over the development as they wonder who will come forward to stand guarantee for them as the guarantor runs the risk of getting named and shamed.

Public sector banks, such as the State Bank of India (SBI) have begun to publish names with pictures of their loan defaulters in the national newspapers to shame them.

The bank has also issued warnings for other defaulters saying, “other defaulters/suit filed cases please note that their photograph may be next to be published after completion of necessary formalities if their dues are not cleared immediately.

The warning further added, “Defaulters, who have changed their residence without informing the Bank, …their photo will be published with last recorded address with the bank.”

The banks have adopted strict measures to recover loans following the advice of the Finance Minister to go after big defaulters.

Bank of India last year began opening debt recovery branches to pursue defaulting borrowers.

“The industry ministers assure us that the MSMEs will easily get loans starting from Rs 5 lakh upto Rs 5 crore without any guarantors.  But when we go to the banks, they ask us for so many documents and guarantors.  It’s really very difficult for the MSMEs to get loans from the banks. We have to go through so much trouble,” said owner of Florist Flower Crafts Kuteera Herbal Products, Priya Vandana Puranik from Belgaum, who is also a member of the Association of Women Entrepreneurs of Karnataka (AWAKE).
 
The government has subsidy loans for the MSMEs under which the banks should not ask for guarantors, but when we contact the banks, they make the process so lengthy and difficult, Priya added.

However, President of the Chandni Chowk Jewellers Association, Surendra Kumar Jain said that the move will not make much difference to the jewellery traders, as most of them take loans against their property or have guarantors who are well known to them.

“They agree to become the guarantor only after looking at the volume of the investment and amount of risk involved. Further, only in few cases the borrowers fail to repay the loan,” Jain added.
 
Banks like SBI, UCO Bank, Allahabad bank, Oriental bank have already adopted this approach to name and shame corporate borrowers who are not paying them back.
   
Earlier this year, the Reserve Bank of India (RBI) had issued detailed guidelines to all scheduled commercial banks on lending to the Micro Small and Medium Enterprises (MSME).

The guidelines provided a time frame for disposal of loan applications, loan limit for dispensing the collateral requirement and sub-targets for micro enterprises within the Micro and Small Enterprises (MSE) lending.

RBI had advised banks to achieve 20 per cent year-on-year growth in credit to MSE and 10 per cent annual growth in the number of micro enterprise accounts in terms of the recommendations of the task force on MSME under the chairmanship of the Principal Secretary to the Prime Minister, the statement added.

Further, banks were advised that allocation of 60 per cent of the MSE advances to the micro enterprises has to be achieved in stages - 50 per cent during 2010-11, 55 per cent in 2011-12 and 60 per cent in 2012-13.   (SD/KNN)