Govt 's CGTMSE scheme failed to provide relief to MSMEs: FOPSIA
New Delhi, Nov 19 (KNN) Micro, Small and Medium Enterprises (MSMEs) in India are in worst position and one of the main reasons for this is high lending rates by banks. The government schemes such as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) are failed in this regard, said Badish Jindal, President of Federation of Punjab Small Industries Association (FOPSIA).
FOPSIA have investigated the truth of CGTMSE scheme of Government of India and found that how the government have managed to amend the figures with a fake data to show their performance on higher side.
On 2nd November 2018, Prime Minister announced loans up to 1 crore to MSMEs in 59 minutes but explaining the position of the scheme already in place for collateral free loans he said that instead of claims of loans up to 1 crore the average loan amount to per micro small borrower is 4.41 Lac.”
“From 28 lakh total loans, the loans to micro small manufacturers is merely 9 lakh persons whereas the number of small scale service & business enterprises is 18 lakh. The banks are considering all commercial vehicles loans to this category for enhancing the data of Credit Guarantee Scheme,” he added.
In credit guarantee ccheme 39% loans are up to 1 lakh, 22% from 1 lakh to 2 lakh, 19% from 2 lakh to 5 lakh, 13% from 5 lakh to 10 lakh. So from total CGS the 93% is under mandatory rule from RBI because Banks cannot take collateral from MSEs, he said.
Besides this 4% loans are from 10 lakh to 25 lakh, 2% from 25 lakh to 50 lakh and less than 1% from 50 lakh to 1 Crore, he added to the statement.
Analyzing the above data, Jindal said “This clearly proves from the data as up to 2010 the amount of loan sanctioned under of this scheme was 4800 crores and after the orders of RBI in 2010 the amount increased to 1.28 lakh crore in next seven years.”
But RBI very cunningly told the banks to convert all collateral free loans to Credit Gurantee Scheme and due to this the Credit Gurantee trust is earning around 850 crores per year from the borrowers up to 10 lakh, added Jindal.
He pointed that it is mandatory for the banks to consider all loans up to 10 Lacs without collateral but banks doing the frauds by black mailing the borrowers and taking collateral from them.
“Banks illegally force the borrowers to sign an affidavit that the borrower doesn’t want to pay the guarantee fee so his loans should be considered with collateral,” added FOPSIA President.
Pointing towards Punjab, Jindal said that Punjab again failed to get the benefit of this scheme as merely 2.3% of the total loans givenin Punjab by banks under this scheme. As from 28 lakh beneficiaries of this scheme only 61864 belongs to Punjab. And from total amount of 1.28 lakh crores distributed under thisscheme the banks in Punjab merely distributes 3242 crores.
So, in the scheme 93% loans are mandatory as per RBI guidelines for the banks and only 7% are taking benefit of this scheme, Jindal raised this point.
But by taking undue benefit of this scheme the banks are charging 1% per annum from the MSEs taking loans upto 5 lakh and 1.50% for 5 lakh to 10 lakh, said FOPSIA.
Jindal said “India stands at 101 rank in banks lending rates as the average lending rate in India are 9.75% whereas India’s arch rival China have 4.3%, European Union have 1% to 3%, Canada 2.9%, USA 4.3% and even Pakistan have 7% banks lending rate.”
But if we calculate the final rate of interest in India including credit guarantee fee and processing charges than the raking of India is 143 among 189 countries of world in interest rate on lending, FOPSIA noted.
Further he pointed that the banks are forcing the MSMEs to pay the interest from 10.5% to 13%; besides this they are charging 1% to 1.5% guarantee fees for availing loans under credit guarantee scheme along with 1% renewal fee.
Such loans up to 10 lakh cost more than 15% to MSEs, which is the main reason of sickness.
Suggesting measures to the Prime Minister, Ministry of MSME, RBI and Ministry of Banking, FOPSIA said that the government must bring down the interest rates for MSE’s and for an effective growth the rate should be at par with China.
Banks should not charge any guarantee fee for loans upto 10 lakhs because these loans are mandatory to give without collateral as per the guidelines of RBI, Jindal recommended.
Beside this banks won’t be able to take the illegal undertakings from the borrowers for not paying the annual guarantee fee.
He said “The CGTMSE should only be kept reserved for MSEs and other loans such as commercial vehicles loans should not be covered under this scheme.”
The distribution of loans should be fair in all the states and it should be the duty of Banks to ensure equal distribution per enterprise in all the states, Jindal opined.