Mumbai, Oct 25 (KNN) The unsecured loans provided to hawkers and street vendors by formalisation of credit through a government scheme, has acted as a force multiplier for deposits under the government-promoted universal bank account scheme — PM Jan Dhan Yojana.

As per a latest study by SBI, the PM Svanidhi scheme for street vendors, a micro-credit initiative for urban street vendors, provides collateral-free loans up to Rs 50,000 in tranches. 

The study has shown several indicators which suggest that the scheme has expanded the number of people included in formal credit.

Responding to the publication of the study, PM Narendra Modi said in a tweet, “This in-depth research by @kantisoumya (SBI group chief economic adviser Soumya Kanti Ghosh) of @TheOfficialSBI provides a very clear picture of the transformative impact of PM SVANidhi. It notes the inclusive nature of this scheme and highlights how it has led to financial empowerment”.

About two-thirds of the borrowers under the scheme fall in the age group of 26-45, and many are first-time borrowers. Moreover, over 50 lakh street vendors, who have borrowed under the scheme, are actively using their Jan Dhan accounts and debit cards.

The ratio of individuals repaying the first loan of Rs 10,000 and taking the second tranche of Rs 20,000 is 68%. The ratio of individuals repaying the second loan of Rs 20,000 and taking the third of Rs 50,000 is higher at 75%, indicating an improvement in borrower behaviour.

According to Ghosh, there are indications that the average debit card spending of PM Svanidhi account holders increased by 50% after loan instalments, marking a significant change in their financial behaviour.

Around nine lakh street vendors are active spenders after loan disbursal. “Clearly, the loan instalment is acting as capital investment in upending the spending/consumption pattern significantly,” the report said.

Of the cities with population over 10 lakh, Varanasi is the top performer where 45% of total spenders are active spenders, followed by Bengaluru, Chennai and Prayagraj. The study said that 43% share of females indicates empowerment capabilities of urban females.

SBI’s study has utilised a “difference in difference” technique and randomised control trials to compare two classes of marginalized populations: those who received a PM Svanidhi loan (treatment group) and those who did not (control group).

The study showed a marked increase in spending for the treatment group, indicating that the formalisation of credit acts as a force multiplier for deeper and more meaningful formalisation of deposits.

(KNN Bureau)