A STUDY ON EFFICACY OF “PSB LOANS IN 59

MINUTES” INITIATIVE OF GOVERNMENT OF INDIA

SUBMITTED BY
NEERAJ,
ASST MANAGER,
764573
 ACKNOWLEDGEMENT
It would not have been possible for us to carry out this project
without the support and guidance of our seniors. We would like to
express our gratitude towards them for the same. First of all, we
express our sincere thanks to Superiors for giving us the opportunity
to work on this project and their guidance, inspiration, sustained
encouragement given to us during the course of research project.
We express our appreciation to all the staff members with
special reference to our mentor, Colleagues, all of our superiors and
field functionaries for their valuable suggestions during the
completion of this project. This work could not have been
completed without their support and advices.
We express our thanks to all of them for their cooperation.

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 TABLE OF CONTENTS
PAGE
SR.NO CONTENT
NO
1. Introduction 4
2. Objective of the Project 5
3. Methodology and Limitation of the project. 6
4. What is “PSB Loan in 59 Minutes”. 7

5. Why it Was Needed? 8

6. Means Provided under the Scheme 12

7. Salient features of the scheme 14

8. Benefits under the scheme 15

9. PSB Loan in 59 minutes: Eligibility Criteria, 17

Convenience fee and interest rate
10. Minimum and Maximum Loan Amount 18

11. Turn Around Time Promised 18

under the Scheme
12. List of Documents Required 18

13 How to Avail an MSME Loan in 59 Minutes? 20

14 Current Scenario 21

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15 Strong Demand Observed: Good or Bad? 23

Potential Shortcomings and pitfalls to be faced by the

16 ‘59 Minutes Loan’ scheme 25

’59 minutes’ loan against NBFC loan:

17 A Comparison 27

18 Concluding thoughts 29

19 Suggestion for viable Improvements 30

20 References 32

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 INTRODUCTION

In order to deal with ever increasing need to provide better ease in

doing business Government of India has introduced " PSB (Public Sector
Banks) in 59 minutes" initiative with the hopes of simplifying in-principle
approval for MSME loans up to Rest. 1 crore within 59 minutes from
Small Industries Development Bank of India (SIDBI) and various Public
Sector Banks (PSBs).

It would use sophisticated algorithms to read and analyses data

points of MSME borrower from various sources such as IT returns, GST
data, bank statements, MCA21 etc. in less than hour. It would also
capture applicant’s basic details using smart analytics from available
documents.

In the first instance, it is apparent that it would provide a significant

push for achieving the underlining objective of fast tracking ease of
doing business. But whether or not it is able to or to what extent it is
able to achieve this target is a matter of research.

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 OBJECTIVES
To understand about the key features of the initiative.

To know about various objectives of the initiative.

To study the means through which the initiative aims to achieve its
objectives.

To understand its eligibility criteria, Interest rates offered, Documents

required and Complete process of registration and approval.

To study its overall advantages.

To study the Turn Around Time (TAT) promised under the initiative.

To examine its efficacy.

To examine its shortcomings and whether they can be overcome.

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METHODOLOGY AND LIMITATION OF THE
PROJECT
Methodology

Through data collected from various online and offline sources like
dedicated portal for the initiative, external website, Reports, internet,
magazines, newspaper etc. in order to understand its various features,
advantages, objectives etc. of the initiative.

By compilation of the data from various previous reports, articles and

studies of the topic incorporating various opinion of the beneficiaries.

Limitations

The study will be based on data collected through the online portal
dedicated to the scheme and various other online resources and some
offline sources. As such, its effectiveness depends upon truthfulness of
its sources.

Veracity of the study depends upon the unbiased opinion of the

constituents of its sources. However, initiative being a government
scheme, it may not be completely untouched by it.

P a g e 6 | 32
 WHAT IS “PSB LOAN IN 59 MINUTES”
MSME loans have turned vital for the small and medium businesses
facing a paucity of funds. The funds availed under the MSME loan can be
very useful for a business in urgent need of money. They can be used for
various purposes, from increasing the working capital to increase
inventory.

Understanding the need to simplify the ease to do business for MSME

sector, on 2ND November 2018, Prime Minister Narendra Modi
announced a Diwali Gift for the MSME (Micro, Small and Medium
Enterprises) Sector in India. The government of India introduced a quick
business loan portal and for the individuals who wish to expand their
existing business.

The scheme introduced as “PSB Loan in 59 Minutes” is an online

marketplace, which enables the business individuals to apply for
Business Loan with Loan Amount starting from Rest 10 Lakh to Rest 1
Crore in just 59 minutes. This initiative was taken to ease the MSME
Business and as well as to promote self-employed business model in
India by reducing the loan approval process and long queues at the
bank. PSB Loans in 59 minutes aims at approving the business loan in 59
minutes thus reducing it significantly from a long 30-day process and
expected to be disbursed in 7-8 working days, if approved.

To give thrust to MSME sector, government on India come with a

plan to provide easy finance to MSME sector. The PSB 59 min is an
initiative by government of India to provide loans to MSMEs without
visiting the branch at starting, anyone can go to government site, fill the
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forms with the relevant information. The system will auto generate the
limit of the loan and provide you in principal sanction on behalf of
chosen bank. The next step would be, the applicant had to approach the
same branch and provide the necessary documents to bank for proposal
of the loan.

WHY IT WAS NEEDED?

In India, 95 percent of industrial units (3.4 million) are in small-scale
sector with a 40 percent value addition in the manufacturing sector.
Enterprises of this type provide the second highest employment level
after agriculture and account for the 40 percent of industrial production.
These units contribute 35 percent to India’s exports. In this setting,
Indian MSME are fundamentally important to the Indian economic
system. Their potential to generate employment, bolster exports and
bring flexibility into India’s business environment deserves close
attention from India’s policy makers and research scholars.

Therefore, Government introduced this new initiative of providing In-

Principle loan approval within 59 minutes to support MSME sector due
to reasons summarized below:

 Backbone of Economy: The importance of MSMEs is

attributable to their caliber for:

(a) employment generation

(b) low capital and technology requirement

(c) promotion of industrial development in rural areas

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 (d) use of traditional or inherited skill

(e) use of local resources

(f) mobilization of resources and exportability of products.

 Contribution to growth parameters: The sector

contributes around 38% to the country’s gross domestic product
(GDP), 40% to overall exports and 45% to overall manufacturing
output.

PERCENTAGE SHARE OF MSME IN GDP

10
9
8
7
6
5
4
3
2
1
0
2004-05 2005-06 2006-07 2007-08 2008-09

PERCENTAGE SHARE OF MSME IN GDP

Inference: The statistics show that the contribution of MSME to

GDP is ever increasing. The below given graph delineates the
percentage share of MSME in the nation’s GDP over the years. It
has managed to increase from 5.8 percent 2004-05 to 8.72
percent in 2008-09.

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 Contribution to job creation: The MSME sector generates
around 100 million jobs through over 46 million units situated
throughout the geographical expanse of the country. MSME sector
is the second largest employment providing sector in India after
agriculture.

MSME AND EMPLOYMENT OPPORTUNITIES

TOTAL WORKING MSME(IN LAKSHS) EMPLOYMENT(IN LAKHS)

1800

1600

1400

1200

1000

800

600

400

200

0
2006-07 2007-08 2008-09 2009-10 20010-11 2011-12 2012-13 2013-14 2014-15

Inference: As per the annual report of Ministry of MSMEs there

were nearly 362 lakhs enterprises in the year 2006-07 providing
around 805 lakhs employment and it has increased to 510.57 lakhs
enterprises 1,171.323 lakhs employees in the 2014-2015 an increase
of 45.5% in employment. This increase has clearly indicated the
significant contribution of MSMEs in creating employment
opportunities.

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  Diversity: The MSME sector in India is quite diverse in terms of
its size, level of technology employed, range of products and
services provided and target markets.
LEADING INDUSTRIES IN MSME SECTOR
Retail TradeExcept motor Vehicles and motor cycles,Repair of Personal and households good
Manufacturing of Wearing Apparel,Dressing and Dying of Fur
Manufacturing of Food Products and Beverages
Other Services Activities
Other Business Activities
Hotels And Restaurants
Sale,Maintenance and Repair of Motor Vehicles and Motor Cycles ;Retail Sale of Automotive Fuel
Manufacturing of Furniture,Manufacturing n.e.c
Manufacturing of Textiles
Manufacture of Fabricated Metal Products,Except Machinery and Equipment
Others

20%

2% 40%

3%
1%
4%

4%

4%

6%

7% 9%

From the following diagram we can see the distribution of 6000 units
of MSME into their respective sectors.

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 Inference: According to the statistics generated on the basis of
activity for registered firms, it is observed that 67.1 percent is
contributed by manufacturing units, 16.8 percent service units and
32.9 percent by service side

MEANS PROVIDED UNDER THE SCHEME

Unlike their larger counterparts, India’s smaller companies have long
faced difficulty in accessing bank loans. The
www.psbloansin59minutes.com website was presented as the solution.
Once a firm uploads key information such as tax returns and ownership
details, proprietary algorithms on the website appraise the application,
determine the loan amount that can be sanctioned and then connect
the applicant to a bank branch – all in under 59 minutes.

The portal is a strategic initiative of SIBDI initially led by five PSB

consortium incubated under aegis of Department of Financial Services
(DFS), Ministry of Finance. It sets new benchmark in loan processing and
reduces turnaround time from 20-25 days to 59 minutes. Subsequent to
this in principle approval, the loan will be disbursed in 7-8 working days.
The portal integrates advanced fin-tech to ensure seamless loan
approval and management in MSME banking credit space. The loans
under it are undertaken without human intervention till sanction and or
disbursement stage. It has User Friendly Platform, which omits need for
physical submission of any physical document for in-principle approval.

It is one of a kind platform that ensures fast in-principle loan

approval. It is a micro-services driven auto scalable platform that not

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only provides own niche excellence but also integrates multiple service
providers into a single powerful engine having hundreds of APIs and
thousands of data points.

The Platform leverages growing digital data footprints and

integrates advanced technologies to automate and digitize the lending
processes for Borrowers and Bankers.

This website is a comprehensive & unique platform integrated

seamlessly with existing infrastructure of banks. This is the only platform
having Banker Interface covering Branch level integrations. The Platform
along with offering ease of finance to borrowers also offers quality
information to the banks by using multiple technology interventions so
to provide faster solutions for internal decision-making processes of
Bankers.

By providing GST details, Income Tax details, Bank account details an

entrepreneur can avail the loan. The GST registered firms shall also get a
rebate of 2% on the interest paid on the loan. Based on the eligibility,
there has been no specific information provided however it would limit
to MSMEs. 6,000 crores have been set aside toward the enhancement
of technology which would ease and enhance the manufacturing sector.
The main criteria however are to boost the growth of manufacturing
sector and to increase GDP as MSME play a major role in the
contribution towards GDP by contributing up to 30%, there have been
five aspects that is focused on. “Access to credit, access to market,
technology up-gradation, ease of doing business, and a sense of security
for employees”.

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 SALIENT FEATURES OF THE INITIATIVE
 A Dedicated portal designed for fast tracking the ease the doing
business will be extensively used for providing finance to MSME
sector in order to fulfill their various business needs like:

 Invest in your firm’s infrastructure

 Meet working capital requirements
 Install new plant and machinery
 Pay for several overheads

 MSMEs will be able to connect with banks without visiting the

branch. There will be no human intervention until the sanction
and/or disbursement stage.

 Only Platform that has an integrated GST, ITR, Bank Statement

Analyzer, Fraud Check and Bureau Check as well as host of other
features which at present are not available with any other player
in the market.

 The portal will be using sophisticated algorithms to read and

analyze MSMEs eligibility to get loans up to Rs 2 crore without
any collateral using this portal. This is so because the 59-minute
loan scheme is directly connected with CGTMSE scheme.

 For registration, the borrower does not require to make any

payment. A borrower whose proposal matches the products of
lenders and who wants to receive an approval in principle will be
needed to make a nominal payment of Rs 1,000 plus applicable
taxes. There is no fee for registering, but once the applicant’s

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 proposal matches the bank’s products, the borrower will have to
submit a fee of Rs 1,000 plus taxes.

 Only Platform that enables Bankers to create Loan Products in

line with the Scoring models & assessment methods within their
approved credit policy.

BENEFITS UNDER THE SCHEME

 Loan Amount starting from Rs 10 Lakh to Rs 1 Crore: PSB
Loans in 59 minutes helps in providing loan amount starting from
Rs 10 Lakh to Rs 1 Crore to all the business individuals so any
business requirement small or big can be met easily with the
mentioned loan amount.

 Rate of Interest: The rate of interest for PSB Loans in 59

minutes starts from as low as 8% and onwards.

 Minimal Documentation: With PSB Loans in 59 minutes, the

entire process of a Small Business Loan for MSMEs is expected to
become super quick and hassle free that too with minimal
documentation.

 Advanced Technology Backed Loans: PSB Loans in 59

minutes processes the loans without human intervention till the
stage of sanction or the disbursement. The analysis process is
done from the various sources of the loan applicant’s financial
profile.

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 Apply at Multiple Banks: PSB Loans in 59 minutes provides a
convenient process for the loan applicants who can apply for a
Small Business Loans at multiple banks in one go.

 Safe and Secure: The platform understands the safety of the

information given by the Loan Applicants. The entire data of the
applicants is safe and secure with the highest level of security.

 CGTMSE Coverage: The platform understands the safety of the

information given by the Loan Applicants. The entire data of the
applicants is safe and secure with the highest level of security.

 Integration with Govt. Facilities: PSB Loans in 59 minutes is

integrated with the latest facilities like Income Tax
Return, GST, Bank statement so it helps in decision making
process of the loan application.

 Online Fund Management: Manage your loan account with just

a few clicks and access your funds easily.
 Good Integration with Current Systems: Only Platform in the
market with a Banker Interface which covers the Branch Level
integrations (with maker-checker-approver) in tune with current
systems of PSBs.
 Timely and hassle free transfer of various subsidies: As
announced by the PM, the business owners with GST registered
companies will receive rebate of 2% on 1 Cr loan. For exporters
receiving pre shipment and post shipment loan, the rebate will be
5%. This new platform will provide an ease of transferring these
subsidies.

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 PSB LOAN IN 59 MINUTES: ELIGIBILITY
CRITERIA, CONVENIENCE FEE AND
INTEREST RATE
Eligibility criteria
For the Business which already exist the borrower should be GST, IT
compliant and should have Six Months Bank Statement. The Loan
Eligibility will be determined on the following factors:
1. Income/Revenue
2. Repayment Capacity of the Borrower
3. Existing credit facilities
4. Other factors set by the Financial Lender
Convenience Fee
According to the scheme, all applicants have to pay a fee of Rs
1,180(1000 + 18% GST) on application, as well as 0.35 percent of the
loan as processing fees, for being considered eligible.

Interest Rates
There is no fixed interest mentioned. The interest rates under PSB
loans in 59 minutes’ scheme are charged according to amount you
applied for. Starting from 8% and going as high as 12%. Suppose you
have applied for loan of maximum 1 Cr, then at the interest rate of 12%
p.a. you will have to pay EMI of Rs. 2,22,444 for tenure of 5 years. Total
interest payable during the tenure will be Rs 33,46,669.
It can be known during the final verification of submitted details by the
selected bank.

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 MINIMUM AND MAXIMUM LOAN
AMOUNT
The minimum loan amount that can be applied for, via this portal is 1
Lakh, and the maximum amount is set to 1 Crore. All MSME will get in
principle approval of business loans from SIDBI and various other Public
Sector Banks.

TURN AROUND TIME PROMISED

UNDER THE SCHEME
As per www.psbin59minutes.com, Turnaround Time (TAT) is the
time taken by a lender in processing a loan application, from submission
of proposal to sanction and disbursement.

This Platform has set a new benchmark by reducing the in-principle

loan processing turnaround time from days to 59 minutes. Post
receiving in-principle approval letter, the loan is expected to be
sanctioned/ disbursed in around 7-8 working days.

LIST OF DOCUMENTS REQUIRED

1.Annual Report (Latest 3 Years) (Audited if applicable).
2.ITR (Latest 3 Years).
3.Bank statement of last 6 months in PDF format (for all business-
related bank accounts).
4.Sanction Letter Copy (If Any, previous loans availed from any bank).
5.Digital version of KYC.
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 6.Provisional /estimated /Projected Financials for current /future
years.
7.Net Worth Statements of Directors /Partners /Proprietor.
8.Financials (Balance sheet and Profit & Loss statements) of the unit
/Holding /Subsidiary /Associate (If Applicable).
9.Sales tax / Income Tax Assessment orders for the last three years,
for the unit as well as Proprietor /Partners /Promoters /Directors
as applicable.
10.Memorandum of Association and Article of Association (If
Applicable).
11.Certificate of Incorporation (If Applicable).
12.PAN card of all promoters/Directors/Partners/Proprietor.
13.Residence Address Proof of all
promoters/Directors/Partners/Proprietor
14.Color photographs of all Directors/Partners/Proprietor
15.Copy of Udyog Aadhar Number (registered
on http://udyogaadhar.gov.in).
16.MSME Registration Number & Certificate.
17.GST certification along with the GST ID and password.
18.Personal details of the applicant along with educational details.
19.Ownership details/certificates of current ventures.

The document requirements mentioned above are indicative and

PSB Banks reserves the right to call upon additional documents at its
discretion based on credit, risk, compliance, loan and other applicable
policies/guidelines of the Bank.

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 HOW TO AVAIL AN MSME LOAN IN 59
MINUTES?
Now the obvious question coming to your mind would be how to
apply for MSME loan in 59 minutes? If you need business loan, follow
the below mentioned steps:

Step 1: Visit the official website, www.psbloansin59minutes.com

Step 2: Next step is to complete the entire sign-up process by entering

your name, mobile number, e-mail address, etc. Then click ‘Get OTP’ for
the verification of the credentials.

Step 3: Enter the received OTP and click on proceed after agreeing to
the terms and conditions.

Step 4: On the next screen appearing, you will have to answer a few
basic questions with yes or no. Click proceed after answering all the
questions.

Step 5: On the next step, you will be asked to fill your GST details,
including GST ID and password. You will also have to fill the income tax
information and upload the ITR in XML format for the last 3 years.

Step 6: At this step, you have to upload the bank statements for the past
6 months in the PDF format.

Step 7: Provide the details of the directors of the MSME, proprietor, and
company address

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Step 8: This step is important! At this step, you have to provide the
purpose for which you are availing the MSME loan. Also, you have to
provide the details of previously availed business loans if any.

Step 9: At this step, you have to select the bank through which you want
to avail the loan. The interest would vary from one bank to another.
Notably, you must choose the bank that offers business loan at the
lowest interest rate.

Step 10: Pay the convenience fee (INR 1,000) plus the applicable taxes.
And download the approval letter.

CURRENT SCENARIO
According to ‘MSME Pulse’, a SIDBI and CIBIL publication, the MSME
loan market (under ₹25 crore) is estimated to be around ₹25 lakh crore,
of which, PSBs hold almost 50 per cent share. Further, PSBs have a
dominant share of over 75 per cent for loans under ₹10 lakhs,
highlighting their critical role in financial inclusion.

The biggest advantage of a PSB loan is its low cost, which could be 5-
7 per cent lower than that of NBFCs. For a small borrower looking for a
collateral-free loan under ₹1 crore, PSB loans are critical, as both private
banks and NBFCs mostly lend against security. PSB loans are also an
important source of funding for the manufacturing sectors such as food
processing, textile, chemicals, and auto components.

Amidst Government-run banks ongoing struggle with low profits and

bad loans aka NPAs, online lending marketplace PSB Loans in 59 minutes

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has emerged as the largest online lending platform in three months
after its launch.

Over Rs 6,400 crore is estimated to have been sanctioned through

the platform to an estimated 24,000 MSMEs, the report said. About
40,000 entities have received in-principle approval from banks.

Since the launch, the sanction rates have climbed over 20 percent to
60 percent. However, approval rates are lower for new borrowers in
comparison to existing ones, a PTI report via BS mentioned.

The report further added that if PSB Loans in 59 minutes continue to

grow like this, it could also help PSBs regain market share and improve
asset quality, which has been on the downside.

As such, this policy measure is proving to be an effective attempt to

reduce the time and effort required to secure credit from PSBs, thus
easing the life of an entrepreneur.

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 STRONG DEMAND OBSERVED:

GOOD OR BAD?
The demand for such a portal is validated by both the large number of
applications (around 1.31 lakh) received within two months of its
launch, and their total loan value.

To substantiate, assuming an average loan size of ₹30 lakhs, these

applications translate into loan requirement of ₹40,000 crores, almost 5
per cent of the total MSME credit for loans below ₹1 crore. (Assuming
SMEs’ loan outstanding of ₹25 lakh crore, and loans under ₹1 crore at 30
per cent of the total loan, total SME loan under ₹1 crore is ₹7.6 lakh
crore.)

However, unless these applications translate into loan disbursals, the

portal would remain just another channel for PSBs to generate qualified
leads, as amount of disbursement is still on assumption basis and no
reliable figure relating to amount of loan disbursed is not yet disclosed
by the portal. The difficulties in getting a loan from PSBs stem from
unwillingness of the ground-level staff to even accept the loan
application.

Even after a loan is approved, the high turnaround around time for
the disbursal remains a challenge. Therefore, the portal is a good first
step to at least reduce the number of branches to be visited. In addition,
the MIS behind the portal would make it easier for the banks to monitor
loan rejections.

The scheme’s success depends on the ability of PSBs to quickly

disburse the loans that are approved by the portal.

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 According to official data, the portal received 1.31 lakh applications
during the first 50 days of its launch, of which, around 1.12 lakh
applications were approved, with a strike rate of 85 per cent. However,
of these 1.12 lakh applications, sanctions were accorded for just 40,669
cases, indicating that just over a third of the approved loans were
sanctioned.

The above performance indicates the following:

 High approval ratio suggests that either most of the SMEs that are
applying through the portal have good credit quality or the portal’s
credit approval norms are not strict enough; and

 low loan sanction ratio indicates that the turnaround time for loan
sanction is more than two to three weeks and a number of
applications are still undergoing due diligence and, therefore, do
not reflect in the sanction data.

Addressing these issues would require deeper integration of the

portal with banks’ processes. The credit approval process should capture
the existing liabilities of the borrower so that there are no disputes on
quantum of credit to be sanctioned.

Also, it should assess the availability of other resources such as

land/technology with the borrower before sanctioning term loan for a
new asset.

On the policy front, the norms for takeover of loans among lenders
should be relaxed. For example, under the current set-up, obtaining
additional working capital loan from a different lender would be difficult,
as banks would not be inclined to share security on pari passu basis for
such small exposures.

In the absence of these measures, the web portal would just be a

superfluous channel for generating qualified leads.
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 POTENTIAL SHORTCOMINGS AND
PITFALLS TO BE FACED BY THE ‘59
MINUTES LOAN’ SCHEME
The thing to note here is that the ‘59 Minute Loan’ scheme is not the
first initiative by the current government to ease business finance. A
similar fast track business loan scheme called the Pradhan Mantri Mudra
Yojna (PMMY) is already in place. The PMMY is also backed by the public
sector banks and offers loans up to 10 lakhs to MSMEs and startups.
However, a closer analysis of the scheme reveals some major
bottlenecks and drawbacks of government-run financial schemes
for small business in India.

For example, since the Mudra program was started in 2015-2016, a

whopping 4.68 lakh crore have been disbursed to 9.9 crore loan
applicants. While the sum of loans given is impressive, simple math tells
us that the average amount per application is just 47,249. So, the
question that needs asking is, can anyone setup a successful enterprise
with less than 50,000?

While someone may be able to setup a shop or similar retail business

for that amount, keeping it up and running is not possible without some
minimum working capital expenditure. Thus, the amount of money
offered under the Mudra program is not sufficient for startups and
MSME funding at all.

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 Moreover, the CBI is already investigating a senior Punjab National
Bank Official for fraud after his PNB branch approved 62 lakhs in lieu of
26 loan applications under the Mudra program. The charges as quoted
in the CBI complaint are “without conducting meaningful pre-inspection
or physical verification of spot of business or residence and without
ascertaining end use of the loan amount or creation of assets from the
loan amount”.

Now, isn’t that the Mudra program? The PMMY was meant for
offering quick business loans without collateral requirements and
stringent check and balances. Which in turn makes the ‘59 Minutes
Loan’ scheme susceptible to unforeseen hindrances. Since the new
scheme offers unsecured business loans up to 1 crore, bank officials are
going to be even more cautious in scrutinizing loan applications. Also,
similar to the Mudra scheme which was a refinancing scheme, for which
the funds were provided by banks, NBFCs and MFIs under pressure from
the government, the new scheme also adds the burden of funding loans
on public sector banks (PSBs). Thus, given the NPA crisis faced by almost
all PSBs, the 7-8 days’ loan disbursal policy also seems a little far-fetched
right now.

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 ’59 MINUTES’ LOAN’ AGAINST NBFC
LOAN: A COMPARISON
The concept of fast business loans is not a new one and the latest
government scheme is just an extension of same-day loan approvals
being given by various NBFCs, albeit with some sugar-coating. Some of
the features being touted by the new loan scheme, such as online portal
for Loan Application and digital submission and verification of
documents, are already in use by NBFCs. Moreover, the simplicity and
steps involved in loan application process are also fewer for NBFC
business loan.

Here are some of the key differences between the ‘59 Minutes Loan’
scheme and NBFC business loans.

 Application Process: Both use online application process,

needing users to register with name, email and phone numbers.

 Documentation: The government’s business loan scheme

requires the submission of 6-month bank statement, 3-year
income tax filings, GST Details (including your password) and
incorporation certificates along with personal, educational and
financial details of the owner/partners/directors. On the other
hand, various NBFC offers loans based on 6-month bank
statements and 2-year ITR returns if your revenue is less than 60
lakhs. It is not mandatory to have net banking and some NBFC does
not ask for ITR and GST in case of Green Zone.

 Loan Amount: The ‘59 Minutes Loan’ scheme offers loans from
10 lakhs up to 1 crore whereas NBFCs’ has a wider scope in terms
of funding with business loans ranging between 50,000 to 1 crore.
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 Loan Disbursal: If all details check out, the government’s loan
scheme offers business loans within 7-8 days, which is not a lot
quicker than the existing loan products offered by banks. On the
other hand, various NBFC promises the disbursal of loan funds
within 3-days’ time once your application is verified.

 Additional Features: Both, the government’s MSME loan

scheme and NBFC loans are unsecured business loans. However,
NBFC offers several additional advantages such as top-up loan,
renewal upon full repayment, zero evaluation charges and no pre-
closure charges.

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 CONCLUDING THOUGHTS
While we should laud the government’s efforts to make India more
business-friendly, only time and numbers will tell the real story here. The
political detractors of the government were quick to point out that the
new MSME finance scheme has all the trappings of a same-day approval
loan and that it is merely a pre-poll sop. Even several bankers have
questioned the feasibility of the ‘approval within 59 minutes’ approach as
the public sector banks which are expected to shoulder the burden are
still reeling from a bad loan crisis and the shadow effects of
demonetization.

Even after this, it is sufficient to say that the idea of providing easy and
fast source of funding to MSME sector by employing a IT based platform
together with an array of initiative introduced around the same time
shows governments’ resolve to promote MSME sector. This resolve
subsequently emboldens the entrepreneurs’ belief and willingness to use
the new platform.

However, most concerning part of the scheme still remains the actual
turnaround time for the business loan. The disbursal time of 7-8 working
days can easily stretch up to 8-12 days when you count weekend holidays
and public holidays. So, in reality, getting loan within 59 min is difficult
considering the procedures of due diligence are still need to be followed
which takes large part of loan processing, both in terms of significance
and time.

Although, initiative has still to some extent helped in reducing the overall
time required to sanction a loan and its disbursement. Earlier, when it was
all offline process of loan sanctioning used to take about 15- 30 days
which has drop down to two weeks and also no requirement to physically
visit the bank is there.
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 SUGGESTIONS FOR IMPROVEMENTS
Government-promoted online loan application platform
psbloansin59minutes.com should expand coverage and extend loans to
startups, as suggested by an expert committee on micro, small and
medium enterprises set up by RBI.

Psbloansin59Minutes, which caters to funding for MSMEs, also needs

to track data from other sources besides tax filings through the Goods and
Services Tax (GST) network and bank statements, the panel said in a
report. “The committee recommends that the portal should also cater to
new entrepreneurs, including those applying for loans under the Pradhan
Mantri Mudra Loan Yojana and Stand-Up India,” it said.

The Reserve Bank of India constituted the committee led by former

Securities and Exchange Board of India chief UK Sinha. The panel, which
had eight other specialist members, submitted the report on June 19 and
it was made public soon after. Applications should be disposed of 7-10
days from the time they get in-principle approval from the platform, the
panel recommended. “Further, the portal should be linked to land
records, Central Registry of Securitization Asset Reconstruction and
Security Interest and Credit Guarantee Fund Trust for Micro and
Small Enterprises,” it said.

The online platform is a central government initiative that is managed

by the Small Industries Development Bank of India (SIDBI).

It permits both private and public sector banks to participate in loan

disbursal. While government-owned banks were the first on the platform,
Kotak Mahindra Bank was the first private sector lender to join the
initiative. When businesses apply for loans, they are assessed through
various sources like GST data, tax filings, bank statement of the
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proprietors and their businesses. Based on the assessment, they are
offered an in principle approval letter, which enables them to get bank
credit

The committee has suggested the formation of a joint working group

of the Indian Banks’ Association and SIDBI to iron out issues pertaining to
creation of new MSME lending products and reducing turnaround time
during the centralized sanctions stage.

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 REFERENCES
i. www.psbloansin59minutes.com/home

ii. www.psbloansin59minutes.com/aboutUs?lander=unionbank

iii. https://www.psbloansin59minutes.com/faq?lander=unionbank

iv. https://economictimes.indiatimes.com/small-biz

v. SIDBI Website

vi. Wikipedia

vii. Paisabazaar Website

viii. RBI website

ix. https://msme.gov.in/documents/reports-and-publications

x. ‘MSME pulse Report’ by Transunion Cibil and SIDBI

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