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Wednesday, 3 June 2020

[Rs. 10,000] PM Street Vendor Atmanirbhar Nidhi (PM SVANidhi) Scheme 2020 - दस हज़ार फेरीवाला कर्ज योजना

PM Street Vendor Atmanirbhar Nidhi (PM SVANidhi) Scheme 2020

As a part of the new Atmanirbhar Bharat Abhiyan, the central govt. will launch a new Street Vendor Loan Scheme 2020. Under this PM Street Vendor Atmanirbhar Nidhi (PM SVANidhi) Scheme, the PM Modi led union government will provide Rs. 10,000 as initial capital working loans to vendors.

Commercial Banks to Face Difficulty in Disbursing Loans

Central Govt's recent announcement to offer Rs. 10,000 loans to phereevaala (फेरीवाला) will put commercial banks in trouble. It is because commercial banks does not have any past experience in disbursing such small size loans in urban clusters. The new PM Svanidhi Street Vendor Loan Scheme 2020 proposes bank credit facility for initial working capital upto Rs. 10,000 for each vendor.

In the nation wide Coronavirus (COVID-19) lockdown, street vendors suffered the most as these people are daily earners. This Rehdi / Patri Wala Loan scheme (रेहड़ी / पटरी वाला लोन योजना) will cover urban as well as rural vendors doing business in the adjoining urban areas. However, mainstream bankers are not excited with extension of such small amount of loans under PM Street Vendor Atmanirbhar Nidhi (PM SVANIDHI) Scheme.

Beneficiaries of PM Street Vendor Atmanirbhar Nidhi (PM Svanidhi Scheme)

As per the initial data collected from state governments, around 50 lakh street vendors would be benefited from PM Street Vendor Atmanirbhar Nidhi (PM SVANidhi) Scheme. The central govt. will extend a credit flow of Rs. 5,000 crore to this sector. Moreover, those street vendors who makes use of digital payments and timely repayments would be incentivized through monetary rewards.

It is important to mention that only a fraction of those 50 lakh phereevaala may have credit history with commercial banks as banks didn't had a product designed for this sector. 

How to Do Credit Appraisal for Entity Without Credit History

It is of major concern that how to do credit appraisal for an entity without any credit history. As per some of the bankers, self help group model which are followed to extend loans in the rural areas could be followed which is given below:-
A) In this model, a group comprising women borrowers mostly is formed with 10-12 individuals of a neighbourhood in a rural area.
B) Here individuals of the group can take responsibility for timely repayment by other members. These groups are required to show savings habit, for at least 6 months, before lending can start.

Problems in Self Help Group Model for PM Street Vendor Atmanirbhar Nidhi Yojana

The main problem in SHG model for PM Street Vendor Atmanirbhar Nidhi (PM SVANidhi) Yojana is that it may not be feasible to form such a group in urban areas. People of urban areas are apprehensive to be a guarantor of another borrower in the group. Moreover, there is no time to build savings habit as the vendor requires the loan immediately.
                                         

Small Finance Banks, MFIs can Disburse Loans Speedily

It is believed that the micro finance institutions (MFIs), and small finance banks who focuses on lending money to urban poor could emerge as the key player to make Street Vendor Loan Scheme a success. SFBs and micro-finance institutions have customers who belong to these community and have expertise in extending small ticket loans.

Key to Implement PM Svanidhi Yojana (दस हज़ार फेरीवाला कर्ज योजना)

In order to make PM Svanidhi Street Loan Vendor Scheme 2020 (दस हज़ार फेरीवाला कर्ज योजना) acceptable for lenders, certain key aspects should be kept in mind:-
1) Interest Rate - There is need to place an interest cap for such loans which should be linked with the cost of funds. Ideally, it should be linked to the MCLR [marginal cost of funds based lending rate] rather than the government prescribing a particular rate.
2) Speedy Disbursal - The success of this scheme depends on the speed at which the loan is delivered. For this purpose, govt. will have to keep documentation short and simple. It should be a single page document as the purpose of loan is speed and convenience at which it is delivered. If borrower runs around for a week, then they will lose interest. So, customer delight is one of the key implementation strategy.
3) Credit Guarantee - Loans under this scheme are likely to be under the Mudra scheme. Mudra loans are guaranteed by Credit Guarantee Trust for Micro And Small Enterprises (CGTMSE). It is not easy to get claims for CGTMSE in case there is a default. Many questions are asked to settle claims as well as loan appraisal report is seen. So in case of NPAs, these loans would incur losses for bankers.
4) Claim Settlement Criteria - To prevent bankers from loss, CGTMSE should clearly state the claim settlement criteria upfront. A deadline must be specified within which a claim should be paid and if not, then interest should accrue.

It is important that the PM Svanidhi Yojana - Street Loan Vendor Scheme 2020 mechanism is effective. The finance ministry is expected to detail the contours of the  दस हज़ार फेरीवाला कर्ज योजना in the next few days.

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