Counting minutes for the post-demonetisation boost

Micro, Small and Medium Enterprises (MSMEs) have witnessed a mixed trend in bank credit during the third quarter of the current financial year 2016-17 and are hoping for a post-demonetisation boost.

The impact of demonetisation had not only hit the cash flows but also decreased their appetite for credit extension during the third quarter, a senior official of State Bank of India (SBI) told BusinessLine .

In fact, the entire business loans portfolio were declined for some major lenders such as SBI.

For example, large corporate and mid-corporate advances declined by ₹4,107 crore and ₹1,278 crore, respectively, for SBI during the quarter ended December 31, 2016, on a year-on-year basis.

The small and medium enterprise loans also witnessed a decrease of ₹4,223 crore.

For some other banks, however, MSME lending showed some positive signs due to sustained focus on the portfolio. Andhra Bank posted 9 per cent increase in MSME advances during the third quarter from ₹23,702 crore to ₹25,835 crore.

Punjab National Bank worked in line with the stated focus of the Government of India on rural and MSME sectors. The share of MSMEs in total advances for PNB as on December 2016 was 19 per cent.

The advances had gone up from ₹78,571 crore to ₹78,933 crore during the quarter.

For Allahabad Bank, it was a modest growth in MSME lending by about 3.12 per cent. Total MSME loans went up from ₹28,006 crore to ₹28,879 crore.

Bankers hope the demand and disbursal of funds to small and medium businesses will improve in the fourth quarter of the current fiscal and the first quarter of the next financial year with the easing of cash flow blues.

“It depends on how the macro-economic behaviour shapes out going forward as MSMEs are not cut off from the headwinds corporates and big industries face. Things are not fine yet,’’ said an official of Andhra Bank.

The Mudra loans could also make some positive difference, going by the trends in in the financial year 2015-16 and up to the end of the third quarter.

The entrepreneurship streak appears to be stronger in the small retail business space, going by the pattern of loans disbursed by the Micro Units Development and Refinance (Mudra) Bank.

Small retailers, shopkeepers and those running micro units have utilised almost half of the loans disbursed under the Mudra scheme launched by the Centre in April 2015.

Mudra offers three categories of loans, Shishu (covering loans up to ₹50,000), Kishor (loans above ₹50,000 and up to ₹5 lakh) and Tarun (above ₹5 lakh and up to ₹10 lakh).

The objective of the scheme is to encourage new small businesses and ensure that at least 60 per cent of the credit flows to Shishu category units and the balance to the Kishor and Tarun categories.

This has been realised as loans sanctioned/disbursed under the first category have so far been higher than those under the other two categories. Data show that the demand for loans has been more from those taking up, among others, transport and community/personal service businesses.

The increase in Shishu category loans being disbursed by micro finance institutions (MFIs) is also expected to be a positive shift with use of new technology.

In a first of its kind move in the micro-finance and financial-inclusion space, Bharat Financial Inclusion recently launched Aadhaar-based instant and cashless loan disbursal for Mudra loan beneficiaries.

According to KV Rao, Chief Operating Officer, Bharat Financial Inclusion Ltd, this is expected to benefit 66 lakh Mudra loan beneficiaries nationally.

The new process is based on the adoption of digital technology combined with the use of a tablet and dongle by loan officers for applicants with Aadhaar cards.

Other MFIs are also expected to follow suit in harnessing the digital technology to make loan sanctions hassle-free, fast and transparent.