Only 1.6% loans to street vendors under PM SVANidhi came from private banks

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The COVID-19 pandemic hit everyone across the world, and the after-effects were experienced far and wide. Every sector was hit, including street vendors, who continue to reel under the effects of the global crisis. To ease the pressure suffered by the section, the Government of India launched the Prime Minister Street Vendor’s AtmaNirbhar Nidhi Scheme or PM SVANidhi Yojana. This scheme aims to provide financial assistance in the form of micro-credit to vendors who are weighed down by the impact of the COVID-19 lockdown.

The PM SVANidhi Yojana enables vendors to access a working capital loan of up to Rs10,000 for a tenure of one year. Upon making timely repayment of the credit, vendors can avail a 7% interest subsidy per annum. While the PM SVANidhi Yojana is noble, loopholes have been flagged among the public as well as private banks in the system of disbursing loans.

Private Banks Shying Away

As per the details surfaced through the Ministry of Housing and Urban Affairs data, private banks have been shying away from providing loans under the scheme. Nearly 41.21 lakh street vendors have applied under the scheme till date and approximately Rs1,983 crore has already been disbursed to 20 lakh street vendors as per the data.

Of the total given number, public sector banks have disbursed loans to a total of 18 lakh beneficiaries until March 29, 2021. This is about 90% of the total loans disbursed so far. However, private sector banks (PSBs) have only disbursed loans to 32,534 beneficiaries, which amounts to a mere 1.6% of the total number.

What is perhaps more surprising is the fact that even regional rural banks have managed to disburse a far higher number of loans to street vendors in comparison. The number ranges to a total of 1.11 lakh beneficiaries. On the other hand, even cooperative banks have provided loans to 29,396 street vendors.

State Bank of India leads PSBs

Several public sector banks have disbursed a significant number of loans under the PM SVANidhi Yojana. However, State Bank of India (SBI) leads with the highest number of loan disbursals. The bank provided loans to a total of 5.8 lakh applicants, followed by the Union Bank of India and Bank of Baroda at 2.32 lakh and 1.99 lakh applicants, respectively.

Jammu and Kashmir Bank leads private banks

The contribution of private sector banks to the PM SVANidhi Yojana is relatively low. Within this low percentage, Jammu and Kashmir Bank disbursed the highest number of loans to 9,595 applicants. IDBI Bank and Karnataka Bank closely followed suit with 7,287 and 6,138 disbursals, respectively.

Official statements on the low disbursal

A senior ministry official shed light on the reason for reluctance among private banks in disbursing loans under the PM SVANidhi Yojana. He emphasized the fact that the loans are collateral-free, which increases the risk of them turning into non-performing assets (NPAs). This leads most banks to shy away from offering the product.

The official, who wished to stay anonymous, also said that stakeholders have had several meetings with private bank operators to address this issue. However, private banks have continued to be reluctant in offering loans under the scheme. They have divulged several reasons for the same that include the risk of default among loan borrowers, low application numbers, and more.

Another unnamed official released a statement explaining how private banks have cited the low number of street vendor accounts at private banks. The beneficiaries usually prefer and hold accounts in public sector banks. This encourages them to opt for the PM SVANidhi scheme through public banks, where they have bank accounts.

Efforts taken to increase the staggering numbers

A Parliamentary panel also called on the Ministry of Housing to persuade the Ministry of Finance and the Reserve Bank of India to relax the norms surrounding CIBIL score or consumer credit score for street vendors.

The PM SVANidhi Yojana is noble and can immensely aid the street vending sector to pave through these tough times. However, the effects can only be released when the scheme successfully reaches every beneficiary through the appropriate channels. Visit Bajaj Finserv MARKETS to stay updated on all the developments made through the PM SVANidhi scheme.