Banks are drafting a model scheme with relaxed eligibility norms and simplified credit appraisal to help vendors build credit histories and transition to larger loan sizes, they said.
“While micro-credit is available, it was analysed that the transition into bigger loans was facing impediments on account of no tailor-made product for this segment. We have now asked banks to bridge this gap through a structured loan scheme,” said a government official, who did not wish to be identified.
At present, the loan ticket size under PM SVANidhi (Prime Minister Street Vendor’s AtmaNirbhar Nidhi) scheme is ₹50,000. So far more than 10.5 million loans amounting to over ₹17,800 crore have been sanctioned under the scheme. Launched in June 2020, PM SVANidhi has facilitated access to formal credit for street vendors, enabling them to expand their livelihoods.
A bank executive said that lenders are working on a draft scheme which will help borrowers under the PM SVANidhi scheme to graduate to Pradhan Mantri Mudra Yojana (PMMY).
“It was pointed out that there have to be some sort of bridge loans based on relaxed assessment parameters which will help these borrowers to take up higher-value loans,” he said on condition of anonymity, adding that banks are working on a model scheme which will ensure these borrowers can avail loans up to ₹1 lakh and further build up their credit history.
Borrowers need to have a satisfactory credit track record to avail a Mudra loan. “This new product will help first-time borrowers to scale up, and if the repayments are timely, they stand eligible for higher-category loans under the Mudra scheme,” said another bank executive.
Bid to Build Credit Histories
The government has already directed banks to scale up lending based on the Grameen Credit Score (GCS) and its complete integration with the JanSamarth Portal. Under Phase I, GCS has been developed using existing data attributes such as rural and agriculture-related borrowings available with credit information companies. Addition of more parameters is expected to result in improved access to formal credit for first-time borrowers.
According to a recent report by CareEdge Ratings, non-food bank credit growth remained strong at 15.8% year-on-year in April, primarily supported by resilient retail demand, micro, small and medium enterprises (MSMEs), strong credit flows to non-banking financial companies and improving infrastructure-related financing.
“MSMEs continued benefiting from sustained credit demand, attractive risk-adjusted returns for lenders, and ongoing policy support measures,” the report said.