Ensure hassle-free loans, Finance Minister tells banks

Indian banks need to become more customer-friendly and ensure hassle-free loans, Finance Minister Nirmala Sitharaman said on Monday, even as the chief of the country’s largest lender State Bank of India promised to roll out a fully digital loan application system in two months to ease borrowers’ lot.

State Bank of India chairman Dinesh Khara, who was part of the audience at an industry interaction with the Minister on the Union Budget in the commercial capital, received a flurry of advice from the Finance Ministry top brass on easing access to credit, after a woman entrepreneur flagged the need for ‘hassle-free’ loans to budding businesses like hers.

Ms. Sitharaman directed the query to Mr. Khara, stating loans should be hassle-free for everybody and ‘more so for women’. “Our PM has said, in Mudra and Swanidhi (schemes), where the poorest of the poor are involved, he told banks look I am the security behind them, don’t ask for any security, give them the loans they want. And actually, the performance on the servicing of those loans has been good. Over and above that, Mr. Khara, the opportunity is yours,” she said.

“Very often for start-ups, more than loans, equity is required and we are more than happy to support with loans provided they have the equity,” the SBI chief initially noted, before being prompted to elaborate. “What is actually being done now at our end is to make it digital end-to-end so that hassle-free loans are addressed, right from the filing of the application to the decision making through the digital means. That will make life much easier and it should be ready in two months or so,” he added.

Remarking that the SBI chief’s initial reaction was ‘very bland’, Ms. Sitharaman said there was ‘no harm’, “but banks will have to be a lot more customer-friendly, not to the extent of taking adverse risks that you don’t need to take, but you need to be a lot more friendly towards customers.”

Revenue Secretary Tarun Bajaj said that the SBI, as an industry leader, should ‘really work out some system to push credit into the economy’. “I would request you to take the leadership to see that in the next two–three years, issues of entrepreneurs, MSMEs (micro, small and medium enterprises) and large businesses also are sorted out,” he said.

“Normally, it is perceived banks don’t sanction loans. Today, my situation is that in one quarter, the underutilisation of the working capital limit has come down by around 900 basis points, and still at that level, the underutilisation of working capital is still as high as 52%. I just wanted to bring it to notice,” the SBI chief pointed out. The bank, he said, had set a benchmark of loans up to ₹5 crore to be processed ‘hassle-free’.

On lending to MSMEs, Mr. Khara said credit based on balance-sheet strength posed challenges, and lending could be more ‘hassle-free’ if lenders have access to credible cash flows instead. This, he said, could push up credit growth in the segment to the 16% level seen in retail loans, where credit scores have made lending easier.

Chief Economic Adviser V Anantha Nageswaran, who was also present, said banks must make loan documents available in local languages, besides English and use the account aggregator framework for ‘hassle-free’ loans.

Economic Affairs Secretary Ajay Seth said that providing such ‘hassle-free’ loans should be viewed as part of the government’s broader pursuit to improve the ease of living and doing business. “Do not look at it just as compliances, now it has to be seen at a more granular level, sector by sector, on how to improve productivity,” he summed up.