INTRODUCTION:

Indian Economy is considered as one of the booming economy in the world Deshmukh and Joseph (2010). According to him it is one of the drawbacks of Indian economy which is dualistic in a sense that there is a growing disparity among the rich and poor. People try to get assistance to do something for their livelihood but they are not getting support from the banks easily. In India, banking system were working under a close environment for almost four decades Joseph (2011). To solve such type of problems department of Financial Services (DFS), Ministry of Finance in collaboration with SIDBI launched an online portal, ‘PSBloansin59minutes.com’ in November 2018. It is a common platform for MSMEs and Banks to fulfil MSMEs’ funding needs as per the data provided by the customer and eligibility criteria as set per various schemes of the Banks. Earlier, customer had to go to the Bank to know about the various schemes available for funding their business and then had to submit the required documents to check if they were eligible for the said schemes. This entire process has been to cut down to a few clicks and 59 minutes by this digital platform. Customers have to submit their documents (KYC, Bank details, Registration Numbers etc). The Online PSB portal is integrated with the latest online facilities like Income Tax Return, GST, CIBIL, etc. and uses this compiled information in decision making of the loan application. Within 59 minutes the applicant will be informed if they are eligible for the scheme or not, to what amount will they be financed at what rate of interest. It has reduced loan processing turnaround time from days to less than 59 minutes and is currently being used by more than 25 PSBs, Private Sector Banks and NBFCs. This leverages growing digital data footprints and integrates advanced technologies to automate and digitize the lending processes for both borrowers and Bankers. Thereby easing the process of credit delivery to MSME and encouraging business development in India by reducing time in loan approval process.

The availability of credit for different consumer needs was also incorporated in the portal. On September 5, 2019 retail products were added to it and at present, the portal provides Business Loan (Term Loan and Working Capital Loan) from INR 1 Lac to INR 5 Crore; Personal Loan In-principle approvals up to INR 20 Lacs; Home Loan In-principle approvals for up to INR 10 Crores and Auto Loan In-principle approvals for up to INR 1 Crore.

The scheme’s success depends on the ability of PSBs to decrease the turnaround time (TAT) and disburse the loans that are approved through the online portal. According to official data on Government website, the portal received 1.31 lakh applications during the first 50 days of its launch, of which, around 1.12 lakh applications were approved. However, of these 1.12 lakh applications, sanctions were accorded for just 40,669 cases, which clearly indicates that just one third of the approved loans were sanctioned.

Essential features of ‘PSBportal59minutes’:

· PSB Portal majorly has stake of SIDBI and 5 Public Sector Banks, namely- SBI, Bank of Baroda, PNB, Vijaya and Indian Bank

· Connection and choice of the customer with multiple Banks without visiting the branch

· Advanced digital/online platform for financing MSMEs with information security which also covers the maker-checker concept as in tune with current systems of PSBs

· Platform that has loan products in line with the risk rating methods within their approved credit framework

· Only Platform that has an integrated CGTMSE, Bank Statement Analyzer, GST/ITR and Bureau Check as well as host of other features which at present is not available with any other player in the market

LITERATURE OF LITERATURE:

A major demographic change is taking place in our country with a huge and growing working population. From ancient to contemporary there is a big chunk aspiring to grow into the middle class India with the support of institutional credit (Abhivyakti and Chaturvedi, 2020). That is how microfinance can play a big role in meeting their requirements and fulfilling their goals. But finance is one of the main problems despite a number of efforts being taken by the concerned ministry and RBI (Yadav, 2014; Khatri, 2019). According to Mittal et al. (2017), the linkage between Global value chain and MSMEs performance can be observed directly they further have observed, that there is need to provide incentives to MSMEs and remove hurdles they face in the process of their integration with global supply chains to provide the benefits to society. Even in retail sector where large retailers are enjoying huge Foreign Direct Investment (FDI), small retailers are struggling for minimum financial support (Chaturvedi, 2016). There is a lack of widespread awareness about the existing schemes and their benefits. Thus, efforts should be made to educate entrepreneurs and public about these schemes so that beneficiaries could take the advantage and banks could recover loans (Saddy and Kaur, 2913). Products for providing credit to those without a credit score, entrepreneurial and consumption credit, handholding, financial literacy, social occasion credits and insurance (life and non-life), are all waiting to be tapped in scale and size. Along with these issues the MSME is also facing challenge of inflation to maintain their profitability (Pramod, 2013). Limited forays have been made but are yet to achieve their full potential. Government of India first introduced Pradhan Mantri Jan Dhan Yojana in August 2014 to make formal banking more inclusive and ‘PSBloansin59minutes.com’ is a measure to further scale it up. Need for online portal is also vindicated as technology is shaping the future of finance, FinTech is the key to improve the accessibility of financial platforms to consumers.

Over the last few years, Private Banks and NBFCs have successfully managed to gain market share from Public Sector Banks on MSME lending (Dheenadhayalan and Rajaprabu, 2014). This initiative comes at a time when state-run Banks have lagged way behind their private sector counterparts on expanding their loans portfolio, despite a huge outreach, due to high non-performing assets or employees will to perform due to job safety (Adinath, 2012). In line with Stat run banks RRBs are also unable to keep efficiency and extend timely loan to MSME and micro-entrepreneurs (Rajesh et al., 2012). More over in the quarter ending Jun’19, the share of NBFCs had declined for the first time in the last two years.

According to ‘MSME Pulse’ January 2020 issue, a SIDBI and CIBIL publication, PSBs hold approximately 50 per cent share of the MSME loan market of which over 75 per cent for loans are under Rs.10 lakh (Jain, 2019, Khatri, 2019). Thus, this highlights PSBs critical contribution in financial inclusion and PSB portal may deepen financial inclusion, digitalisation and develop brand of PSB.

PSB Online was initially set up by two friends in 2015, Jinand and Ronak Shah, with the help of their family members and friends. They built an IT team that looked at technology along with the functional aspects of banking in order to design a single application that took care of the due diligence sought by Banks. By 2016, they successfully built up a prototype. The start-up raised around Rs 80 million through fund infusion by promoters and private placement at a premium of Rs 100 per share. Soon, the start-up caught the eye of the Government and then SIDBI along with five Public Sector Banks approached them for acquisition. The need for such a portal is validated as large number of applications (around 1.31 lakh) were received just within two months of its launch.

Government and Reserve Bank of India are trying hard to digitize our Economy by various measures for growth and transparency with a vision for consumer protection and technology enabled supervision bringing down intermediation costs (Fozia, 2015; Singh and Arora, 2015). Online PSB portal is a step forward in this direction and will further help in quantitative easing in the economy. This paper is focused on identifying the issues in implementation of PSB portal and suggests ways to improve it.

OBJECTIVE OF STUDY:

This paper will study the constraints faced by Bankers while financing MSMEs via PSB portal and also the reasons for rejection of the applications to analyze the success of the platform in since its inception, as the loans are filtered for eligibility without human intervention till sanction and disbursement stage.

RESEARCH METHODOLOGY:

This research paper is based on secondary data, data collected from journals, newspapers and relevant websites.

Aftermath of implementation of ‘PSB portal’ in India:

In the present scenario of lending, Banks have become much more prudent in lending to the MSME sector. They have become risk-averse due to increasing number of Non Performing Assets and liquidity crunch in the Economy especially after NBFC fiasco in 2018. They have been warned by the RBI about mounting defaults under the flagship MUDRA scheme which was started by the Government to refinance and develop micro enterprises and start-ups. It did help micro enterprises, however as on date, the main concern for Banks is the growing level of NPAs among these borrowers. As a result, Banks have increased their risk premium and insist on additional security in form of collateral security from the MSMEs/borrowers. Paper formalities for taking loans from public sector Banks are generally treated more cumbersome. Multiple handoffs of loan applications impacted the Bank’s ability to service higher volumes of loans. There was also significant backlog in loan processing from a credit analysis perspective. The absence of a strong centralized processing centres and reporting structure coupled with inconsistent internal timelines add to Bank’s lending problems. For start-ups, PSBs follow strict guidelines and therefore require more information and it’s a lengthy review process. The difficulties in getting a loan from PSBs also stems from reluctance of the ground-level staff to accept the loan application. Online PSB portal is a cost-effective initiative to reduce TAT resulting in quick disposal of loan applications without visiting the Branch for submission of application and documents for preliminary valuations. This system will also avoid wastage of man-hours and duplicity of information asked from applicants. MIS behind the portal makes it a lot easier for the PSBs to monitor the reasons behind loan rejections.

But, getting in-principle approval means nothing to an entrepreneur if the loan disbursal takes time. Even after in-principle approval, the bank will do due diligence such as site visits, data appraisal, etc. Thus, unless these loan applications are converted into loan disbursals, this portal would just be another addition to various channels available for PSBs to generate qualified leads.

Since consumers are avaricious (Dwivedi and Chaturvedi, 2020) and repayment of credit is psychologically considered loss of resources, the tendency of default is not uncommon. As a safety measure, online credit approval process should also include capturing the existing assets, liabilities, availability of other resources such as land/technology of the borrower so as to ensure bank’s interests are safeguarded and correct eligibility of the borrower is calculated. On the policy front, the norms for takeover of loans or multiple banking etc among lenders should be relaxed.

SUGGESTIONS AND CONCLUSION:

With the growth of the internet and mobile phones, today we are seeing an explosion of data in several sectors of our economy. Likewise, in microfinance, a lot of formal and informal data is becoming available in the form of digital footprints by low income customers who also transact on e-commerce platforms and use the internet. These digital footprints are being used by leading Banks and online lending firms to lend to individuals as well as micro and small enterprises. Artificial intelligence (AI) and machine learning are also finding greater application in the Indian banking and financial services industry. As Government has financially supported trade and commerce by coming up with different plans, providing online portal for submitting loan application is a definite step forward. PSB portal is expected to widen the horizon beyond micro credit to transform the livelihoods of the borrowers. PSBs should be constantly mindful of the technological transformation in the banking and financial services industry and should continue to pursue the adoption of innovative, futuristic and high-impact business models. As observed, these additions will only add to the merit of the portal without which the web portal would just be another channel for generating qualified leads.

Based on our analysis, our suggestions to further the scope of PSB portal model in Indian context are as follows:

· Banks should consider sanction and disburse of loans for capex investment in technology upgradation and innovation of SMEs/start-ups via this portal to promote economy.

· Banks should also think beyond finance by extending financial support or sponsorship of chair with Technology or Management Institutes such as IIBF, IBPS, NIBM, IIBM, IITs, NITs, IIMs etc for undertaking research on technological upgradation of SMEs in our country. Such options should be made on portal.

· The demand for this type of portal is demonstrated by means of both a large number of apps received within two months of its release and their total value amount. Data confidentiality and consumer protection are major areas that also need to be affirmed.

· MUDRA is a case in point, where such a massive push would have lifted many beneficiaries out of poverty, there has been some concern at the growing level of non-performing assets among these borrowers. Banks need to focus on repayment capacity at the appraisal stage and monitor the loans throughout their life cycle much more closely.

· On the portal when Audited Balance Sheet (ABS) is uploaded the Credit Monitoring Arrangement (CMA) data should be automatically generated based on past history. When the applicant submits its own CMA data, the same can be compared for sensitivity analysis. This will also strengthen the appraisal standards.

This brings in the need of a transparent, technology and data-driven approach from the Banks as systemic risks may arise from unsustainable credit growth, increased inter-connectedness and financial risks manifested by lower profitability on these advances.

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Received on 16.02.2021 Modified on 08.04.2021

Asian Journal of Management. 2021;12(4):389-393.

DOI: 10.52711/2321-5763.2021.00058