The Hindu Business Line : Simplified loan forms for micro, small units seeking up to Rs 1 cr

Mumbai, Nov. 4 In a bid to boost credit appetite in the economy, the Reserve Bank of India is considering extending the scope of the simplified, standardised loan application form to encompass credit proposals from MSEs (micro and small enterprises) up to a limit of Rs 1 crore.

Currently, MSEs wanting to avail themselves of credit up to Rs 25 lakh can use simplified, standardised loan application being provided by banks.

Credit pick up in the financial year so far (up to October 9) at Rs 1,14,766 crore is less than half the offtake (Rs 2,47,775 crore) during the corresponding period last year.

According to the MSE code brought out by the Banking Codes and Standards Board of India (BCSBI), banks are required to provide simplified, standardised easy to understand loan application form to MSEs customers. MSEs will also be provided with a checklist to enable them to submit completed loan application.

Further, at the time of making available loan application forms, banks have to provide information about interest rates, processing fees/ charges, if any, etc., so that MSE promoters can make meaningful comparison with other banks and take informed decision.

Mr K. Unnikrishnan, Deputy Chief Executive, Indian Banks’ Association, said the feasibility of making the simplified, standardised loan application form applicable to MSE units with credit requirement of up to Rs 1 crore was being examined by the central bank. He was speaking at a joint meeting of the BCSBI, Federation of Indian Export Organisations and the Council of EU Chambers of Commerce.

Cautioning MSEs against entering into foreign exchange derivatives transactions, which are complex and not easy to understand, Mr M.V. Hariharan, Assistant General Manager & Head, Regional Treasury Marketing Unit, State Bank of India, said, MSE exporters would do well to have an internal benchmark for costing and book simple forward contracts to take care of their hedging requirements.

He emphasised that forex derivatives were not low-hanging fruit which can be easily plucked.

Mr R.C. Arora, Senior Vice-President and Compliance Head, BCSBI, pointed out that the MSE Code was not only a charter of rights for MSEs but also of obligations. Banks on their part should highlight the most important terms and conditions so that MSE borrowers are aware of the loan covenants.