There is no effective mechanism for loan recovery and the number of defaulters is also high

Availing Differential Rate of Interest (DRI) loans is turning out to be a major challenge for petty traders and businessmen in the south of the city. Apprehensions about the recovery of loan dues and increase in workload by bankers are the reasons , social activists point out.

The banks extend DRI loans at four per cent interest to Micro, Small and Medium Enterprises (MSME). Usually, the loan amount is below Rs. 25,000 and the Reserve Bank of India guidelines stipulate the banks to sanction it within 15 days of receipt of an application.

Mohammed Turab, executive secretary, Confederation of Voluntary Organisations (COVA) says not all banks are cooperating with the people in this regard, forcing them to approach private financers and money lenders for loans at exorbitant rates of interest.

The organisation has recently taken the initiative to facilitate people avail of DRI loans through the banks across the south of the city. Around 300 applications were filed by a team from COVA in four different banks. “A few bank managers are cooperating, while many are reluctant forcing us to apply online,” says Mr. Turab.

He blames lack of awareness among the bank staff. “Sanctioning loans to small entrepreneurs has its own issues, so they focus on big businesses to complete their quota,” he says. Mr. Turab feels that unless the senior officials at the city level intervene the situation will not change.

“Apart from lending money the banks will also benefit by way of new customers,” he says.

However, bank officials say they face lot of problems in recovery of loan and the previous experiences are preventing them from sanctioning loans.

“We do not have an effective mechanism for loan recovery and the number of defaulters is high here,” a bank official, said on condition of anonymity.

Keywords: banksMSMEloansDRIOld CityRBIinterest

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