Banks accused of flouting norms on collateral security for MSMEs

‘Many are not aware loans of up to ₹10 lakh does not require any collateral security’

January 19, 2017 07:31 am | Updated 07:31 am IST - VIJAYAWADA:

 Nabcons project manager A.V. Ramakrishna Rao addressing an awareness meeting on bank loans in Vijayawada on Wednesday. Chambers president Muthavarapu Muralikrishna is seen.

Nabcons project manager A.V. Ramakrishna Rao addressing an awareness meeting on bank loans in Vijayawada on Wednesday. Chambers president Muthavarapu Muralikrishna is seen.

Bankers in the State are accused of flouting Reserve Bank of India (RBI) guidelines on collateral free loans for micro, small and medium enterprises (MSMEs).

Insistence on collateral security by the banks was one of the key complaints that figured at an awareness meeting organised by the Andhra Pradesh Chambers of Commerce and Industry Federation here on Wednesday.

One major aspect that emerged from the discussion was that many were not aware that loans of up to Rs.10 lakh did not require any collateral security.

Representatives of industry associations pointed out the need to make available funds at low interest rate easily to the MSMEs. They also pointed out to non-acceptance of agricultural land as collateral security and poor implementation of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme.

Nabcons (Nabard Consultancy Services) Credit Facilitation Bureau (Nabcons CFB) project manager A.V. Ramakrishna Rao said the bankers were insisting on collateral security though it was not required for loans of up to Rs.10 lakh.

“Officials insisting on it are liable for action,” he added.

Banks insist on collateral where there was no track record of repayment and also when there were no assets. Some first generation entrepreneurs were asked collateral security just to create a binding to the loan.

“These issues are taken up periodically by the government with the banks to achieve the desired results,” he said.

Chambers president Muthavarapu Muralikrishna and general secretary P. Bhaskara Rao were among others who spoke.

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