The State Level Bankers’ Committee (SLBC), Tamil Nadu, has flagged the issue of many banks insisting on the CIBIL score for sanction of loans under the Prime Minister Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi).
The SLBC has cited the instruction from the Directorate of Financial Services, under the Union Ministry of Finance, not to consider the CIBIL score and has told the member-banks to reconsider the rejected applications.
The special micro-credit facility scheme is aimed at providing affordable collateral-free loans to the street vendors who were impacted by the COVID-19 pandemic and to help them resume their livelihood.
The credit support is provided in three tranches. In the first, ₹10,000 is lent. On timely repayment, the street vendors are supported with ₹20,000 in the second tranche. On prompt repayment, the third tranche of ₹50,000 is given. The Centre has extended the scheme, beyond March 2022, till December 2024.
According to the information shared by the SLBC at a recent meeting, as on May 31, 2022, 3,72,978 applications had been uploaded for the first tranche and about 10.42% or 38,887 applications had been rejected because of a low CIBIL score. Many banks were insisting on the CIBIL score for the applicants as well as their spouses, it noted.
As per its data, 1,95,196 applications were cleared and of them, the first tranche amount was disbursed to 1,66,151 applicants. The remaining 29,045 were yet to be given the loans. While 1,04,776 applications have been returned by banks, 1,38,895 applications or 37.23% are pending.
The SLBC said many bank branches were rejecting the applications because the addresses of the applicants were in rural areas (outside the service area of the banks) and they were vending in the urban agglomeration.
During the field verification by bank representatives, if a vendor is not found in a specific location, the application is rejected on the grounds that he is not traceable. In core cities, banks receive a higher number of applications and it is a reason for rejection, and there is no scope for applications to be transferred to other banks, as applicants are unwilling to open separate bank accounts, it added.
The SLBC instructed banks to fix branch-level targets for sanction and disbursement of loans, based on the number of applications. It also told the banks to expedite the processing of 61,723 applications pending for the second tranche out of the 64,935 eligible applications.
