THE GOAN PANAJI
The Parliamentary StandingCommittee for Industry under the chairmanship of Tiruchi N Siva MP visited Goarecently to review the Prime Ministers Employment Generation Program (PMEGP) inGoa. This scheme is aimed to specially support microenterprises up to Rs 25lakh and can be availed for individuals over 18 years of age having cleared StdVIII.
The scheme has not performed upto the expectations in Goa for various reasons and GCCI who were the inviteefor interaction with the Parliamentary Standing Committee have given thefollowing representation to Tiruchi Siva, MP who is the Chair of the StandingCommittee. GCCI president Shrinivas Dempo made a presentation to the StandingCommittee.
Key concerns expressed by GCCI are:
Low Targets and Achievement: The target for PMEGPunits in Goa for the year 2024-25 has been set at only 82 units, like theprevious year when 83 units were assisted. In comparison, Goa has many bankbranches. A higher target, even one where each bank branch sanctions just onecase annually, would vastly improve scheme coverage, potentially supportingover 500 cases each year. The current low target limits the reach and impact ofPMEGP in the state.
Challenges in Loan Approval: Many banks are treating PMEGPapplications with the same scrutiny as commercial loans, despite the schemebeing designed for first-generation entrepreneurs. As a result, nearly 50% ofapplications are rejected, with the primary reason cited being poor CIBILscores. This contradicts the spirit of the scheme, which aims to empowerindividuals from weaker sections of society, such as unemployed youth,scheduled castes, scheduled tribes, and other backward classes.
Preference for StateGovernment Schemes: TheChief Minister’s Rojgar Yojana (CMRY), operated by EDC, is preferred by manyapplicants due to its faster processing times and more supportive approachcompared to PMEGP. This is a cause for concern as it diminishes theattractiveness of PMEGP, a central government scheme.
Low Credit-Deposit Ratio inGoa: Goa’s credit-depositratio is currently one of the lowest in the country, at around 30%, compared tothe national average of over 70%. This is a significant barrier to the successof schemes like PMEGP, where the availability of credit is crucial for itseffective implementation. Increased awareness and encouragement of lendingunder PMEGP can help rectify this situation.
Collateral-Free Loan Issues: Despite PMEGP being a collateral-freeloan scheme, banks are still insisting on personal guarantees from directors inthe case of company applications. This adds an unnecessary burden on theentrepreneurs and goes against the fundamental objective of the scheme.
Increasethe target for PMEGP units in Goa to reflect the State’s potential,ensuring broader coverage of the scheme.
Recommendations by GCCI are:
Creating Awareness of PGEMP: This scheme needs to be made aware andpromoted specially to the weaker sections of the Society. GCCI is ready tosupport and promote this initiative.
Instruct banks to adopt a more facilitativeapproach in line with the PMEGP’s objective, especially for first-generationentrepreneurs. The aim should be to find reasons for accepting the applicationsand not for rejections.
Ensure improvements in Goa’scredit-deposit ratio throughtargeted measures encouraging banks to actively participate in PMEGP lending.
Streamline the applicationand sanctioning process toavoid delays and eliminate unnecessary requirements such as personal guaranteesfor collateral-free loans.
Sanjay Amonkar, directorgeneral of GCCI suggested measures for priority lending sector of MSME in Goa.“As regards MSME and priority sector in Goa the Banks have achievedthe annual credit plan for the year 2023-24 and has achieved the figure of Rs8725 crore against the annual target of Rs 6400 crore. The credit for thisachievement goes to Banks,” said Amonkar.
The suggestions by Amonkar are:
Security and collaterals forloans - Securitybeyond 100 - 150% of the loan value should not be insisted upon. And securitycover should be directly correlated to the outstanding loan and not as onavailing date. As principal amount is reduced the security cover remains as perinitial availing. This loan reduction/cover can be reviewed on a yearly basisand part security could be released so that the promoter can use same for otherrequirements of the business.
Cross collateral guarantee - For example, a large PSU Bank lendingto large priority sector, having CRISIL Rating of BBB (Stable) has to givesecurity up to 300% of the loan amount along with personal guarantees plusadditional company cross collateral guarantees which hampers thegrowth prospects of second company.
CIBIL rating for Covidrestructure - Allloans during Covid which were restructured should not be reflected on recordsof enterprises. In some cases, such a request to the bank was even not askedfor, and still restructured, which reflects badly on records of various goodEnterprises. Also, CIBIL rating can take up to to six months to reflect in theaccount which becomes a deterrent.
Loan sanction/rejectiontimeline - Prioritysector loan proposals need to be sanctioned/rejected within 60 days.
