Indian Overseas Bank (IOB) may be one of the first public sector banks off the blocks to ease the credit situation for the MSME sector, in response to the clarion call from the government. The bank has announced that the loan amount sanctioned under the 59-minute approval scheme is being upped to Rs 5 crore.
The RBI has been steadily bringing down the interest rates over the past few quarters and in his last media interaction, the RBI Governor had made it amply clear that there is no liquidity constraint in the market and credit offtake should not be a problem.
The 59-minute loan concept was launched last year so that the public sector banks can take on some of the digital lending platforms who are very quick to evaluate loan applications and to take decisions on approving or rejecting a loan application. Thereās a website psbloansin59minutes.com that the borrowers can visit and fill in the details. The banks will have their own staff keeping a tab and the bank will come forward with the loan offer all within 59 minutes.
Indian Overseas Bank has been able to register a decent growth in the number of loans sanctioned in this 59-minute psbloan scheme and now wants to move ahead with these two key announcements. One is of course, the increase in the ticket value to Rs 5 crore, as mentioned above. This would be the upper limit and since this loan product is being focused on the MSMEs, the actual amount will depend on how much each borrower needs and their ability to service the loan.
The other key announcement is that IOB wants to improve the loan offtake in the retail segment as well and there the bank says, going ahead, they would link the interest rates on the loans to the external benchmark repo rate. This would make it easy for the borrowers to know they are paying interest at only the benchmark rates and no additional amount is being charged by the bank.
A lot of lending and borrowing has to do with the trust established between the bank and the borrower, and such gestures go some way in creating a better and more transparent relationship.