The banking industry has loosened its purse strings for unbanked and under served street vendors with Rs 1,200 crore loan disbursements under the PM Street Vendor's Atma Nirbhar Nidhi Scheme. The scheme was launched in June last year as part of Covid relief to street vendors, who had no other way to earn livelihood due to lockdown and other social distancing restrictions.
The scheme, a micro loan facility, offered collateral free loans of Rs 10,000 per person with an average interest rate of 10 per cent for a year. Currently, the home loan interest rates are between 7-8 per cent and personal loan rates are 11-13 per cent. Banking experts say the interest rate under street vendor is quite reasonable as there is no collateral requirement.
The largest bank in the country the State Bank of India (SBI) , has disbursed around Rs 180 crore by December 2020. States like Uttar Pradesh, Maharashtra and Madhya Pradesh are the biggest recipients of the scheme. The government recently released the figures under street vendor scheme. The banks have received 31.64 lakh applications while they sanctioned 16.77 lakh applications, the disbursement was made to 12.17 lakh applicants. The government didn't disclose the disbursement data.
While formal sector comprising of salaried class, MSMEs and corporate sector got benefit of loan moratorium, govt guarantee and one time restructuring, the street vendor scheme was designed to support micro entrepreneurs working in metros and urban centres to make a living.
Currently, there are many new age NBFCs and Fintechs exploring the credit to street vendor based on cash flow financing but banks keep away from such lending. The current government initiative along with presence of NBFCs will help in creating a credit history of such borrowers. This will also help good borrowers to take credit facility from small finance banks and micro finance institutions in future.