Despite historically difficult economic times brought on by the Covid pandemic, small borrowers have shown greater integrity in loan repayment.
As banks struggle with higher non-performing assets (NPA) due to large borrowers’ defaults on loans, Gujarat-based cooperative banks have reported minimal NPAs of just 0.20% in the Atmanirbhar loans given to small business owners and individuals with low incomes in times of crisis.
“Small borrowers have shown that they pay back loans with more honesty than big borrowers. The NPA in Atmanirbhar loans given to small borrowers is less than 0.20% which is negligible,” said J V Shah, CEO of the Gujarat Urban Cooperative Banks Federation.
Shah claimed that Atmanirbhar loans were advantageous to banks as well since they facilitated credit expansion during Covid, a period of declining demand from large borrowers.
According to the most recent report by the State Level Bankers’ Committee (SLBC), Gujarat, the gross non-performing assets (NPAs) of cooperative banks in the state were Rs 1,220.11 crore during the third quarter of 2022, while total advances were Rs 28,388.15 crore.
This indicates that cooperative banks have a gross NPA to the outstanding ratio of 4.3%, which is lower than the 5.14% for all other banks. In Gujarat, nationalised banks actually had the highest NPA to the outstanding ratio (13.15%), while private banks had some of the lowest ratios (1.49%).
In Gujarat, cooperative banks and credit societies distributed mostly unsecured loans ranging from Rs 1 lakh to Rs 2.5 lakh to almost 2.42 lakh families during the extremely unsure times brought on by Covid.
These heavily subsidised loans were provided as a part of the Atmanirbhar Gujarat Sahay Yojana, which was established by the state government to aid small business owners, independent contractors, and those with low incomes in surviving the pandemic’s difficult economic conditions.
More than 99% of the small borrowers have been repaying the loans on time nearly three years later, making the banks quite happy.
Ajay Patel, chairman of The Gujarat State Cooperative Bank Ltd (GSC Bank), said: “During Covid, economic activities came to a grinding halt and economically weaker sections were in dire need of money. Traditionally, we have experienced that people taking small loans repay with more honesty, something which is apparent in the Atmanirbhar loans too. Of the total Atmanirbhar loan disbursement of Rs 110 crore to 10,958 people, only Rs 6.95 lakh amount of 11 people is NPA which includes six cases of death of the borrower.”
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