It is a telling scenario where 150103 loan applications sanctioned by the banks in first quarter in FY 2020-21, only 84087 opted for disbursement while in 2021-22 during the corresponding quarter the figures read as 327368 disbursements out of sanctioned loans of 360108. It means that while in 2020-21 the percentage of disbursement to sanction was 56%, the same rose to almost 91% during corresponding quarter in 2021-22.
The reasons are not difficult to fathom. It’s a known fact that the Bank Managements are known to push the ground staff to the maximum for showing up figures which may please the Government. To this end, the lower rung officials and through them the existing borrowers are cajoled or coerced for opting extra credit facilities, whether they need it or not. Converting a sanction in disbursement however is a different ballgame altogether. Since it requires mortgage charges and other procedures, normally a customer who had consented for a mere sanction just for the sake of extending favour to the manager, chickens out.
This explains why 46 out of 100 borrowers who were sanctioned a loan did not wish to avail it during June quarter of 2020-21. If the figure of availing disbursement rose to 91 out of 100, it clearly means that industries and businesses have sensed the need for it.
The Emergency Credit Guarantee schemes are sold at 7.5% with no processing charges. There may be three reasons for the surge. first, genuine need, second, dubious but acceptable – repaying existing loans running at higher rate of interest and third, outright dubious – diversion of fund to other activities. it can be anything from unproductive expenses like expensive cars to real estate investment to share market.
Another striking feature emerging out of data is there is 140% incremental change in sanctioned number of loans under emergency credit guarantee schemes (from 150103 to 360108), which is a whopping 213% ( from Rs. 7480.29 crores to Rs.23424 crores ) if we talk about the amount involved. Either bankers have bettered their selling skills, coercion has multiplied, or the borrowers have ultimately found that magical point to be willing to bear excess lending burden.
Or, accumulating overhead costs, stagnant revenue and longer payment cycles might have forced many industrial units to opt for further lending in form of emergency credit line guarantee scheme.