Soon after the Nafcub President’s demand, Rajasthan based urban cooperative banks have also raised the issue of inclusion of UCBs of the state as the eligible members in the National Credit Guarantee Trust Company (NCGTC) and its various funds. Rajendra Gehlot, the leaders of UCBs in the state have raised the issue before Union Finance Minister Nirmala Sitharaman by writing a letter to her.
Earlier, NAFCUB President Jyotindra Mehta has sought parity on the issue of government guarantee on loans given by the UCB sector and as announced by Union Finance Minister Nirmala Sitharaman in her Rs 20 thousand crore Package.
Mehta argues “Being sound in CAMELS (capital adequacy; asset quality; management; earnings; liquidity; and systems and control) rating model, UCBs should also get the benefits being rolled out through NCGTC.
Membership to the recently announced NCGTC means, govt will stand guarantees to loans given by a bank to micro and small enterprises (MSMEs). Underlining the fact that about 35 UCBs are having loans in outstanding about 4000 crore to the MSME sector, Gehlot says it is justified to seek government support.
“UCBs are one of the important and significant institutions that finance micro and small enterprises in a big way. Since the loan size of micro and small enterprises financed by UCBs is generally small, the number of such enterprises helped by the urban banks is very significant”, Gehlot letter argues.
It bears recall that the Govt of India provides for guarantees to scheduled commercial banks, financial institutions and NBFCs but urban cooperative banks which are important lenders to micro and small enterprises are not included in the list of types of banks that are eligible for getting guarantees under the GOI schemes.
“It is not fair to keep them away from the benefits being offered by the government, when the UCB sector is regulated by RBI in the same manner as the commercial banks are regulated’, argues Gehlot.
He also says that UCBs working in Rajasthan, are by and large financially sound. The deposit size of these banks is to the tune of Rs 7000 crore plus. Therefore, these banks are well qualified to be included in all the schemes of the Govt. of India.
Benefits of the new GECL of Rs 3 Lac crore announced by the government are also not available to UCBs and to the thousands of micro and small enterprises that are the existing customers of the UCBs, he stated.
“In order for the Govt. of India to broad base its support to micro and small enterprises, it is submitted that all the UCBs may be permitted to apply for being Member Lending Institutions of CGTMSE without any stipulation of size of their DTL”, Gehlot petitions.
Additionally, all the existing micro and small enterprises who are customers of the UCBs should be made eligible for emergency support extended to the enterprises under the GECL or any other scheme that the Government has announced to mitigate the economic hardships on account of the COVID 19 pandemic, he says.
Rajasthan UCBs are anxious to ensure that all the existing micro and small enterprises are not deprived of the guarantee cover only because they are our customers, rues Gehlot.