In a letter written to Union Finance Minister Nirmala Sitharaman, NAFCUB has demanded that all the urban cooperative banks- scheduled and non-scheduled should to be made eligible institutions to be members of CGTMSE. Currently only scheduled banks are allowed to be its members.
Credit Guarantee Trust for Micro and Small Enterprises, is a mechanism of the Ministry of MSMEs which provides guarantees to defined eligible lending institutions after they take its membership. Presently, only three UCBs namely Saraswat Bank, TJSB Sahakari Bank and NKGSB Bank are its members.
Signed by Nafcub President Jyotindra Mehta, the letter reminds the Minister about the role being played by the UCB sector in supporting the micro enterprises across the country.
“An urban cooperative bank is typically small man’s bank. It has immense potential to scale up loans to the micro and small enterprises in the MSME sector. A strong local feel of urban cooperative banks is an important component of the sense of ‘belonging’ it creates among customers,” the letter argues.
“As you are kindly aware, while only 54 out of a total of 1540 urban banks are scheduled, it is the vast majority of the non-scheduled urban banks that finance lakhs of micro enterprises across the Country. The non-scheduled urban banks are also regulated by RBI for over five decades and they have the experience of adhering to all the regulatory disciplines of a banking institution”, goes on the letter.
Nafcub argues that UCBs can become the mainstay of financing the unorganized sector and displace the informal money lending system that is the major source of credit to the micro and small enterprises which are mostly in the unorganized sector.
It is therefore requested that the necessary modifications may kindly be made in the rules to enable all the urban banks to be eligible to be members of CGTMSE and to avail benefits of the guarantee of the Trust, Nafcub pleads.
With many micro and small enterprises shutting down on account of the effect of Covid19 on the economy, vulnerable sections of population may find themselves unemployed without any source of income and in such a situation UCBs may act as a bulwark against their unemployment, says Nafcub.
This move to permit all non-scheduled urban banks to be members of CGTMSE will encourage all the urban banks to go out and finance more and more micro and small enterprises which is what is required now, in the economy affected by the Covid19 when creation of employment and livelihood opportunities is of paramount importance.