IMPLEMENTATION PRIME MINISTER'S ROZGAR YOJANA...
44
CHAPTER Vl IMPLEMENTATION OF PRIME MINISTER'S ROZGAR YOJANA - PROCEDURESAND PROBLMES
Transcript of IMPLEMENTATION PRIME MINISTER'S ROZGAR YOJANA...
CHAPTER Vl
IMPLEMENTATION OF PRIME MINISTER'S ROZGAR YOJANA -
PROCEDURESAND PROBLMES
CHAPTER Vl
IMPLEMENTATION OF PRIME MINISTER'S ROZGAR
YOJANA - PROCEDURES AND PROBL.EMS
The success of the Government sponsored schemes depends to a great
extent on the socio-economic conditions in which the beneficiaries live and
perform their economic activities. A survey was conducted among the
beneficiar~es to know their experience in obtaining loans, the problems they
encountered, utilization. repayment and impact of bank loan. For the purpose of
this study 150 PMRY beneficiaries were selected at random from the universe
of 90.028 In the State of Kerala. The information was collected with the help of
a structured questionna~re and detailed discussions.
A survey was also conducted among the Bank Managers to know their
experience in the implementation of the PMRY Scheme in Kerala. In this
survey, an attempt is made to know, the problem faced by the banks in
sanctioning and disbursement of loans, as well as supervision, monitoring and
recovery of loans disbursed under the scheme. Fifteen bank branches were
selected at random for the purpose of collection of data. This includes 6 banks
each from the State Bank group and Nationalised Banks and 3 banks from
Other Commercial banks in the State. A separate questionnaire was used for
collecting information from Bank Managers.
Socio-Economic Status
The socio-economic profile of the selected beneficiaries, are given in
Table 6.1
Age and Sex Profile
The majority of the respondents (80 per cent) are youngsters and are
less than 30 years of age. Table 6 .1 reveals that 60 per cent of the beneficiaries
are in the age group of 25 to 30 years. It is a good sign that the unemployed
youth of Kerala are veiy fond of availing PMRY loans. The bankers and the
policy makers should think of value additions to PMRY Schemes so that the
Yojana attracts middle- aged and senior citizens. It is surprising to note from the
table that males dominate the PMRY Scheme. Eighty-two' per cent of the
beneficiaries are male while eighteen per cent are female. This indicates that
the loan is mainly availed by males and is a male dominated lending scheme.
Caste Status
Twenty per cent of the respondents belong to the scheduled caste
category. Scheduled tribes constituted 10 per cent. The survey also covers
other backward communities, who constitute 30 per cent, while the remaining
40 per cent belong to the general category.
Literacy Level
In a highly literate state like Kerala, 50 per cent of the respondents are
graduates and it may not be surprising to note that 20 per cent of the
respondents are post-graduates. The minimum qualification of the beneficiary
as fixed by the polrcy makers 1s matriculation, but 30 per cent of the
respondents chosen for this survey are educated upto higher secondary. It is
interesting to note that 40 per cent of the respondents are technically qualified.
Family Income
Among the selected respondents, 70 per cent are earning an annual
income of less than Rs.18,0001-. Twenty per cent of them are earning an
income of more than Rs.18000, but less than Rs.24,000/- per annum. Merely 10
per cent of the respondents are having an annual income of more than
Rs.240001-
Experience
The experience of the respondents influenced the task force committee
in the selection of beneficiaries. Table 6.1 shows that 60, per cent of the
respondents are experienced in their respective fields and 40 per cent are not
experienced. This is a clear indication of the preference given by the task force
committee to the experienced applicants. Among the experienced, 10 per cent
have more than five years' experience. 30 per cent have more than two years'
experience and 20 per cent less than two years' experience,
Table 6.1 7- Socio-Economic Profile of Beneficiaries
Variables I No. of Respondents 1 Per cent
SEX I I
~ IT--.- . - M A L E I FEMALE r- ~.
! i TOTAL * 150 ---- ~ t- r--; AGE I&. -. - ____.-.
BELOW 20 YEARS .- - 7-- 20 - 25
+. ~
30
25 - 30 tA -I-- 90
ABOVE 30 YEARS t--- 30
i TOTAL -t-- 150
I 31 COMMUNITY -7-
82
18
1 oo
20
60
20
100
SC -1 30 ~-
ST .-
15
20
10
OBC 45 -- -.
GENERAL
TOTAL
MARRIED t---
45
UNMARRIED - ~ - i 2.- TOTAL
.... --
30
40
100
30
70 -- 100
Contd ... Table 6.1 --
5 : QUALIFICATION I - BELOW
HIGHER SECONDARY , 45 -----C--
GRADUATION 75
150
TECH. QUALIFICATION -- -- - - - - 60
90
I - ~-
I BELOW 12000 I 1 1
30
50
20
100
40
60
TOTAL 1- 150
1 7 1 FAMILY INCOME
1 1 ABOVE 24000 I I 15 1 10 1
100
~ -
it TOTAL --J---- t---~-t 100 EXPERIENCE -
NO EXPERIENCE
BELOW 2 YEARS -+ I '--+~~- YEARS
ABOVE 5 YEARS
TOTAL I L 150 -.
100
Source: Survey Data
Preference For Bank Loan
The preference of the beneficiaries for bank loan compared to other
sources of finance was analysed and the result of the survey is given in Table
6.2. As per the table. 70 per cent of the respondents preferred bank loans due
to reasonable rate of interest. 72 per cent of the respondents pointed out that
they preferred bank loan because of the easy repayment facility. Another
reason to prefer bank loan is non-availability of finance from any other source
Table 6.2
Preference For Bank Loan -~
items -
I Preference For Bank ' 1 1 Loan b. Easy repayment facility L
c No other source of finance 72 48
70
k- I Scheme I I
d. Unemployment 1 L- 1 78 1 52
1 ; e Low Family Income ( 1 2 0 80 ,
I I Reasons for avall~ng F i ~ ~ o ~ r a l - security
/ 2 1 loan under PMRY c Subs~dy
. _ . __-L I I I
Source Survey Data
Table 6 2 also shows the reasons for availing loans under PMRY
scheme. As per the table, 90 per cent of the respondents availed, PMRY loan
because no collateral security was required for the loan; 80 per cent of them
pointed out that they availed the loan because of their low family income. 70 per
cent of the borrowers revealed that the low rate of interest was an added
attraction of the scheme. Eighteen per cent have availed the loan to enjoy
subsidy and fifty-two per cent due to unemployment.
I
135 90
27 j 18
Awareness of the Scheme
The success of the scheme depends to a large extent on the publicity
about the scheme. Table 6.3 shows the media through which the respondents
received information about the scheme. Seventy per cent of the respondents
got information through newspapers, which is the most effective and cheapest
media, and 20 per cent received information from friends and relatives. The
remaining 10 per cent disclosed that they received information about the
scheme from political leaders. These are cost free media and most effective as
far as PMRY beneficiaries are concerned.
It is clear from the table that 70 per cent of the borrowers were aware
about the interest rate and 40 per cent about the subsidy. Further enquiry
revealed that 28 per cent of the borrowers were not aware of the availability of
the loan without collateral security. Twenty per cent of the borrowers were not
aware of the full details of the scheme. But these beneficiaries have not made
any attempt to learn the details.
Interference Of Political Leaders
It is important to note from the survey that the PMRY scheme is not free
from political strings. It is always said that without the involvement of the
political party, nothing can be done. This is true of PMRY Scheme also. Table
6.4 shows that 88 per cent of the selected respondents obtained loan without
involvement of political parties while the remaining 22 per cent could avail loan
only with the help of political leaders
Table 6.4
Involvement of Political Party - - - -- -
S.No. (Involvement Of Political Party I No. Of Respondents
- 2 No
Total
Percent I - I---- I
Source: Survey Data
Yes 33 22
Bank Managers complained about the interference of ~ol i t ical leaders in
the selection of the borrowers and the sanctioning of loans under the PMRY
scheme. The opinion of Bank Managers on this matter is given in Table 6.5.
Forty per cent of the Managers reported interference of middlemen in the
selection of borrowers, while 60 per cent of the Managers agreed that there was
no political interference in selection of borrowers. These middlemen include
political leaders and superior officers. in the State Bank group such interference
was reported by 50 per cent of the Managers while in the Nationalised banks
and other commercial banks it was 33 per cent each.
Table 6.5
Interference of Middlemen --.- ~~~ r-.~~ : I
I I
I I Number of Bank Managers 1 Total I
/Interference Of I Middlemen
Group , - - ~
! I No. % No. %
No 1 50 -- , ~---
1 Total 6 i 'I00 ; 6 100 100 15 100
Source : Survey Data
Approach for PMRY Loan
Application for loan under the PMRY scheme is to be given to District
lndustries Centres or Taluk offices and not directly to the Bank. But banks are
not prevented from receiving applications directly from the people. The bank
should send such appl~cat~ons to the Task Force Committee with their
recommendations. After the approval of the Task Force Committee, the banks
can grant loans to such applicants. Opinion of the respondents on approach for
loan is glven in Table 6.6.
F--- ~~
Table 6.6
1 Borrowers Approach For PMRY Loan -- ~ .- I--
: 'Industries Centres/ Total Item !, Details I
As per the table. 24 per cent of the respondents approached the bank for
No. Percent
Direct , 63 1 42 j 1 Approach t~,z-- for Loan
1 Total 114 76 .-
I ~oliticai -~-G24 ' , j 2, Indirect '' Leaders ! ! Approach ' Friends and 1 I Relatives 1 27 18
& Total I 57 i 3 4
-.-- A
PMRY loan, while the remaining 76 per cent approached lndustries centers. 42
per cent of the borrowers approached lndustries centers directly, while 16 per
No.
24
Source. Survey Data
12
36
9
3
12
Percent
16
8
24
6
2
8
No.
87
63
150
Percent
58
42
100
33
30
1
22 1 20
63 42
cent approached with political leaders and 18 per cent approached with friends
and relatives.
16 per cent of the respondents approached the bank directly while 6 per
cent approached with polltical leaders and 2 per cent approached the bank with
friends and relat~ves.
Nature of Activities
Under PMRY, the entrepreneurs can take loan for any entrepreneurial
activity, industry service or business. However, not more than 30 per cent of the
enterprises should be from business sector. The opinion of the respondents on
the nature of activities selected for PMRY loan was analysed and the result of
the analys~s is given in Table 6.7.
Table 6.7 shows the inclination of the people to stah industries. The
survey reveals that 60 per cent of the respondents put their stake in starting
industries. while 20 per cent deposited in the service sector, another 20 per
cent have invested in the risk free trading activities.
Table 6.7
Nature Of Activities
~.~~~ I
r-~.- - r I S.No. Activity No. Of + R e s p o n d e n t s 1 Persent
1 Industry ! I _ ._ _.
Business -- -7
30 ~ -.
i Service -- ,- I
Total 100 - -- -- _1 150
Source Survey Data
To study the priority of the borrower to various activities, x2 test was
applied. The following null hypothesis was framed for this purpose.
H6 There is no significant difference among the borrowers in the selection of
activity
The calculated value of %' is 48 whereas the table value at 5 per cent
level of s~gnificance is 5.991 Since the calculated value is. greater than the
table value Hypothesis t i 6 is rejected. Hence it is concluded that borrowers
differ significantly in the selection of activities,
Capital Requirement
Under the PMRY scheme entrepreneurs can set up projects requiring
capital ~nvestment of Rs. 2 Lakhs including fixed capital and working capital.
Table 6.8 shows the opinion of the respondents on loan requirement.
Table 6.8
- ~ -~ ~- Loan Details
Item I Details Per cent I__ - _ _ ..
--
I .
Rs.50,000 - Rs75.000 ( 1 Loan Appl~ed i Rs.75.000 and Above
- - _ ~ L Total
Full amount sanctioned 1 -
2. Loan Sanctioned less than what was required 150 100
Total --
150 100
Amount was sufficient i 48 32 3 Sufficiency of the loan I Amount was not sufficient
amount 102 68 1-
I- +-- Total 150 100 ~~
1 Working capital alone
! ' F c a p i t a l alone 132 88 4. Nature of loan
12 J
100
sanctioned Both working capital and fixed
p a .- -
! Total
Source : Survey Data
18
150
The amount of capital investment determines the size of the business
units. All the proposed business units started under the PMRY scheme are very
small. As per table 6.8, sixty per cent of the respondents applied for starting
small un~ts requiring capital investment between Rs.25,000 and Rs.50,000.
Thirty per cent applied for starting business units requiring capital investment
between Rs.50,000 and Rs.75.000 and only 10 per cent of the respondents
applied for starting slightly bigger units requiring capital more than Rs.75,0000.
Sufficiency Of Loan Amount
Insufficiency of the loan amount will put pressure on the PMRY
beneficiaries to resort to external sources of funding. Table 6.8 reveals that
none of the respondents received the full amount of the loan. Whatever project
finance required by the beneficiaries was not fully sanctioned by the lending
agencies. Cent per cent of the respondents disclosed that the amount
sanctioned by the authorities was less than what they have requested for.
The Table also discloses the sufficiency of the loan amount to launch the
projects. 68 per cent of the respondents opined that the amount sanctioned by
the authorities was less than what was required. This is an indication that the
beneficiar~es have resorted to other means of funds for fulfilling their capital
requirements. Mere by 32 per cent of the respondents agreed that they
obtained sufficient amount to start their projects. Such beneficiaries admitted
that they had applied for more than what they required.
Working capital requirements of the beneficiaries are not given much
consideration by the lending agencies. They granted working capital only to a
very small number of beneficiaries. As per the table. 12 per cent of the
borrowers received both working capital and fixed capital. While 88 per cent
received only f~xed capital. None of the borrowers received working capital
alone. Many borrowers complained about the inadequacy of working capital.
Non-prov~sion of adequate amount of working capital is a serious drawback of
the scheme.
Opinion Of Banks On Amount Of Loan Sanctioned
Bank Managers have a different opinion on the nature and amount of
loan sanctioned. The opinion of the Bank Managers on this aspect is anlaysed
and the result given in 'Table 6.9. As per the table, 60 per cent of the banks
sanctioned only less amount than what was applied by the beneficiaries, while
40 per cent sanctioned full amount of the loan applied by the beneficiaries. 50
per cent of the State Bank group sanctioned full amount of loan applied by the
beneficiary.
Table 6.9 Opinion of Banks on Loan Sanctioned
Number of Bank Managers Total
Bank Nationalised OC Bank , Group Bank
Item Per Per Per
No. cent I cent
1 a. Full Amount applied -
b Less than what appl~ed l.---- 67 2 67 9 60 Total ++: / 100 1 3 1 7 0 0 15 j l00 I
1 2. Nature of Loan sanctioned 1 1 I I 1 1 l
a. Working capital alone 2 33 2 13
b. Fixed capital alone 3 50 4 67 2 67 9 60
2 33 1 33 4 27 .-
I Total i 1 0 0 6 100 3 100 15 100 ~ ~ . . p-~ 3. 0~1n1on on sufficlencv of Loan -kLi-I I
Wh~le the remaining fifty per cent of the State bank groups sanctioned
1 a. Sufficient 83 2
17 1
- 100 3
less that what was applied for, by the beneficiaries, Sixty-seven per cent of the
nationallzed banks sanctioned less amount than what was applied for by the
Source : Survey Data
benef~ciar~es, and thirty-three per cent sanctioned full amount of loan applied. It
80
20 1 100
6 7 ' 12
is the same case with other commercial banks.
33
100
6
15
Thirteen per cent of the banks sanctioned loan for working capital alone,
sixty per cent of the banks sanctioned fixed capital alone. Twenty-seven per
cent sanctioned both fixed and working capital. The table also shows that thirty-
three per cent of the State Bank group sanctioned working capital alone. None
of the nationalized banks and other commercial banks sanctioned working
capital alone. 50 per cent of the State Bank groups sanctioned fixed capital
alone wh~le 67 per cent of the nationalized banks sanctioned fixed capital alone.
Other scheduled commercial banks also claimed the same proportion in
sanction~ng the fixed capital alone. 17 per cent of the State Bank group
sanctioned both fixed and working capital, while 33 per cent of nationalized
banks, and the same per cent of other commercial banks sanctioned both fixed
and working capital.
Banks also differ in opinion on sufficiency of loan sanctioned under the
PMRY scheme. 80 per cent of the banks opined that loan sanctioned by them
was suffic~ent to start the proposed activity under the Scheme, while 20 per cent
of the banks admitted that the amount sanctioned by them was not sufficient to
start the project. Such banks pointed out that the beneficiaries also have to
contribute more than the margin money specified under the scheme. Otherwise
they will not have any interest in running the project. 17 per cent of the
nationalized banks and State Bank groups opined that the amount sanctioned
by them is insufficient to start the project. 33 per cent of other scheduled
commercial banks also have the same opinion about the amount of loan
sanctioned.
Training Programme
Training is imperative to execute the policy decisions at the grass root
level. PMRY is no exception for that. The bank personnel at the branch level
should be trained adequately for implement the PMRY Schemes effectively. To
achieve the same, training should be imparted to them. The Yojana guidelines
also specify that the beneficiary training is inevitable for the successful
implementation of the PMRY. The period specified for training under the
scheme is twenty days for industrial ventures and ten days for business and
s e ~ i c e ventures.
TABLE 6.10
Training Programme Attended By Beneficiaries r-- -- - - I S.No. Training -- -- /NO. Of ~espondentsl Per Cent 1 I
1 1 Yes +- - -
1 2 t I No
:- 7- . . - . . -~ -
I TOTAL )I - _ --
(Source Survey Data)
105
45
150
70
30
100
Though the scheme aims at compulsory training for the beneficiaries, the
PMRY Committee has the discretion to exempt the beneficiaries from training
programme, if it thinks it appropriate that to a particular group of activities
training is not required or the present experience of the parties is sufficient.
Table 6.1 0 shows Training Programmes attended by the beneficiaries.
As per the table, 70 per cent of the respondents have undergone training
programme and 30 per cent have not attended any training programme. The
untrained and ignorant people also availed loans under the Scheme.
Opinion Of Recommending Agency On Exemption From Training
The discussion with the District Industries Managers revealed that a
number of beneficiaries have been exempted from undergoing training
programme under the Scheme. They admitted that the beneficiaries exempted
from training have undergone equivalent or higher Entrepreneurship
Development Training of same or higher duration conducted by a reputed
institution or bank. In the opinion of the General Managers of the lndustries
Centres the beneficiaries exempted from training have acquired adequate skill
and they are capable of setting up and running enterprises. They also stated
that in respect of such beneficiaries, no training expenses have been incurred
and no stipend has been issued to such beneficiaries. The General Managers
of lndustries Centres have issued necessary certificates on their request to the
banks in order to enable them to disburse loans without delay. The following
table shows the opinion of General Managers of Industries Centres on
exempting beneficiaries from undergoing training
TABLE 6.1 1
Beneficiaries Exempted From Training
2. Whether the exempted possess 1 - adequate skill
Total
-~ ~ ~ ~-
i Items Details ~~ . ~~~
f - x s 1. Whether beneficiarhes exempted t I 1
1 Yes 1 3. Whether exempted cases 4 100
1 recommended for disbursement / No
No. Of DIC Managers
2
50 from Training
Table 6 11 clearly shows that, fifty per cent of the lndustr~es Managers
Per Cent
50 1 L
No
of loan
I I
Total 4 - . .~ .
Yes , 4 . Whether any stipend given to
the exempted 1 No 4
L-~ --.-..I ~~, 4
selected for study exempted beneficiaries from undergoing training
2
100
-
100
100 1
programme. They agreed that such beneficiaries have adequate skill in setting
Source : Survey Data
up and running the enterprises and that they recommended the cases of such
beneficiaries to the banks for disbursement of loans. No Industries Manager
has given any stipend to the beneficiaries exempted from training under the
Scheme.
Disbursement of Loan Without Training
Opinion of the bank managers on disbursement of loans to those
beneficiaries who have not undergone the compulsory training programme
under the PMRY scheme is given in Table 6.12.
T A B L E 6.12
Loan Disbursed Without Training
I ! Nationalised Items 1 Details ; Group Bank
i No. I ~ e r cent
As per the Table. 27 per cent of the respondent banks disbursed loans to
1 Whether a. Yes 2 33 1 17 p ~ .- 1 Loan
4 67 5 83
100
the benef~ciaries who have not attended any training programme under the
OC Bank
No. J ~ e r cent
Total
NO. I ~ e r cent
1
2
3
1
33
67
100
100
skill 1 ,,,,,T 1 - T z - ~ 1 100 +
L-.-L.-I.~ I Source Survey Data
100 1
4
11
15
4
2 7
7 3
100
100
. 4 100
scheme 17 per cent of the nationalized banks and 33 per cent of the State
bank groups disbursed loans to those who have not attended training
programme. Other commercial banks also account for 33 per cent. The banks
that disbursed loans to the beneficiaries without attending training programme
agreed that such beneficiaries possess adequate skill and no additional training
is required for them to set up enterprises.
Difficulties in getting Loan
Survey reveals that it is not simple and easy to obtain loan and to start
the business under government sponsored schemes. Difficulties experienced
by the borrowers in getting the loan, is given in Table 6.1 3. As per the Table, all
the respondents experienced difficulty in getting the loan under the scheme. 70
per cent of the respondents are of the opinion that they experienced
unnecessary procedural delay in obtaining the loan. 20 .per cent of the
respondents experienced difficulty in preparing the project reports. Of course,
this may be lost sight of, because it is a technical difficulty on the part of the
beneficiaries and 10 per cent complained about non-cooperative officials.
Seventy per cent of the borrowers reported that unnecessary delay was
there in getting loan The t~me lag for getting loan for twenty per cent of the
borrowers was more than one year and for ten per cent it was between six
months and twelve months. 50 per cent of the borrowers received loan within a
period of three to six months and 20 per cent received loan within three months.
Table 6.13
1 Difficulties In Getting Loan I
~- Beneficiaries a. Preparing Project
Reporl I
I : a. Yes 105
2. Delay in Getting Loan t b. No. 45
t -- - .- - - - Total y ' , 1 y: 1 a 1 month to 3 months
105 i 1. Difficulty in Getting
70
30
l a. Procedural Formalities .- I I b Submitting Documents 1 c Getting necessary ' 3. Reasons for Delay ! certificates from Govt. 1 offices
d. Site Inspection ,-
70 b. Procedural Delay
I Total 7 150 I 100 1
10
100
1 ~ o a n
60
45
30
15
1 ) b. 3 months to 6 months 1 I 1
d. More than 12 months I 30 1 20 /
c. Non-cooperative 1 I
Officials 15
Total I 150
40
30
20
..
10
75 I
50 Time lag in gett'ng c 6 months to 12 months / 15
1 .. I
Source : Survey Data
10
1 I
Total 150 100
The borrowers put forth a number of reasons for delay in getting loan. 40
per cent of the borrowers complained about the procedural delay. In their
opinion repeated and unnecessary procedures are involved in the loan
proceedings from the time of submission of application till the disbursement of
loan. 30 per cent compiained about the documents like Invoice, No Objection
Certificate, etc. to be submitted for getting loan. They pointed out the diffici~lty in
changing these documents when required at the time of sanction of the loan. 20
per cent of the respondents opined about the difficulty in getting certificates and
documents like Income Certificate. Community Certificate, etc. to be obtained
from the Government offices. Unnecessary delay was involved in getting such
certificates. 10 per cent complained about the official's delay in visiting the
place of activity before the disbursement of loan.
Difficulties in Achieving PMRY Target
The Central PMRY Committee fixes the target for each State under the
PMRY scheme. The State PMRY Committee allocates the target to different
districts on the basis of development potentialities. The Sub-committee of
which the lead bank is a member allocates the district target to different taluks.
The targets are then allocated to different banks. The controlling office fixes the
targets after cons~dering the bank credit plan and potential.of the branches.
S ~ m e of the banks performed well in fulfilling the targets. Some other banks
could not fulfill their targets.
TABLE 6.14
Difficulty In Achieving Target
--
1 3. Reasons for :c Diffe
I d Applicant already availed loan from the
! Bank e. Technical difficulty in
start~ng the venture
The opinion of the banks on the achievement of target is given in Table
6.14. As shown in the table, none of the respondent banks could achieve the
target under the PMRY Scheme.
There is multiplicity of reasons for not achieving the target. Some Banks
have pointed out that applications received by them were less than the target
fixed for them. These banks granted loans in respect of all the applicants. Table
6.14 shows that sixty per cent of the respondent banks could not achieve their
target due to non-viable proposals recommended by the Task Force
Committee. Some proposals received by the Task Force Committee are non-
viable due to some technical difficulties like difficulty in obtaining power supply,
delay in getting the proposed premises for starting the units, time lag in
arranging necessary inputs, etc. In such cases, banks postpone the sanctioning
of the loan to the next financial year.
Another 60 per cent could not achieve their target on the ground that the
proposals recommended by the PMRY Committee have no scope under the
present situation due to change in the market condition, failure of similar
projects, etc. Banks refuse to grant loans for such proposals. In such cases
Banks ask the applicants to submit new proposals. Such proposals will be
postponed to the next financial year.
AS shown in the table 80 per cent of the banks failed in achieving their
target because of a number of similar proposals recommended by the PMRY
Committee. Cumulation of similar enterprises in the same area will reduce the
profitability of not only the existing units but also the new units, which awaits
sanctioning of loans under the Scheme. One of the main drawbacks of the
PMRY Scheme, from the point of view of the banks, is the recommendation of a
number of similar proposals by the PMRY Committee. The PMRY Committee
does not take much care in evaluating the proposals before recommendation to
the banks for sanctroning of loans. The cumulation of similar line of business
reduces the profitability of the units and the ultimate result will be difficulty in
repayment of loan. Therefore, banks refuse to grant loans for such proposals.
Many applicants withdraw their proposals due to several reasons such
as getting permanent job, loss of interest, fear in starting business, insufficiency
of loan sanctioned by the banks, no scope for the proposals in the changed
conditions, etc. Forty per cent of the banks could not achieve their target due to
the w~thdrawal of the proposal by the applicants.
Reject~on of applications by the bank is another reason for not achieving
the target. Schemes recommended by the PMRY Committee or Task Force
Committee is not ordinarily financed by the Banks. Banks always make their
evaluation, and only viable schemes are selected for granting loans. Banks will
advise the beneficiaries who have submitted non-viable proposals to rectify or
modify their proposals. After rectification and if found viable, the bank will
finance such proposals. As per the table, 80 per cent of the banks rejected
applications and they could not achieve their target because of the rejection of
applications.
There are a number of reasons for the rejection of applications by the
banks after being recommended by the PMRY committee. Some of the
important reasons are techn~cal difficulty in starting the project, project
submitted outside the scope of the scheme, applicant already running similar
business, difference of opinion among members in case of group activity,
withdrawal of the proposal by the applicants, etc.
An important feature of the PMRY Scheme is that loans granted under
the Scheme should be utilized for starting new ventures and not for modification
or extension of the existing ventures. Some applicants take loans from banks
for starting business by offering security to the banks. Later when they know
about the PMRY scheme they submit application for loan under the PMRY
scheme for the same business or different business. The bank usually rejects
such applications. As shown in Table 6.14, twenty per cent of banks rejected
applications on this ground that applicants already run similar business.
Banks generally grant loan for feasible projects, However, the bank will
ensure that the applicant can run the project successfully. When the bank finds
that the applicant has no technical know-how, or the applicant has not received
electric connection or no feasibility for operating and running the business unit
for which he has subm~tted application for loan under the scheme, the banks
will reject the applicatiorl. Usually applicants submit their application before
making such arrangements and expect to do it before the sanctioning of the
loan. But often they could' not complete or make it possible even after
recommendation by the PMRY Committee. Table 6.14 reveals that, twenty per
cent of the banks rejected applications on ground of technical difficulty in
starting the venture. Since Table 6.14 shows multiplicity of reasons, it does not
tally.
Delay in Disbursement of Loan
To ensure the desired results all activities should be completed in a time-
bound manner. Necessary care should be taken for disbursing the loan without
much delay. After sanct~oning the loan, concerned branches have to intimate
the DIC about it, so that the DIC can make arrangements for training facilities.
Banks are required to disburse loans only to those applicants who have
successfully completed the training programme arranged by the DIC. Usually
four to eight weeks time is necessary for scrutinizing the application by the Task
Force recommending the selected applications to the banks, verification of the
applications by the banks, sanctioning loans, arranging the training programme
by the DIC and the final disbursal of loans by the Banks. But under certain
circumstances the disbursal of loans takes unnecessary time. The opinion of
the banks on disbursement of loans are analysed and stated in Table 6.15.
As shown in the Table, 20 per cent of the banks have sanctioned and
disbursed the PMRY loans in less than three months. 40 per cent of the banks
took three to six months for disbursing loans. But, it is important to note here
that 20 per cent of the banks took six months to one year for disbursing loans
while another 20 per cent took even more than one year for disbursing loans.
Delay in the disbursement of loans is always common in government
spo~lsored schemes especially self-employment schemes like PMRY, SJSY,
etc. Compared with other kind of lending, bank branches took more than the
usual time in disbursing loans under PMRY schemes. This may be due to the
fact that other loans are guaranteed by collateral security of the borrower, and
banks are not stringent in disbursing such loans.
TABLE 6.15
Delay In Disbursement Of Loan
P------- 7- I No. Of Bank I I
Details
I I .-
I 1 .Time taken for 1 b. 3 to 6 months k --
I Disbursement of I c . 6 to 12 months 1 1 1 1 . 1 3
1 Lo,m 1. -- , Total liii i j 5 i loo /
1 Loan I ore than one year I #, Total
-~..- --
I 2. Delay in , a. Yes I L~-.-.-p I Disbursement of : b. No
I--- !a~hange of projects
I I : providing necessary
1 -
I in Disbursement
I
6
4 1 4
I
document 1. --
L-- Source : Survey Data
2
1 c. Similar Projects 7 I . 1 3 Reasons for Delay d. Nan-viable scheme
20
20 --
40
1 1 9
2 I
The loans under. the PMRY Schemes are granted without collateral
security. Therefore banks are much more cautious in disbursing such loans.
100
3
6 1
60
2
2
2
t-6-beiay in getting power connection ---
f. Delay in locating suitable premises
g . Mis-use of loan already disbursed
h. Change of quotation after sanction of loan
1 5
1
6
2
2
3
3
I
,
2
2
60
60
20
20
I
6
6
4
3
1
1
40
40
2
3
1
1
9
9
3
3
They evaluate the schemes according to their norms of usual lending and some
of the proposals submitted fail to fulfill the lending norms and some are outside
the scope of the scheme. This analysis of the proposal by the banks, always
result in the delayed disbursal of loans. Though not all banks, some of the
banks make delay in disburs~ng loans under the PMRY Scheme.
Table 6.15 reveais that. 60 per cent of the banks disbursed loans in time.
40 per cent of the banks took more than usual time for disbursing loans under
the Scheme.
As revealed by the banker respondents, there are varied reasons for
delay in the disbursement of PMRY loans. The delay could have been avoided
at the inlt~al stage if necessary care was taken. Some of the banks are of the
opinion that the Task Force committee should recommend only those
applications that have arrangements for starting the unit and with the financial
assistance from the banks, so that the beneficiaries can start their activities
without delay.
One of the main reasons for the delay in disbursement of loans is the
delay in getting power connection for operating the machinery. Units for
production of art~cles of fabrication work, etc. cannot function without power
connection. Banker respondents are of the opinion that if loans are distributed
to such units before getting power connection, such loans will be misused and
the object of the scheme cannot be achieved by merely providing loans to such
units. Normally such units take three to six months to get power connection.
The banks usually disburse loans only after getting power connection and this
results in delayed disbursement of loans. Table 6.15 reveals that, 60 per cent of
the banks made delay in disbursement of loans on the ground of not getting
power connection in time. The table also shows that this is the major reason for
the delayed disbursement of loans.
Similar prolects recommended by the Task Force Committee, is another
reason for the delay in disbursement of loans by the banks: The Task Force
Committee, which is the recommending authority, recommends a number of
similar or identical projects to the banks for sanctioning loans. Banks
discourage such tendency. They find no use in providing loans to a number of
similar projects. In thelr opinion, it will reduce the profitability of the units. In
such cases the banks request the applicants to change their projects and keep
such applications pending. This also results in the delayed disbursement of
loans. Table 6.15 clearly shows that 40 per cent of the banks delayed
disbursement of loans on this ground.
In many cases applicants made a request to the banks to allow them to
change the proposal after sanctioning of the loans. Many of the applicants after
submitting proposals for starting business under PMRY scheme want to change
the proposals when they get some idea about new and more profitable
proposals. Banks usually allow such change of proposals, which aiways require
time and results in delay of disbursement of loans. As shown in the table, 40
per cent of the banks delayed disbursement of loans on this ground.
Banks always refuse to disburse loans against non-viable schemes.
Many of the banks financing PMRY Scheme face this problem. The projects
recommended by the 'Task Force Committee may not be viable from the bank's
point of view. Financing a non-viable scheme is mere waste of money. Banks
require the applicants who have submitted non-viable schemes to change the
proposal and keep such applications pending. Banks also sanctioned such
loans after intimatrng the PMRY Committee. Table 6.15 reveals that 40 per cent
banks made delay in disbursing loans on this ground.
Those who have submitted application for loans under the PMRY
scheme are required to produce certain documents like ration card, identity
card, proof of address and residence, quotation for suppliers for supply of
assets, rent agreement permitting the applicant to occupy the building etc. for
cross reference by the Task Force Committee and by the Bank. In the absence
of these documents. banks will not disburse the loan. The applicants make
unnecessary delay in producing such documents. This causes delay in
disbursement of loans. Table 6.15 shows that, 20 per cent of the banks are
forced to postpone the disbursement of loans on this ground.
Beneficiar~es often take time in locating suitable premises. A majority of
the respondents submitted their applications for loans under the PMRY scheme
without locating suitable premises for carrying out their activities. Some banks
pointed out that the applicants would like to start their business unit under the
PMRY scheme in an adjacent room to their house that is to be built with the
loan amount or to get a room on rent at a good location after sanctioning of
loans. This always takes time Banks require the beneficiaries to make
necessary arrangements for startlng the units and after such arrangement only
they will grant loans The above table shows that 60 per cent of the banks made
delay in d~sbursing loans necause of the beneficiaries delay jn finding suitable
premises for startlng the un~t.
Diversion of fund by the beneficiaries is also a reason for the delayed
disbursement of loans by the banks. Banks usually disburse loans in two or
three installments. It was seen in many cases that some beneficiaries use the
part of the loans already availed by them for some purposes other than those
for which the loan has been sanctioned. It was also found that some of the
benefic~aries used the loans already availed by them for their personal
purposes. In such cases banks postpone the disbursement of the remaining
part of the loans. The above table shows that 20 per cent of the banks made
delay in disbursement of ioans on this ground.
Under the PMRY scheme loans are granted for the purchase of fixed
assets like machinery, tools and equipments, vehicles, etc: Working capital
requirements are usually not financed by the banks under the PMRY scheme.
The 3rnount for the purchase of fixed assets is not paid in cash instead the
banks issue drafts in favour of the supplier of the fixed assets on the basis of
the quotations submitted by the applicants. The beneficiaries often make a
request to the bank for allowing them to change the quotation already submitted
by them, on several grounds like difference in price, quality of assets, etc. This
takes a few more days or weeks ultimately resulting in the non-disbursement of
loans in time. The above table shows that 20 per cent of the banks could not
disburse loans in time on this ground.
Table 6 15 shows n~ultiplicity of reasons hence it does not tally
The study reveals that the beneficiaries experienced difficulties in
starting and running the venture. The problems faced by beneficiaries have
been analysed under two heads, namely problems in starting the unit and
problems in running the unit
Problems In Starting The Unit
Table 6.16 shows the problems faced by beneficiaries in starting the unit.
As shown in the table, the major problem in starting the unit was the
delay in getting the loan. Fifty-six per cent of the beneficiaries were affected by
the delay in disbursement of the loan. This forced the beneficiaries to take loan
from moneylenders even at a very high rate of interest and this in turn had an
adverse effect on the operation of their venture. The beneficiaries reported that
because of the financial delay they could not reach upto their expectations.
Such beneficiaries made default in repayment of the loan. The adverse effect of
delay in getting loan was more on industrial activities. Sixty-two per cent of the
beneficiarles in the industr~al sector were affected by the delay in getting loan. It
affected 44 per cent of the beneficiarles in the business sector and 52 per cent
in the servlce sector.
Table 6.16 ,---. ~- ~~ ~
- -- . -- .. -.
Problem
! r--. ~~
~..
a a. Delay in gett~ng loan
b. Delay in getting power connection
.-
I c. Delay in getting assets - I d. Delay in getting liccn
I -- Source Survey Data---
Delay in getting power connection was another problem faced by the
beneficiaries In start~ng their act~vities. Forty-two per cent of the beneficiaries
reported that they could not start their activities in time due to the delay in
getting power connection. They opined that the delay in getting power
connection adversely affected their production and marketing. Forty-eight per
cent of the beneficiaries in the industries sector were affected, while in the
business sector, it affected 33 per cent of the beneficiaries and in the service
sector, it affected 33 per cent
Delay in getting delivery of the assets forced the beneficiaries to
postpone the launch of their project. Forty per cent of the beneficiaries could not
start the~r venture in time due to the delay in getting the required assets in time.
This affected the beneficiaries more adversely in the service sector. Forty-eight
per cent of the benefic~aries in the service sector were affected by the delay in
getting delivery of assets. It affected 44 per cent of the beneficiaries in the
industries sector and twenty-five per cent of the beneficiaries in the business
sector.
Delay in getting necessary licence or permit for starting the venture
affected 42 per cent of the beneficiaries. It affected 33 per cent of the
beneficiaries in the service sector and 22 per cent in the business sector. In the
industries sector, it affected 25 per cent of the beneficiaries.
Due to multipl~city of problems faced by the respondents. Table 6.16
does not tally.
Problems in Running the Unit
The problems faced by the beneficiaries in running the unit are shown in
Table 6.17. The Table reveals the infrastructural deficiencies in operation of the
PMRY in the State of Kerala. As per the table, shortage of power resources was
a major setback for the development of small scale in industries in the State.
Figum 6.1
Problems In Running PMRY Unit
Problem
Per Per Cent
Table 6.17
I Problems In Running the Unit
a. Power Failure -~
b. Shortage of Fund 33 75 50
+
I 1
I No. of Beneficiaries
c. High cost of operation 9 25 12 44 63 42
Source : Survey Data
Total
F~fty per cent of the respondents disclosed that the shortage of power
supply had affected their units started under the PMRY Scheme. Power failure
affected industrial units more severely. Sixty-three per cent of the respondents
in the industr~es sector were adversely affected by the power failure. The
Government was unable to provide uninterrupted power supply to the industrial
units, but is trying its level best to remove this hurdle in the State.
The benefic~ar~es revealed that the power failure (power cut) affected
their production and resulted in the increased cost of production. Power failure
affected 28 per cent of the respondents in the business sector and 48 per cent
of the respondents in the servlce sector.
The shortage of funds for working capital is hindering the PMRY
beneficiaries in the State. They could not execute their orders in time due to
shortage of funds. For working capital requirements, they resort to the private
moneylenders at a high rate of interest. This results in increased cost of
production and reduction in their profit margin.
As showr. in the table, the shortage of funds affected 50 per cent of the
beneficiaries in running their units. It affected 61 per cent of the industrial units
and 2.6 per cent of the business units. In the service sector it affected 33 per
cent of the respondents.
The high cost of operation is another problem faced by the beneficiaries.
Forty-two per cent of the beneficiaries revealed that their cost of operation was
high hence they could not compete in the local market. Increase in the cost of
spare parts, petrol, diesel. etc. are the main cost accelerating items. This
affected the units in the service and industrial sector severely. Those who took
auto-rickshaws reported that their earnings reduced due to the increase in the
cost of petrol and spare parts. It affected 44 per cent of the respondents in the
servlce sector and 48 per cent of the respondents in the industries sector. In the
business sector. it affected 25 per cent of the respondents.
Since the borrowers faced multiplicity of problems, table 6.17 does not
tally.
