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SME loans: SBI to close one-time settlement scheme

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is closing its one-time settlement (OTS) scheme for bad loans of small, micro and medium enterprises due to disappointing response.

A senior official of the country’s largest lender said the response to OTS has been less than desired. The repayment capacity is under severe strain, making it tough to close chronic accounts.

SBI’s total gross non-performing assets were about Rs 39,676 crore at the end of March 2012. Out of which, SMEs’ share was Rs 11,929 crore (30.1 per cent). The total SME portfolio was Rs 1,39,175 crore at the end of March 2012.

Under the scheme, the persons concerned would have to pay upfront five per cent of the loan taken for settlement of the dues within a year. It was part of the effort to recover and settle loan accounts. The scheme provided discounts of 15 per cent to borrowers who make full payment within a month and 10 per cent to those paying back in three months from the date of approval of the OTS.

Diwakar Gupta, managing director and chief financial officer, SBI, said small and micro enterprises face a challenge is growing the top line in the current economic downturn. Also, their input costs are growing.

In June, the country’s largest public sector lender has cut across all borrower categories to ease pressure on repayment.

SBI passed on the benefit of reduction in cash reserve ratio. There is an overall reduction in interest rates in the range of 50 basis points to 350 basis points across all categories of borrowers.

It had introduced separate rate structure for SME borrowers covered under the credit guarantee scheme. This is applicable for limits up to Rs one crore to encourage SME borrowers to obtain guarantee cover and ensure enhanced credit flow to this segment.

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