ICICI Bank to offer MSMEs loans up to Rs 10 mn based on their GST returns

Firms availing loans needn't submit several other financial statements, the bank says the move will reduce paperwork, cut lead time between application and sanction

In order to make working capital for easily available to them, ICICI Bank on Monday announced a new overdraft facility for medium, small and micro enterprises based on their GST returns. Under the new system, firms can submit their GST returns to avail overdraft up to Rs 10 million without having to furnish a whole lot of other financial statements. 

In a press statement, the bank said that this facility is available to all firms including non-customers of ICICI Bank. Additionally, this reduces paperwork and cuts the lead time between application and sanction of a loan, claimed ICICI Bank.

“This facility brings in the improved convenience of availing quick OD facility, as it does away with the requirement of paper-intensive assessment of financial documents including balance sheets of previous years,” the bank stated. “This also enhances convenience for MSMEs by enabling the usage of GST returns for assessing their eligibility of working capital limit, thereby simplifying the process for sanction of the OD within two working days.” 

This facility is available solely on the basis of GST returns without any further assessment of the financial position from the balance sheet, according to ICICI Bank. For a loan, the customers are required to submit their GST returns from the past six months. Basis the turnover mentioned in the returns, OD amount will be calculated. The bank has capped the loan limit to 20 per cent of the turnover as stated in the returns. 

Moreover, this is not a collateral-free facility as it requires customers to submit their residential/commercial /industrial property as collateral security, the bank said. 

In the month of August, GST collections dropped to Rs 939.60 billion from Rs 964.83 billion in the previous month, according to official data. The number of GSTR 3B filings, however, increased slightly to 6.7 million from 6.6 million in June. 

Even as GST continues to mop up a large chunk of revenues for both the state and centre, ICICI Bank’s survey showed that 11 per cent of businesses think that the launch of GST will have a negative impact on their turnover. The bank said that this is a drop from 22 per cent people reporting the same in the previous financial year. 

With this facility, ICICI Bank hopes to strengthen its business loan book as GST returns are likely to provide a largely secure analysis of a company’s financial position. Moreover, the collateral is likely to add additional security to the loans at a time when corporate non-performing assets remain a looming cloud over the banking sector. 

“Since GST takes into account comprehensive business flows, we believe that GST returns will change the lending paradigm for MSMEs with faster and hassle-free access to working capital finance from financial institutions,” said Anup Bagchi, Executive Director, ICICI Bank. 

ICICI Bank hasn't specified the applicable interest rates for these loans on its website as it claims that interest rates are competitive but decided on each borrower's profile, financial position, repayment track record among other factors.