State Bank of India (SBI) and Bank of Baroda, the top two public sector banks, do not figure in the leading list of maximum number of collateral-free MSME loans up to Rs 10 lakh and Rs 10 lakh to Rs 25 lakh as of March 2023.

Punjab National Bank (PNB), Bank of Maharashtra and Union Bank of India occupy the top three positions among the public sector banks, according to the data provided by Bhanu Pratap Singh Verma, Minister of State in the MSME Ministry.

Under the up to Rs 10 lakh collateral-free loan category, PNB tops with 18 lakh loans amounting to Rs 27,124 crore, 

Bank of Maharashtra follows next with 15.20 lakh loans amounting to Rs 22,783 crore. 

Union Bank of India occupies the third chair with 14.64 lakh loans amounting to Rs 20,351 crore, as of March 2023.

The data was provided by Verma in a written reply to a question in the Lok Sabha. The loans to the MSMEs are under the up to Rs 10 lakh collateral-free loan category.

Bank of Baroda extended 13.66 lakh loans amounting to Rs 21,543 crore under this category. While its loan amount was more than Union Bank of India’s, in the number of loans extended Bank of Baroda fell short.

Within the Rs 10 lakh loan vertical, SBI had 9.92 lakh loans amounting to Rs 17,406 crore outstanding as of March 2023. 

In the Rs 10 lakh to Rs 25 lakh collateral-free MSME loan segment, PNB had 1.07 lakh loans amounting to Rs 13,247 crore outstanding, as of March 2023.

Bank of Maharashtra was in the second spot with 82,389 loans amounting to Rs 11,206 crore, while Union Bank of India had 72,296 loans amounting to Rs 18,570 crore. 

SBI and Bank of Baroda had 54,753 and 44,062 loans amounting to Rs 6,869 crore and Rs 5,372 crore outstanding as of March 2023, respectively. 

This is in contrast to their positions as of March 2022 with SBI dominating the two loan categories by size with 18.61 lakh loans (up to Rs 10 lakh loan segment) amounting to Rs 28,297 crore and 88,247 loans amounting to Rs 11,357 crore (Rs 10 lakh – Rs 25 lakh segment) outstanding, The Financial Express reported. 

Canara Bank had 15.56 lakh loans amounting to Rs 20,165 crore in the up to Rs 10 lakh loan segment and 70,696 loans involving Rs 9,663 in the Rs 10 lakh – Rs 25 lakh segment outstanding as of March 2022. 

“All scheduled commercial banks (excluding Regional Rural Banks) are mandated not to accept collateral security in the case of loans up to Rs 10 lakh extended to units in the MSE sector. Banks are also advised to extend collateral-free loans up to Rs 10 lakh to all units financed under the Prime Minister’s Employment Generation Programme (PMEGP) administered by KVIC,” said Verma in his response. 

Banks may, on the basis of good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to Rs. 25 lakh (with the approval of the appropriate authority), Verma added. 

Importantly, the credit outstanding to the MSME sector by scheduled commercial banks in FY23 jumped by 12.3% to Rs 22.6 lakh crore from Rs 20.11 lakh crore in FY22, according to the data shared by Verma in the Parliament recently. The amount outstanding in FY21 and FY20 stood at Rs 17.83 lakh crore and Rs 16.13 lakh crore respectively, The Financial Express reported. 

During the five-year period, the credit outstanding to the MSME sector grew by 49.6% from Rs 15.10 lakh crore during FY19.