Stand-up India Scheme - Will it really work or will it be another shot in breaking the banking industry?

The Stand-up India scheme launched by the Prime Minister envisages to provide bank loans ranging from Rs. 10 lacs to Rs. 100 lacs (Rs. 1 Crore) to woman entrepreneurs or those belonging to SC/ST category.  The scheme guidelines are available in the official portal of the scheme.  Now the million rupee question is - are all these schemes really going to work?

The answer is paradoxically simple - it just depends!  But at Ethmos we are not presently really gung ho! about this scheme the primary reason being that despite various advises and representations from banks/FIs as well as think-tanks like us, the government has still failed to create a fool-proof justice delivery system for bringing to justice the defaulters, especially the willful ones, in the financial ecosystem.  The result of this lackadaisical attitude is visible in the burgeoning NPAs of the banks and the banks forced to declare loss due to heavy provisioning requirements.

However, we appreciate that the government did the right thing by giving the flexibility to banks to ask for collateral security (property mortgage, gold, deposit guarantee, etc.) if it feels that giving a collateral-free loan would not be prudent.

Our analysis is that considering the present highly stressed banking scenario, banks will not be very aggressive in giving these loans.  But the government seems to have already judged the banking industry sentiment and has made it mandatory for each branch of the scheduled banks to finance at least two loans, one each to an SC/ST and another to a woman entrepreneur.  This is going to be a tough toffee for the banks to chew since the present scenario of defaults by the borrowers has created an environment of defiance in the present lot of borrowers who have slowly but surely realized the loopholes in not only our banking system but also our judiciary, which can put the slowest of the sloths to shame.  It is these kind of dirty defaulters who create the bottlenecks for the genuine sincere ones who wish to just start their business and clear their loans as fast as possible.

We had written previously regarding the urgent need for a brand new legal system in our country and total dismantling of the erstwhile British Raj era constitutional/legal systems which were simply aimed at creating circulatory laws/guidelines/circulars so that the poor Bharatiya public just gives up the hope for justice.  These systems need to be changed before implementing any such grand scheme of things for "distributing" public's hard-earned money in the hands of "stand ups".

Further the scheme should be made open to ALL THE PUBLIC OF BHARAT rather than discriminating on the basis of caste or gender if the government really wishes to create an equitable society.