As loan default mounts, govt mulls new policy for seed funding

Total outstanding amount of loans in 2013-14 was over Rs 127 crore, average recovery a mere 2.65 per cent

Written by Partha Sarathi Biswas | Pune | Updated: July 23, 2015 6:41 am
DIC scheme, loan default, RTI, Indian Express RTI, Pune news Since 2007-08, repayment of both the seed money loan and district industries centre scheme has been abysmal.

The state government’s ambitious scheme to help micro and small entrepreneurs with loans for seed capital seems to have backfired as it has failed to recover loans. In answer to an RTI query filed by The Indian Express, the Directorate of Industry has revealed that as of 2013-14, the total outstanding amount is more than Rs 127 crore with an average recovery as low as 2.65 per cent Under this scheme, the state government provides seed capital to  entrepreneurs as soft loans. Seed money assistance to educated unemployed, district industries centres (DIC) scheme and entrepreneur development training programme are the three components of the scheme.

Assistance for seed money component is Rs 3.75 lakh and bank loans cover 75 per cent of the project cost. The loans issued are soft loans and loan repayment starts six months post disbursement. Failure to pay installment on time attracts 1 per cent penal action.

DIC scheme, loan default, RTI, Indian Express RTI, Pune newsSince 2007-08, repayment of both the seed money loan and district industries centre scheme has been abysmal. The total disbursement till 2013-14 was Rs 117.43 crore in terms of seed money loan, while the total disbursement of district industries centre scheme was Rs 10. 64 crore. Most of the DICs had disbursement targets which they managed to do on time.

However, when it came to recovery of loans, the DICs has had a very bad record. Of the seed money loans, the total pending till date is Rs 116.39 crores, while Rs 10.52 crore is pending for loans disbursed under the DIC scheme. The average recovery of the loan is only 2.65 per cent per year. Poor recovery of loans has put extra burden on the government scheme and has raised a question mark on the financial viability of the project.

These schemes, targeted mostly at the educated unemployed, is also supposed to help build the ecosystem for bigger industries. In the state, the districts of Pune, Thane and Nashik had seen a majority of the loans being disbursed.

Apparently, many had thought that the state government would be waiving off the loans akin to the farmer’s debt waiver scheme of 2008-09.

Sadashiv Survase, joint director, Directorate of Industries, admitted that they  had failed to get the loan payments done on schedule. “We are now going to change the scheme, and instead of loans the government will invest in equity shares in start-ups. The final programme will be revealed soon,” he said.

Video of the day

For all the latest Cities News, download Indian Express App

    Live Cricket Scores & Results