Street vendors still not able to avail benefits meant for MSMEs

Ahna Prakash | NT
Bengaluru

Laxmi, a street vendor on Church Street, sells bangles. Her business has been improving, but she is not able to take a loan to expand it. As she lacks documents like income tax returns and securities, she is not able to avail bank loans.

Urban street vendors like Laxmi now fall under the Ministry of Micro, Small, and Medium Enterprise (MSME). They can now register on the Udyam registration portal as retail traders, allowing them to take advantage of bank priority sector lending.

But in reality, these street vendors are not able to get loans because they fail to meet the eligibility criteria.

“I have my Aadhaar card and Pan card, but still the bank doesn’t help me. I sell these bangles on the street; how will I have income tax return documents,” Laxmi asks. She adds that the banks doubt her ability to repay on time.

Shyam, a vendor at K.R. Puram, has registered under the portal. But his loan still has not been approved. “I want to start a small juice shop. I have the documents like resident proof, but every time I go there for the loan, they say I have nothing to prove that I can pay back the loan,” Shyam said. He also mentioned that he does not want to approach local money lenders, as they charge exorbitant interest.

Raghvendra D, a banker, said that while giving loans to the MSMEs, certain documents are required, such as financials, profit and loss statements, internal scoring sheets, tax returns, and documents regarding the nature of business. “Only after the bank is aware of the financial status of the person, can they lend,” he said.

However, the MSME circular does not mention any such provisions for the availability of bank loans for street vendors. G.R. Akadas, Director, MSME Development Institute Bengaluru, said, “This is a policy matter. We can’t decide anything here; the requirements come from the central government.”

Raghvendra also said that while providing these vendors with loans, the banks check their transactions, receipts, licence, repayment history and a nominal balance of approximately Rs 20,000. “Recovering loans from these small vendors is a difficult task, and they are not very punctual with the payment, and they mostly rely on future government policies to clear out their loan,” he explains.

But now, more people are using digital payment methods like UPI to pay the street vendors. This can work as a proof of transaction for them in the banks. The Reserve Bank of India extended the Payments Infrastructure Development Fund Scheme in August last year to street vendors to enhance digital payments among street vendors. This will help the street vendors in taking loans from the Bank.

Prof Parvathamma G.L., an economist, said that this is a good move by the government to help the vendors. “Most of these people often go to private lenders, who charge high-interest and are often very exploitative.” He also adds that more policy decisions for encouraging street vendors would help the country’s economy grow.