Public sector banks eye common online platform for giving loans to start-ups

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Public sector banks (PSBs) are exploring the possibility of setting up a common online platform to meet the credit needs of start-ups. This is aimed at giving a fillip to the government’s “Startup India” initiative.

The Finance Ministry is understood to have asked the State-owned banks to examine the establishment of a “common start-up hub portal”.

This move comes as the government seeks to support entrepreneurship, build a robust start-up ecosystem and transform India into a country of job creators instead of job seekers.

Proposed portal

The architecture of the proposed portal would be such that start-ups will be able to their upload loan application (single application across all lenders), track the application status online, get loan sanction and decide the lender offering the best terms and conditions for the loan, among others, according a senior executive with a PSB.

Towards this end, PSBs are closely examining Online PSB Loans Ltd’s “www.psbloansin59minutes.com” digital lending platform, which connects MSMEs borrowers with multiple lenders. Currently, this platform offers business loans (MSMEs and Mudra loans) and retail loans (home, personal and auto).

At present, State Bank of India (SBI), Bank of Baroda (BoB), Canara Bank, Union Bank of India, among others, have dedicated branches and schemes for start-ups. The start-up verticals at these banks are expected to channelise loan applications from the proposed “common start-up hub portal” to the branch closest to the start-up for further action.

Credit guarantee scheme

To encourage Banks and Non-Banking Financial Companies (NBFCs) to lend to start-ups, the Government of India has established a Credit Guarantee Scheme. Under this scheme, credit guarantee is provided to loans extended to DPIIT (Department for Promotion of Industry and Internal Trade) recognised start-ups.

Specifically, credit guarantee scheme for start-ups, which was operationalised by the National Credit Guarantee Trustee Company from April 1, 2023, is available to loans extended to start-ups by Scheduled Commercial Banks (SCBs), NBFCs and Venture Debt Funds under SEBI registered Alternative Investment Funds.

As on October 31 2024, a total of 1,52,139 entities have been recognised as start-ups, of which, 73,151 start-ups have at least one-woman director, said Jitin Prasada, Minister of State for Commerce & Industry, in his reply to a question in the Lok Sabha.

The eligibility criteria for a company to become a DPIIT recognised start-up is: its period of existence and operations should not exceed 10 years from the date of incorporation; and should not have annual turnover exceeding ₹100 crore in any of the financial years since its incorporation.

Further, the entity should not have been formed by splitting up or reconstructing an already existing business; and should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment.