Modi's '59-Minute' Loan Scheme for MSMEs Linked to Ahmedabad-Based Firm

Among the slew of 'grand' announcements that Prime Minister Narendra Modi excels in making, is one about a 'Diwali gift' for lakhs of cash-strapped MSMEs. With a click of a mouse on psbloansin59minutes.com, MSMEs can firm up loans of up to Rs 1 crore in 'less than an hour' or '59 minutes',  promised Modi, along with assuring more relaxation in labour laws. 

 

Modi's announcement was music to the ears of lakhs of medium, small and micro enterprises (MSME), as the sector is one of the largest employment generators and has been reeling under the impact of the demonetisation disaster and the shoddy implementation of the goods and services tax.

 

But, here's what lies behind the 'music' of the '59-minute loan', according to a Facebook post by Maheshwari Peri, the founder and chairman of 'Careers 360', who has raised some questions on the loan process that requires linking borrowers with banks,  as well as the selection of an Ahmedabad-based fintech company to do the same, as reported by The Quint.

 

Peri, who was formerly with Outlook magazine, went step by step, as guided by the portal, and found a connection between the scheme and a Gujarat-based company, named ‘Capitaworld’, which till March, 2017 (two years after it was incorporated) did not run any operations and that one of its latest directors (incorporated in 2018), was Akhil Handa, who ran Modi’s election campaign back in 2014.

 

Capitaworld, an Ahmedabad-based fintech company, has among its signatories Jinand Shah and Vikas Shah. Another director on the board, Vinod Modha, works as a strategic advisor for corporates, including Nirma and Mudra, which was earlier owned by Anil Ambani, adds the report. As of March 31, 2017, the company did not start operations and had a revenue of Rs 15,000.

 

So the questions that Peri has raised is: "How was such a massive project trusted to a company with no experience? What were the terms of the contract? Any projections on how much Capitaworld makes?” 

 

Among the other questions he raised are: How can Capitaworld sanction a loan and tag the bank? What is their locus standi? What were the terms of the contract? How were they chosen, as they were neither operational nor had experience?

 

According to Peri, Capitaworld makes its money from banks, who in turn load it on the customer. 

 

The amount of money this fintech company stands to make is humongous, as Peri rightly asks: "Is it true the Rs 1,180 we paid goes to CapitaWorld and also a part of the 0.35%? Imagine a million SMEs applying?", wondering if there is anything on data privacy and non-disclosure. "After all, this Ahmedabad-based private company will hold our data with serious repercussions - Net Worth, GST, ITRs etc," he adds.

 

To get an idea of the amount of money involved, Scroll went to the website and found that the statistics counter (which has been removed since) claimed 1.69 lakh registrations and loan approvals of Rs 23,582 crore. By a simple calculation, 0.35% of that works out to Rs 82.53 crore. 

 

“Can you imagine the amount of money that can be made if a million MSMEs apply for loans?” a Delhi-based businessman who applied for a loan told the Scroll, wondering why he got an email containing his “in-principle approval” not from a government bank but from [email protected].

 

Going deeper into the questions raised, the report found that the website "mirrored the aims outlined in a tender issued by the state-owned Small Industries Development Bank of India (SIDBI) on January 22, seeking to hire a consultant to set up a new legal entity that would facilitate contactless lending."

 

The report says "the tender went on to define eligibility requirements. To qualify, consultants needed to have earned a fee of at least Rs 50 crore from management consulting during the three preceding years....The consultant should have been in existence in India since April 01, 2012. Once a consultant was shortlisted, said the tender, a new legal entity would be formed, in the form of a company with SIDBI and other banks as shareholders."

 

However, on closer look, "psbloansin59minutes shows that the company behind it does not quite meet the tender stipulations. "The website is not run by a new legal entity as envisioned by the SIDBI tender. Instead, it is run by a Ahmedabad-headquartered fintech company called CapitaWorld Platform, which was set up in 2015," says the report.

 

So, yet again (remember Rafale?) an inexperienced private entity is being entrusted with such a huge task, despite the SIDBI doing this for ages. Why? Prime Minister Modi, the nation want to know.