This paper is an attempt to find out the reason why banks are reluctant the extend loans even though a large portion is to be subsidised by MSME

1. AN ANALYTICAL REVIEW
OF THE
VERACITY OF REASONS FOR REJECTION
OF
PRIME MINISTER’S EMPLOYMENT
GENERATION PROGRAMME
IN MIZORAM
Prepared by
Dr. Zonuntluanga, Mcom, Ph.D
Principal
Aizawl City College
Submitted to
MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES
GOVERNMENT OF INDIA

2. INTRODUCTION
The number of Prime Minister’s Employment Generation Programme (PMEGP)
applications received by the three agencies in Mizoram for the year 2020-21 amounts to
1873 projects. Out of them 1698 were approved and sent to banks for approval. Banks
sanctioned 427 (25%) projects and rejected 299 (17%) projects while 1188 (70%) projects
are pending for approval. This paper is an attempt to find out the reason why so much
rejection happened at the bank level in spite of the fact that a large portion of the project
cost is financed by the Ministry of Micro Small and Medium Enterprises (M/oMSME).
OBJECTIVE OF THE STUDY
To ascertain the veracity of the reasons indicated by the banks namely
1. Projects are not viable/feasible
2. Unable to complete bank formalities
3. Applicant not interested
4. Other reasons.
METHODOLOGY
For the purpose of analysis, PMEGP applications supplied by Khadi & Village
Industries Commission (KVIC), Khadi & Village Industries Board (KVIB) and District Industry
Centres (DIC) but rejected by the bank counterparts to the tune of 184 applications from all
over the State for the year 2020-21 are taken for study. Sample size of 10% for each of the
above four reasons are drawn. The main limitation of the study is that since the sample size
is too small it is impossible to draw statistical inferences.
Table 1:
Reasons for Rejection and Sample Size Determination
Sl. No Reasons for Rejection Population Sample
1 Projects are not viable/feasible 46 5
2 Unable to complete bank formalities 17 2
3 Applicant not interested 24 3
4 Other reasons 97 10
Total 184 20
Source: KVIC
DISCUSSIONS
● Based on the data presented, male and female applicants are almost the same in
number, male applicant accounts for 53.3%.
● More than half of the rejected applicants are from Lunglei District, followed by Aizawl
District (21.2%) and Siaha District (10.9%)

3. ● About two third of rejected applicants are from DIC, followed by KVIB with one fourth
applicants and KVIC with only one tenth.
● About 40% opt for loans upto 5 lakhs, over three fourth of the applicants opt for loans
upto 10 lakhs.
Table: 2
Major Reasons for Rejection by Banks and activities
Sl.no Activities
Reasons for Rejection
Total
Project
is not
Feasibl
e
Incomplet
e bank
formalities
Applicant
is not
intereste
d
Other
reason
s
1
Automobile Work/Auto Service
Centre/Engineering workshop
2.17 1.09 1.09 3.80 8.15
2 Bakery Products/Food/Fruit veg process 1.63 1.63 0.00 3.26 6.52
3 Brick/Masonry/Stone cutting/Granite work/ 0.54 0.00 0.54 2.72 3.80
4
Cable T.V. Network/ Computer/Electronic
Store/Electronic servicing
2.17 0.00 0.00 3.26 5.43
5 Candle/Fuel briquette 0.54 0.54 0.54 0.54 2.17
6
Carpentry/Sofa repair/Cotton bed
pillows/Wood work
2.17 1.63 0.54 3.80 8.15
7 Fabrication Work/Steel grills 1.09 0.54 1.63 2.17 5.43
8
Tailoring/Embroidery/Screen printing/
Kamble Weaving/Laundry/Shoe making
5.98 1.63 2.72 13.59 23.91
9 Ayurvedic Herbal Beauty Parlour/ Products 0.54 0.00 1.63 3.80 5.98
10 Tea Stall /Confectionary Shop 0.54 1.09 0.54 3.26 5.43
11 Others Activities. 7.61 1.09 3.80 12.50 25.00
Total 25.00 9.24 13.04 52.72
100.0
0
Other activities includes: Soap making , blacksmithy, carts, offset printing, mud pot manufacturing, photo and video
editing , stone mining, barber shop and manufacturing of poly bags.
Source: KVIC
● More than half of the rejected applications was due to other reasons. Other reasons
includes:- re-submission of fresh application, revised project report to be submitted,
project under process, project to be reviewed and rejected.
● As report by the banks, the project report submitted by 25% of the applicants are
not feasible. About 13% of the applicants are not interested while about 10%
applicants could not complete bank formalities.

4. ● About 25% of the applicants sought loans for wearable business that includes
tailoring, embroidery, screen printing, kamble weaving, laundry, shoes and
sandal-manufacturing industry. About 6% of them are found with project report that
is not regarded to be feasible. About 14% of them are rejected due to other
reasons.
● Other activities account for 25%, this includes soap making, blacksmithy, carts,
offset printing, mud pot manufacturing, photo and video editing, stone mining,
barber shop and manufacturing of poly bags. About 7% are found with project being
not feasible.
PERCEPTION OF THE APPLICANTS
According to banks, the most prominent reasons for rejection of applications are
projects are not feasible, unable to complete bank formalities, applicant not interested,
and other reasons. The applicants are asked whether these reasons are valid in their case.
The number of times the bank is visited indicates how serious they are in their projects. As
shown in Table 3, more than half of the applicants stated that the reason for their rejection
is different from what the bank has stated. 40% of the applicants believed that the reason
for their rejection stated by the bank is true and valid.
30% of the applicants visited the bank one time while 20% of them visited 2 times to
discuss about their project. There are 5% who visited the bank 5 times. Only 10% of them
visited the bank only one time, while 5% of the applicant visited the bank two, three, four
and five times each. 10% of the applicants visited the bank ten times indicating that they
have real interest in their project. It must also be noted that 5% of the applicants cannot be
called as their phone number is inactive.
It is apparent from the table that those applicants who said yes visited the bank
more often than those who said no to the question. It must also be noted that 5% of the
applicants cannot be called as their phone number is inactive.
Table 3
Reason for Rejection State by the Bank is True or Not
Whether reason for
rejection is true or not
Number of Visits (No. of times) Total
(%)
1 2 3 4 5 10
Yes 10 5 5 5 5 10 40
No 30 20 0 0 5 0 55
Total 40 25 5 5 10 10 95
Source: Field Survey
The applicants are also asked their experience with the banks as regards to their
loan application. They are given ordinal values so as to rank their experience every time
they visited the banks. As shown in Table 4, 40% of the applicants had a bad experience

5. with their banks and regarded the bank officials as not helpful as far as their loan
application is concerned. Only 25% of the applicants had positive experience with their
banks.
Interestingly, among 10% who had visited their bank ten times, half of them said
that they have good experience with the bank another half of them said they have normal
relationship. 55% of the applicants have visited their banks 2 times out of which half of
them said they had very bad or bad experience with their banks. It must also be noted that
5% of the applicants cannot be called as their phone number is inactive.
Table 4
Experience with the Bank
Experience with the
Bank
Number of Visits (No. of times) Total
(%)
1 2 3 4 5 10
Very Bad 0 5 0 0 0 0 5
Bad 5 20 0 5 5 0 35
Normal 0 20 0 0 5 5 30
Good 0 10 5 0 5 5 25
Very Good 0 0 0 0 0 0 0
Total 5 55 5 5 15 10 95
Source: Field Survey
FINDINGS
● The important reasons for rejecting the applicant as stated by the banks were found
to be false by more than half of the applicants. 55% of the applicants believed that it
was other reasons for which they are rejected by the banks.
● Applicants has to make certain number of visits in order complete the loan
procedure. Contrary to this, applicants are not visiting the bank as much as they
should have. One of the main reasons for not paying more visits to the bank is that
the banks are not helpful in dealing and found no use in visiting the same.
● Bank staffs are not efficient in following up their applicants. This may largely be due
to insufficient number of field staff.
● The applicants are unable to convince the banks enough so as to approve the
project proposal. This is largely due to the fact that project is made by expert
without involving the prospect borrowers. The applicants are ignorant of their
applications and cannot defend their case.
● Banks often gives false hope to the applicants resulting in loss of time and money.
● Even the banks staffs are found to be ignorant about the loan offered by their banks.
● Banks cannot extend loan more than the quotas allotted to them. But more often
than not, the applicants are intimated in the last minute.

6. ● Banks insists on collateral which posed serious problem to those who are not lucky
enough to provide one.
● The main motive of most applicants for PMEGP is the margin money subsidies, they
will opt for any activity to get subsidies.
● Most applicants are oblivion about their projects. They relied completely on the
consultants whose main motive is to charge a hefty amount for their service.
● The present Entrepreneurship Development Programme (EDP) are found to be
ineffective. In fact, entrepreneurs who had undergone entrepreneurship training
through Rural Self Employment Training Institute (RSETI), DIC etc. earn lesser than
those who had not undergo such training.
SUGGESTIONS
● The bank staffs require more training on how to deal with customers particularly
schemes that involve other agencies. They must possess enough knowledge and
information about the loan so that the applicants are guided in the most
appropriate manner.
● Entrepreneurship training programmes should be organized much before loan is
sanctioned. This will enhance the knowledge required to even to apply, start, run
and eventually make profit. After all training is very much appreciated and required
by any prospect even if they failed to avail the loan.
● More co-operation between the three agencies of MSME and banks is of utmost
important. This cooperation should start at the outset when prospect borrowers fill
up an application.
CONCLUSION
Along with many other schemes, PMEGP is a one of the effort to create more and
more self-employed in the country and people should become job creator rather than job
seekers. However, it seems this basic aim has not been achieved. This is a high time to
effectively formulate and implement the scheme effectively.
REFERENCE
● https://www.kviconline.gov.in/pmegpeportal/pmegphome/index.jsp#
(Accessed:10:30 pm, 7.3.2021)