PM Vishwakarma Yojana 3 Lakhs Loan Amount get Vishwakarmas
Government of India newly introduced PM Vishwakarma Yojana for traditional workers for providing 3 lakh rupees of financial assistance to vishwakarmas through bank loans in the form of "Enterprise Development Loans" without the need to provide assets or security against the loan amount that serves as a pivotal mechanism for mitigating financial troubles and developing dignified life of artisans and also provide a safety net to lending institutions for minimizing the risk from defaulters.
Loan Terms:
Loan amounts, and repayment periods is as indicated in the following table.
| Loan term | Amount of loan | Tenure of Repayment |
|---|---|---|
| 1st loan | up to Rs 1 lakh | 18 Months |
| 2nd | up to Rs 2 lakh | 30 Months |
What is the Interest rate and Subvention of Vishwakarma Loan?
Usually, the traditional artisans and craftspeople pay lower interest rates to banks, which is fixed at 5% and the government supports to banks through subvention at 8%. Hence, the total gross interest charged 13% is the same for both the first and second pools of loans. Below table illustrates on the calculation of interest and subvention rate on loans.
| Particulars | Amount |
|---|---|
| Loan amount is taken by beneficiary [A] | Rs 1,00,000 |
| Monthly Installment | Rs 5,000 |
| Rate of Interest @ 5% [A*5*1/12*100] | Rs 417 |
| The borrower pays interest monthly to the bank [B] | Rs 417 |
| The Bank receives a monthly subvention from the GOI @ 8% [A*8%*1/12] | Rs 667 |
| MOMSME provides financial support to banks monthly 8% through subvention [C] | Rs 667 |
| Total interest earning by Bank from the beneficiary and GOI [B + C] | 417 + 667 = Rs 1084 |
How to apply Vishwakarma Yojana loan?
The total loan arrangement would be Rs 3,00,000/- wherein, the targeted beneficiaries can avail of the first loan of up to Rs 1 lakh after completion of first level training and the second loan of up to Rs 2 lakhs will be provided to skilled beneficiaries who have successfully repaid the first one while not required to apply for loan separately.
Vishwakarma Yojana loan sanctioning procedure:
By instilling confidence in banks or financial institutions, the Government created the Credit Guarantee Fund trust to encourage lenders to extend credit support to Vishwakarmas who are struggling to access loans due to a lack of collateral requirements or low credit score, which is also serves as a safeguard for participating banks and financial institutions if the borrower fails to repay the loan.
However, the real fact is lenders assess track of your repayment history on your previous loan before making lending decisions so that maintaining a good credit history is crucial and also increases your chances of availing loan.
The details of credit support coverage are given in the following table.
| First Loan | Second Loan | |||
|---|---|---|---|---|
| Percentage | Coverage | Percentage | Coverage | |
| First loss | 0 to 7.5% | 100 % | 0 to 5% | 100% |
| Second loss | Above 7.5 to 20% | 80% | Above 5 to 15% | 80% |
| Third loss | Above 20 to 50% | 60% | ||
| Minimum guarantee cover | 50% | 15% | ||
As of my knowledge, I will explain the concept by using a relatable example making it easier for you to understand.
Let's say a bank provides a loan of Rs 1 lakh to a beneficiary but the borrower failed to repay the debt of RS 7500/- out of the sanctioned loan amount, then the government will pay the total amount to the banks.
If the beneficiary pays Rs 80,000 debt but unable to pay 20 % on Rs 1 lakh i.e. RS 20,000/- then the government cover 80% on default debt. That means paying Rs 16,000 to banks on behalf of the borrower from the credit guarantee fund and the bank would be responsible to recover the RS 4000/- outstanding debt from the borrower.
Conclusion:
The Credit Guarantee Fund is available in PM Vishwakarma Yojana that emboldens lending institutions to extend financial support to Vishwakarmas for preserving traditional craftsmanship, enabling them to expand their business, allowing them to purchase new tools for upgrading their skills, and helpful for capturing new markets.
