MP launches PM SVANidhi 2.0 for street vendors:Banks to refund deducted interest money; loans to be provided at 14% interest rate

Beneficiaries of PM Modi’s PM SVANidhi scheme will now receive loans from the MP government at a 14% interest rate. Those who previously received bank loans with interest deducted will have this amount returned, totaling around Rs 120 crore, according to the Urban Administration and Development Department. The scheme supports small street vendors with loans to expand their businesses, offering a 7% interest subsidy from the center and the remaining subsidy from the MP government. Although the scheme allows zero-interest loans, banks had been disbursing funds after deducting interest. MP govt sets 14% cap on PM SVANidhi loans Sources say beneficiaries had grown disillusioned with the scheme. In response, the state government wrote to the Ministry of Finance, which agreed to set an upper cap. Now, beneficiaries will receive loans at a 14% interest rate, and banks will disburse the full amount without deducting interest. Read the report… Why was there a need for change in PM SVANidhi scheme?
The Pradhan Mantri SVANidhi scheme was launched by the central government to provide financial support to street vendors affected by the COVID-19 pandemic. This is a micro-credit scheme. Its main objective is to provide working capital to small traders without any guarantee, so that they can restart their businesses. What was happening in the scheme until now?
Under the scheme, 32 government and private banks in Madhya Pradesh were distributing loans. According to the rules, banks had to claim the interest subsidy amount from the government every three months, which the government would directly transfer to the beneficiary’s loan account through DBT. However, instead of following this process, most banks were adopting an easier route: Bank interest rates up to 25%, loss to government The issue escalated when a review by the Urban Administration Department found some banks charging exorbitant interest rates up to 24.91%, violating the scheme’s welfare principles. On September 13, 2024, the department’s Additional Commissioner wrote to the central government, suggesting banks charging over 20% be banned from the scheme or at least a policy be set for those exceeding 12%. How did the matter reach the Centre?
This case of banks’ arbitrariness and the scheme’s failure came to light during the preparation of the 2024-25 budget. Subsequently, the state government raised this issue at various levels. Following these continuous efforts, the central government took cognizance of the matter and agreed to allow the state government to impose an upper cap on the interest rate. What changes have occurred, how will beneficiaries benefit?
After the consent of the Centre, the Madhya Pradesh government has made several significant changes to the scheme, which will prove to be a game-changer for street vendors.