Businesswomen hit by KSFC volte-face on interest

BENGALURU: Several women entrepreneurs, applying for loans at a subsidised interest rate from the Karnataka State Financial Corporation (KSFC), have complained that the organisation's decision not to lend the entire sum at 4% interest is affecting their plans and forcing them to reach out to other financial institutions.
In the previous budget, the state government had increased financial assistance to women entrepreneurs through KSFC from Rs 50 lakh to Rs 2 crore at 4% per annum. However, many businesswomen, who approached the corporation in the recent past, told TOI they're being denied the entire amount of Rs 2 crore at 4%. Officials told them they could borrow part of that loan - decided case by case - at 4% and pay regular interest rates, as high as 14%, for the rest. An entrepreneur, who wanted to start a new business, needed Rs 1.5 crore as loan, but was told she could only get 70% at the subsidised interest rate and at 14% interest for the rest. "I took it up with higher officials, including those in the finance department. There seems to be no change in policy," Smitha (name changed) said.

A woman, who wante d to branch out from a family-run business to set up a manufacturing unit, said she's approaching other institutions, including commercial banks. "I was happy when the limit was hiked from Rs 50 lakh to Rs 2 crore at 4%. But other institutions offer loans at a lesser rate. I hope the government looks into this," she said.

Spreading out cash

KSFC officials said the policy has been helping hundre ds of women realise their dreams. "If we give loans up to Rs 2 crore at 4%, the total number of women we could provide loans was only 100 across the state. The budget had announced Rs 200 crore for this but we weren't given this money," KSFC managing director Ekroop Caur said.

She said the interest rate did not go up to 14% and women could still borrow up to Rs 2 crore at 8%, which is better than what's offered by commercial banks. "We give the first Rs 50 lakh at 4%, and if it's up to Rs 1 crore, then 50% is at 4% and the rest at a higher rate. It's similar for up to Rs 2 crore. So, if somebody is borrowing Rs 2 crore, they're actually getting it at 8% annual interest," Caur said.

Though she couldn't immediately say how many applications the corporation receives annually, she said more than 50% need about Rs 50 lakh. "The decision to change interest rate was taken in consultation with the finance department and the KSFC board," Caur added.