COVA recommendation for Banking Implemented by the Govt of India

Hyderabad: Finance Ministry of the Government of India had accepted 8 of the 12 Recommendations made by COVA for financial inclusion of the poor in 2015. Now, one more of the Recommendations- of automatic electronic assessment for sanction of Loans for Micro Enterprises is operationalised. 

Government of India has initiated the eMudra scheme from October 2019 wherein a borrower can file an online application for loans up to Rs. 50,000 under the Shishu Scheme of MUDRA and the loan is sanctioned instantly and the loan amount credited to the bank account of the applicant based on computerised assessment of the loan worthiness of the applicant through CRIF-a 3-digit numerical credit score assigned to the borrowers by lenders to determine the level of risk involved in lending to the borrower concerned. Bank managers and representatives are to visit the borrower within 3 months of the sanction of the loan for verification.

Mazher Hussain, Executive Director COVA said, “COVA had made this recommendation to the Finance Ministry, Government of India in 2014 and again in 2016 as part of two studies undertaken by COVA titled ‘Critical Study of Financial Inclusion in G20 Countries with Focus on India” and “Study on Status of Micro and Small Enterprises in BRICS Economies: Review and Recommendations for Advancement” for the G20 Summit of 2013 and BRICS Summit of 2016 respectively.

The Studies can be accessed at

The specific proposals were that all banks should provide facility of online applications for DRI and MUDRA loans as is available for other loans as part of the G20 Study in 2013 and in 2016 for the BRICS Study, COVA had come up with the ideas of use of Entrepreneur OD (Over Draft) Cards that should be automatically issued to all registered Nano and Micro-Entrepreneurs from INR 10,000 or $150 to INR 50,000 or $750 depending on the credit limit determined by the banks after an initial assessment.

With the introduction of the eMudra Scheme, these recommendations are now realized and can significantly improve the access of the poor to bank credit and promote small entrepreneurs like never before. 

The Studies also proposed the concept of Mobile Bank Deposit Cards to be designed along the lines of Mobile Recharge Cards that will enable Nano and Micro businesspersons to deposit their daily earnings into bank accounts by using scratch cards that can be made easily and widely available at all times at negligible transaction costs. This Recommendation is under consideration and we hope it will be accepted soon.

The Entrepreneur OD Cards and Mobile Bank Deposit Cards can bring down the cost for accessing credit and repayments/recovery to negligible levels and make lending to the poor profitable for banks- that alone can open up access to bank credit to Nano and Micro Enterprises and make our economies broad-based and sustainable.

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