NPA fear hits Mudra loan disbursement
A total of Rs 2,46,437.40 crore of loans was disbursed under the MUDRA scheme.
Fearing the generation of non-performing assets (NPAS or “bad loans”), lenders (especially public sector banks) have slowed down the disbursement of loans under the Micro Units Development and Refinance Agency Ltd (MUDRA) scheme. With just 22 days left in the current fiscal, public as well as private sector banks still need to meet the target of Rs 3 lakh crore by way of loan disbursements.
According to data of the Ministry of Finance, as on 9 March this year, the total amount of loans disbursed under the MUDRA scheme during the current fiscal stood at Rs 2,12,896.77 crore as against the sanctioned amount of Rs 2,21,271.26 crore.
In budget 2018-19, the Finance Minister had set a target of lending loans under the MUDRA scheme of up to Rs 3 lakh crore.
As per the Ministry’s data, in 2017-18, a total of Rs 2,46,437.40 crore of loans was disbursed under the MUDRA scheme. The disbursed amount had exceeded the set target for the fiscal year.
Experts say that the reason behind the slowdown in the disbursement of loans under the MUDRA scheme is the fear of generation of NPAS. Bankers are fearful that the MUDRA loan might turn into a bigger NPA.
Tarun Jain, former lending board member of the State Bank of India, told The Sunday Guardian: “The lenders have a genuine concern on MUDRA loans as these constitute small sums in the range of Rs 50,000-Rs 10 lakh, but are without any collateral. The probability of them turning into NPAS is also high and this fear has slowed down the disbursement
Sensing a bigger credit risk due to the disbursement of MUDRA loans, lenders have put in place stricter scrutiny. The lenders have also alerted the Ministry of Finance, as most of the MUDRA loans have gone to first-time entrepreneurs and that increases the risk of MUDRA loans turning into NPAS.
of loans under the MUDRA scheme.”
“Sensing a bigger credit risk due to the disbursement of MUDRA loans— that has reached more than Rs 7 lakh crore till date—lenders have put in place stricter scrutiny. The lenders have also alerted the Ministry of Finance, as most of the MUDRA loans have gone to first-time entrepreneurs and that increases the risk of MUDRA loans turning into NPAS. Lenders have also sought stricter procedure to restrict the rate of disbursement of loans,” Jain said.
The Pradhan Mantri Mudra Yojana (PMMY) scheme was launched by Prime Minister Narendra Modi in April 2015 to improve access to micro finance for non-corporate, non-farm small/micro enterprises and stimulate job creation in the country. Any individual can apply to private or public banks for loans of up to Rs 10 lakh without having to provide any collateral. The PMMY scheme is mainly divided into three categories — Shishu Loans, Kishore Loans and Tarun Loans. Shishu covers loans up to Rs 50,000, while Kishore covers above Rs 50,000 and up to Rs 5 lakh. The Tarun category provides loans of above Rs 5 lakh and up to Rs 10 lakh.