RBI WARNS ON NPA SPIKE IN MUDRA LOANS
Central bank fears hike in non-performing assets may plague banking system again
NEW DELHI: The Reserve Bank of India (RBI) has raised a redflag on the spike in non-performing assets (NPAS) under the government’s flagship scheme to support micro enterprises in the country under the title the Pradhan Mantri Mudra Yojana (PMMY). The bank loans provided under the Pradhan Mantri Mudra Yojana is called Mudra loans.
According to Finance Ministry sources, RBI has cautioned the ministry that the scheme might turnout to be the next big source of NPAS, which have plagued the banking system.
The central bank has flagged that bad loans under PMMY have risen to Rs11,000 crore.
As per the annual report of PMMY, 2017-18, total disbursements under the scheme stood at Rs2.46 trillion in FY 18.
Out of this, 40 per cent were disbursed to women entrepreneurs and 33 per cent to social categories. More than 4.81 crore micro borrowers have benefited through PMMY during the year FY2017-18.
The PMMY was launched on April 8, 2015. Under the scheme, banks are required to finance micro and small entrepreneurs for up to Rs10 lakh. Loans can be granted under three categories - up to Rs50,000 under ‘Shishu’; Rs50,001-rs5 lakh under ‘Kishore’ and between Rs5,00,001 and Rs10 lakh under ‘Tarun’ category.
In addition, RBI’S caution comes at a time when the country’s financial system in reeling under sevier stress due to the IL&FS crisis which continues to hurt banks with impairments, the most recent case being Indusind Bank.
On January 9, Indusind Bank in its latest quarterly earnings result statement without naming the IL&FS Group, said: “Advances granted to various companies and SPVS belonging to a Group in the infrastructure sector against certain identified cash flows and pertaining to specific assets are ‘Standard’ as at December 31, 2018 on the basis of the conduct of the accounts till date.
“Since October 1, 2018, certain governance and management changes have taken place in the Group and measures to turn it around through a Resolution Plan are underway.”
The bank said it was monitoring the developments and implications of the ‘Resolution Plan’.
“In the interim, as a prudential measure, the bank has made a contingent provision of Rs255 crore on these ‘Standard’ assets during the quarter ended on December 31, 2018, in addition to an amount of Rs275 crore made during the quarter ended on September 30, 2018.
FOREX RESERVES UP
India’s foreign exchange (forex) reserves rose by $2.68 billion during the week ended January 4, an official data showed.
According to RBI’S weekly statistical supplement, the overall forex reserves increased to $396.08 billion from $393.40 billion reported for the week ended December 28.
India’s forex reserves comprise Foreign Currency Assets (FCAS), gold reserves, special drawing rights (SDRS) and India’s position with the International Monetary Fund (IMF).
FCAS, the largest component of the forex reserves, edged higher by $2.21 billion to $370.29 billion during the week ended January 4.
Besides the US dollar, FCAS consist of 20-30 per cent of other major global currencies.
A man speaks on his cellphone outside the Reserve Bank of India headquarters in Mumbai.