Ahead of the crucial general polls, banks seem to have worked overtime to meet the target under the Pradhan Mantri Mudra Yojana (PMMY) meant for small and budding entrepreneurs. In just one month through March 22, lenders disbursed Mudra loans of as much as Rs 71,080 crore, or close to a quarter of their full-year (FY19) target of Rs 3 lakh crore, setting a record. They disbursed a total of Rs 2,73,749 crore as of March 22, compared with Rs 2,02,669 crore reported up to February 22, as per the latest official data. While the Mudra scheme has improved the access to credit at affordable rates (8-12%) for people from even vulnerable sections who used to rely heavily on informal channels such as money lenders, experts have warned of potential NPA risks, as most of these loans are collateral-free.
The number of Mudra loans sanctioned also surged to 5.41 crore as of March 22 (FY19), up from 3.89 crore a month before and compared with 4.81 crore in the entire FY18.
In value term, the lenders sanctioned Rs 2,82,594 crore as of March 22, against Rs Rs 2,10,760 a month earlier, showed the data. An official source said the disbursement target of Rs 3-lakh crore, announced in the Budget for 2018-19, may have been met when the fiscal ended on March 31.
Mudra loans, of late, have raised concerns about becoming the potential source for the next bad loan crisis, along with some other schemes for MSMEs and farmers. Late last year, former RBI governor Raghuram Rajan warned that credit targets were sometimes achieved by abandoning appropriate due diligence. “Both Mudra loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk. The Credit Guarantee Scheme for MSME run by SIDBI is a growing contingent liability and needs to be examined with urgency,” Rajan said in a 17-page note to the Parliamentary Estimates Committee.
The government has, however, pointed out that non-performing assets (NPAs) in the Mudra loans are still much lower than overall bad debt. According to the 2017-18 annual report of the PMMY, the NPA level under Mudra loans was only 5.38% as of end-March 2018, against over 10% in the overall banking system covering all loans.
State-run banks, which account for an overwhelmingly large proportion of the overall NPAs, seem to have performed well in this scheme. In a reply to a question in the Lok Sabha, Shiv Pratap Shukla, minister of state for finance, said: As reported by public-sector banks (PSBs), total NPAs for loans extended under Pradhan Mantri Mudra Yojana during the last three years were Rs 596.72 crore (2015-16), Rs 3,790.35 crore (2016-17) and Rs 7,277.31 crore (2017-18), respectively. PMMY NPAs as on 31st March, 2018 for PSBs were 3.43% of the amount disbursed under the scheme.
The scheme, launched in April 2015 by Prime Minister Narendra Modi, aims to offers loans up to Rs 10 lakh to non-corporate and non-farm small/micro enterprises. However, some activities allied to agriculture–such as dairy, poultry, bee-keeping–are also covered under it. Mudra loans have three categories Shishu, Kishore and Tarun. Shishu covers loans up to Rs 50,000, Kishore covers above Rs 50,000 and up to Rs 5 lakh and the Tarun category provides loans of above Rs 5 lakh and up to Rs 10 lakh.