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All is well with Modi’s Mudra loans; NPAs within RBI limits, says finance ministry official

Monika Yadav
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The non-performing assets (NPAs) under Modi government’s flagship scheme Pradhan Mantri Mudra Yojana (PMMY) for promoting small businesses are within the Reserve Bank of India s permissible limits, but there are a few PSU banks which may have breached the RBI threshold, a senior finance ministry official said.The RBI had flagged the issue of rising NPAs under Mudra scheme with the government early this year. The finance ministry had received a letter from the central bank about the burgeoning stress levels under the scheme.

“The overall NPA level in Mudra scheme is around 5%, which is less than the Basel norms. But there are a few PSU banks which may have crossed the RBI’s threshold which is little worrisome,” the official told Financial Express Online, seeking anonymity. He declined to comment about the quantum of latest NPA level. However, according to the other media reports, the NPA level in Mudra loans had crossed Rs 11,000 crore in January.

Notably, former RBI governor Raghuram Rajan, in a note to the Parliamentary Estimates Committee on bank NPAs, had cautioned against the credit risk in Mudra loans and Kisna Credit Card last year.

Rajan had said that the credit targets are sometimes achieved by abandoning proper diligence, creating the environment for future NPAs. He had also said that both MUDRA loans and Kisan Credit Card have to be closely examined.

According to the provisional data of the government, the total loan disbursed up to March 22 in FY19 under the Mudra scheme stood at Rs 2,73,748.57 crore, while in FY 18 and FY19, the government had disbursed Rs 175312.13 crore and Rs 132954.73 crore respectively.

The Pradhan Mantri Mudra Yojana, a flagship scheme of the government was launched by Prime Minister Narendra Modi in 2015 to support small businesses by providing loans up to Rs 10 lakh. These loans are given by commercial banks, rural reserve banks or RRBs, small finance banks, cooperative banks, MFIs and non-banking finance companies or NBFCs to the non-corporate, non-farm small and micro enterprises.

Any individual, proprietary concern, partnership firm, private or public company who has a satisfactory credit track record is eligible to avail the loan under the Mudra scheme. The borrower can approach any of the authorised lending institutions or apply through its online portal. Under the scheme, Mudra loan can be granted under three categories – ‘Shishu’, ‘Kishore’ and ‘Tarun’. While under the category of Shishu, the loan can be extended up to Rs 50,000, under Kishore and Tarun, the loans can be granted up to Rs 5 lakh and Rs 10 lakh respectively.