Even as concerns were rife about a significantly large number of bad loans in the Pradhan Mantri Mudra Yojna (PMYY) scheme, the actual repayment data obtained under Right to Information Act shows that it was not as bad as it was perceived. In the seven years since the scheme was launched, the borrowers --essentially micro and small enterprises -- have maintained a comparatively much healthier repayment record.
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The data showed that banks' non-performing assets for Mudra loans - including those extended during the Covid-19 pandemic when small enterprises were hit the hardest -- were lower than average of the banking sector.
The Indian Express, which sought the data through RTI, reported that since Mudra was launched in 2015, bad loans under it accounted for Rs 46,053 crores, or 3.38 percent of overall disbursements till June 30, 2022. This represents less than half of the Indian banking sector's 5.97 percent NPAs for the financial year 2022.
What is Mudra loan?
The Micro Units Development & Refinance Agency, or MUDRA, is a financial institution set up by the Government of India to promote and refinance micro enterprises. MUDRA's goal is to finance small businesses in the non-corporate sector through a variety of lending schemes.
Under the PMYY, the government offers three different forms of loans for business startups. The first loan, known as the Shishu loan, is up to Rs 50,000. The second loan, Kishore, is from 50,000 to 5,00,000 rupees, while the third loan, Tarun, ranges from 5,000 to 10,000. Over 19 crore persons in these three groups have received loans from the government in the previous seven years.
According to the latest data on PMMY portal only 83 lakh firms out of the total number of enterprises, which availed the loan, have been partially defaulted or unable to repay the loan. That is, only four of every 100 loans taken out by borrowers were defaulted. The remainder have paid off the government's debt in full or are making timely EMI payments.
What made Mudra under the radar?
The Mudra scheme has been on the radar since quite some time as the opposition leaders like senior congress leader P.Chidambaram, Ex-Chief Minister of Karnataka Siddharamaiah and Communist Party of India leader Sitharam Yechury, among others have been skeptical and had expressed concerns about the scheme. The scheme was also questioned by former RBI governor Raghuram Rajan saying; "Mudra might become the next banking crisis as it might create a conducive environment for NPAs".
The criticism mainly stemmed out of the worries surrounding the increase in NPAs within the Indian banking system, which "could eventually reduce the flow of credit".
Also, the scheme had been facing backlash since data provided by Bhagwat Karad, Minister of State for Finance, last year indicated that gross NPAs under the Pradhan Mantri Mudra Yojana (PMMY) reached Rs 34,090.34 crore during the financial year 2020-21, an increase of 30.7 percent from Rs 26,078.43 crore in FY20, which was nearly double from Rs 17,712.63 crore in FY19.
These NPAs represented 2.51 percent of total loan disbursements in the system in FY19, 2.53 percent in FY20, and 3.61 percent in FY21.
(Edited by : CH Unnikrishnan)
First Published: Dec 1, 2022 7:07 PM IST
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