Tag: Pradhan Mantri Mudra Yojana

The ratio of gross non-performing assets (NPAs), or bad loans, in the loans outstanding under the Pradhan Mantri Mudra Yojana (PMMY) stood at 11.98% as on March 31, 2021, the Micro Units Development & Refinance Agency (Mudra) has said in response to a Right to Information (RTI) query.

In absolute terms, the value of gross NPAs in Mudra loans as on March 31, 2021, was Rs 34,090.34 crore, while the value of loans outstanding under the scheme stood at Rs 2.84 lakh crore on the same date. While comparable data on Mudra loan NPAs for the last two years are not publicly available, at the end of FY18, the bad loan ratio under the scheme was a much lower 5.38%, as per Mudra’s annual report for that year.

The pandemic has hit small businesses harder than their larger counterparts and that may be putting pressure on loans taken by them, including Mudra loans. On Tuesday, analysts at Crisil Ratings said that the micro, small and medium enterprises (MSME) segment, despite benefiting from the emergency credit line guarantee scheme, is likely to see asset quality deteriorate and will require restructuring to manage cash-flow challenges. “In fact, restructuring is expected to be the highest for this segment, at 4-5% of the loan book, leading to a jump in stressed assets to 17-18% by this fiscal end from ~14% last fiscal,” the agency said in a report.

Similarly, bankers have expressed concern about asset quality in the MSME segment. In an interview with FE in August, Bank of Baroda MD & CEO Sanjiv Chadha had said that the MSME segment has been more challenged than others because for the last one year, they have been impacted by lockdowns and demand disruption. However, he was hopeful of a pullback. “My own sense is that both for MSME and retail, the kind of slippages we saw in the last quarter (Q1FY22) was peak distress, and that should start diminishing over the next few quarters,” he added.

In the past too, Reserve Bank of India (RBI) officials underlined the rising levels of stress in Mudra loans. In November 2019, RBI deputy governor MK Jain had said that while a push as massive as the Mudra scheme would have lifted many beneficiaries out of poverty, there was some concern at the growing level of NPAs among these borrowers. “Banks need to focus on repayment capacity at the appraisal stage and monitor the loans through their life cycle much more closely,” he had said.

PMMY was launched on April 8, 2015, with the aim of aiding micro entrepreneurs to access credit from the formal financial system. The three categories of loans under the scheme are Shishu (less than Rs 50,000), Kishore (between Rs 50,000 and Rs 5 lakh) and Tarun (over Rs 5 lakh and up to Rs10 lakh). The agency Mudra offers refinance to commercial banks, non-banking financial companies and microfinance institutions against loans to micro enterprises.