December 10, 2019
Manish Gupta speaks about the rising NPAs of MUDRA loans
FULL TRANSCRIPT
The Pradhan Mantri MUDRA Yojana was launched in 2015 for providing small loans to income generating micro enterprises in trading, manufacturing and services sectors. However, non-performing assets of bank loans under MUDRA category has increased over the last few years.
The total value of NPAs held by public sector banks under the category was Rs 7,277 crore in 2018. This figure increased by more than 100% to Rs. 16,481 crores in 2019. Furthermore, the number of NPA accounts has increased from 17.99 in 2018 to 30.57 lakh accounts in just a year.
Public sector banks have suffered heavily due to this scheme as no collateral is mandatory under the scheme. Over 2300 cases of fraud have also been reported by PSBs since 2016-17. The RBI has also stressed on the need to address the issue of rising NPAs of mudra loans.
So far, Rs. 1.41 lakh crore worth of mudra loans have been disbursed this fiscal year. Steps must be taken by banks to carefully evaluate the repayment capabilities of borrowers before handing out further loans.
However, sources have claimed that bankers are pressurised into granting Mudra loans to people, who sometimes have no business plan. The average loan under the scheme is around Rs. 45000 crore which is not enough money to start a business or create jobs according to many reports. Moreover, data suggests that only one out of five or 20% of mudra loans have resulted in job creation.
This is yet another example of poor economics and poorer implementation on part of this government for short term political mileage. I can only urge them to roll back this scheme before rising NPAs stifle credit growth and lead to the ruin of MSMEs in India.
