Even as banks and microfinance finance institutions (MFIs) advanced MUDRA loans of Rs 97,000 crore till first week of February, the refinance funds disbursed by the government under the scheme is only Rs 1,364 crore in the same period, a Parliamentary Standing Committee pertaining to the Ministry of Micro, Small and Medium Enterprises (MSME) has said in its report. The panel also sought reasons from the government for sluggish pace of refinancing under the MUDRA Yojana.
“Of the first tranche of Rs 5,000 crore to MUDRA, till the first week of February, 2016 only Rs 2,184 crore were sanctioned for refinancing of which only Rs 1,364 crore were disbursed,” the committee said in its report tabled in Rajya Sabha last Tuesday. The committee found that MUDRA refinancing of MFIs and non banking finance companies (NBFCs) have been rather sluggish as compared to the scheduled commercial banks.
MUDRA (Micro Units Development Refinance Agency) Scheme’s intent is to refinance collateral-free loans of up to Rs 10 lakh given by lending institutions to non-corporate small borrowers, for income-generating activities in the non-farm segment. All such loans — sanctioned on or after April 8, 2015, when Prime Minister Narendra
Modi launched the scheme — are being branded as PMMY (or Pradhan Mantri MUDRA Yojana) loans.
“The Committee has been monitoring the progress of this important scheme in different States and with different banks. For year 2015-16 a target of Rs 1.22 lakh crore was set. Till the first week of February 2016, loan amounting Rs 97,000 crore to some 270 lakh borrowers was distributed, of which some 248 lakh were Shishu borrowers with Rs 50,000 and less,” the report said.
Loans under the MUDRA scheme have been bracketed in three categories: Shishu loans are up to Rs 50,000; Kishor loans are between Rs 50,001 and Rs 5 lakh; and Tarun loans of Rs 5-10 lakh. Banks and MFIs can draw refinance under the scheme after becoming member-lending institutions of MUDRA.
The committee noted that one reason for sluggish pace of refinancing could be the interest rate charged by MUDRA. “…The actual interest rate permissible to MFIs under MUDRA Yojana was around 19 per cent, which is too high. Whereas the interest rate permissible for Scheduled Banks under Mudra Yojana is at around 8-9 per cent which was lower than the prevailing interest rate charged by Banks,” it said.
The recommended that interest rates for MFIs should be capped at a reasonable rate. “MFIs have scarce funds and need cheap and prompt refinance and should be natural partners in MUDRA Yojana instead of cash-rich banks whose RIDF (Rural Infrastructure Development Fund) forms the corpus for the MUDRA Yojana,” it said.
The MUDRA Scheme does not provide any interest subsidy or waiver, but still turns out to be cheaper for the non-corporate small business borrowers. Banks provide a composite loan for both working capital and term loan requirement under the scheme.
To make the MUDRA scheme more attractive, the government had announced setting up of a Rs 3,000-crore Credit Guarantee Fund for these loans. This will provide insurance against default on MUDRA loans to the maximum extent of 50 per cent.