The government’s ambitious project to finance small and micro borrowers has witnessed a surge in bad loans at a time when the system-wide non-performing assets (NPAs) have started showing signs of a decline. Gross NPAs under MUDRA, or Micro Units Development and Refinance Agency Ltd, rose by 68.7 per cent to Rs 16,480.87 crore for the financial year ended March 2019 from Rs 9,769 crore a year-ago, MUDRA said in an RTI reply.
MUDRA NPAs work out to 5.28 per cent of the total disbursements of Rs 311,811 crore as of March 2019, when compared to 3.96 per cent of total disbursements of Rs 246,437 crore in the previous year, as per MUDRA’s figures. NPAs were Rs 8,501.68 crore in 2016-17. Of the total disbursements, as much as 41.42 per cent, or Rs 129,153 crore loans, are taken by women. In the financial year 2018-19, 3.706 crore women entrepreneurs benefitted from MUDRA loans, MUDRA said.
However, bad loans under the MUDRA scheme are much lower than the total system-wide NPAs. The banking sector’s gross NPAs declined to 9.3 per cent in March 2019, much faster than the Reserve Bank of India’s estimate and steeply down from 11.5 per cent the year before, a report by ratings agency Crisil said.
MUDRA loans are given by commercial banks, rural reserve banks, small finance banks, cooperative banks, microfinance institutions and NBFCs to the non-corporate, non-farm small and micro enterprises. These loans are refinanced by MUDRA, with allocation from the Centre.
Cautioning the bankers and the government, in a note to the Parliamentary Estimates Committee on bank NPAs late last year, former RBI governor Raghuram Rajan had said, “Credit targets are sometimes achieved by abandoning appropriate due diligence, creating the environment for future NPAs. Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk.”
Bankers blamed a host of reasons from demonetisation to loan waivers for the rise in MUDRA NPAs. “Loan waivers by state governments, the credit crunch in the MSME sector after demonetisation and ambitious targets to push up lending to the sector are among several factors that led to the rise in defaults,” said an official of a nationalised bank. The outstanding against Kisan Credit Card has gone up from Rs 649,600 crore in 2017 to Rs 670,960 crore in 2018, according to the RBI data. Number of Kisan Credit Cards, however, fell from 7.152 crore to 6.921 crore in 2018.
Last week, an eight-member committee on MSMEs headed by UK Sinha — constituted by the Reserve Bank — submitted its report to the Governor of the central bank. The panel has reportedly proposed long-term measures, including doubling the cap on collateral-free loans to Rs 20 lakh from the current level of Rs 10 lakh, to boost the fund requirement of the MSME sector. If implemented, loan disbursements under MUDRA are expected to rise sharply.
Under the aegis of the Pradhan Mantri Mudra Yojana (PMMY), MUDRA has created three products, namely Shishu, Kishor and Tarun, to signify the stage of growth, development and funding needs of the beneficiary micro unit/entrepreneur and also provide a reference point for the next phase of growth.
Under Shishu scheme, loans up to Rs 50,000 are offered. Under Kishor scheme, loans above Rs 50,000 and up to 5 lakh are given to borrowers. Tarun scheme covers loans above Rs 5 lakh and up to Rs 10 lakh.
The MUDRA refinances the loans which are offered through commercial banks.
The state level performance is being monitored by State Level Bankers Committee. In FY19, MUDRA loans worth over Rs 3.11 lakh crore were sanctioned against a target of Rs 3 lakh crore.
In fiscal 2017-18, Tamil Nadu topped with Rs 25,331.68 crore sanctions, closely followed by Karnataka with Rs 23,009.73 crore. Maharashtra stood at third with Rs 22,751.40 crore MUDRA loans. The top ten states contributed 71 per cent of total sanctions in FY18.