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Small businesses struggle amid Covid, NPAs under PM scheme rise to over Rs 587 crore

According to officials of the Gujarat Chamber of Commerce and Industry (GCCI), despite the green shoots in the Indian economy, a number of small enterprises in Gujarat were still facing liquidity issues and are finding it difficult to repay loans.

Written by Avinash Nair | Ahmedabad | January 1, 2021 3:20:57 am
covid-19 in Gujarat, covid-19 lockdown in gujarat, Pradhan Mantri MUDRA Yojana, gujarat news, indian express newsThe biggest spike of NPAs has been among Tarun beneficiaries where the NPAs have grown by 56 per cent. (Representational)

With small businesses unable to reopen or find traction after Covid-19 lockdown in Gujarat, the Non-Performing Assets (NPAs) under the Pradhan Mantri MUDRA Yojana (PMMY) have risen to over Rs 587 crore at the end of September 2020.

The latest State Level Bankers’ Committee (SLBC) report points out that bad loans worth Rs 587 crore under the PMMY scheme as on September 2020, is 33 per cent more than the Rs 442 crore recorded during the same month last year.

“The NPAs have risen despite the moratorium and the restructuring of the loans. These are small loans and people are not coming forward for repayment. Due to the lockdown and economic slowdown, a number of small businesses that had taken these loans were badly impacted,” said MM Bansal, convenor of SLBC-Gujarat and General Manager, Bank of Baroda. PMMY loans are collateral-free loans.

PMMY was launched by Prime Minister Narendra Modi on April 8, 2015, for providing loans upto Rs 10 lakh to non-corporate and non-farm, small and micro enterprises. Under the scheme, loans up to Rs 50,000 are given to “Shishu” beneficiaries, loans above Rs 50,000 and up to Rs 5 lakh are given to “Kishor” beneficiaries, while loans up to Rs 10 lakh are given to those designated as “Tarun”.

The biggest spike of NPAs has been among Tarun beneficiaries where the NPAs have grown by 56 per cent. In comparison, the NPAs in Tarun and Kishor categories is 24 per cent and 11 per cent respectively. “Those impacted and have been unable to repay loans are the self employed lot like small shop owners, tailors, barbers, etc. These people work with very low capital,” said Bansal.

If performance of some of the individual banks under this scheme is taken into consideration, then there are at least five banks with more than 10 per cent NPAs, which is considered to be on a higher side by bankers.

For instance, the latest SLBC report points out that Canara Bank has NPA as high has 23.4 per cent, while bigger banks like State Bank of India also have NPAs as high as of 13 per cent. Other banks such as Baroda Gramin Bank, Indian Bank and Punjab National Bank have high NPAs under PMMY that range between 19-24 per cent.

“If NPAs rise by more than 10 per cent in any particular segment, then we usually put a caution-tag. This indicates that the segment is not doing too well,” Bansal added.

According to officials of the Gujarat Chamber of Commerce and Industry (GCCI), despite the green shoots in the Indian economy, a number of small enterprises in Gujarat were still facing liquidity issues and are finding it difficult to repay loans.

“The moratoriums have helped but more needs to be done to ensure that the smaller players get back on track,” said an official who did not wish to be identified.

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