Even as the banking sector continues to grapple with the issue of non-performing assets (NPAs), Prime Minister Narendra Modi's flagship scheme Pradhan Mantri Mudra Yojana (PMMY) may have added to public sector lenders' woes of mounting bad loans.
Bad loans under Mudra Yojana have jumped almost 53 per cent to Rs 14,930.98 crore during the first nine months of the current financial year 2018-19, as compared to Rs 9,769.99 crore reported in last year, according to the Indian Express.
Micro Units Development & Refinance Agency (MUDRA), which has been set up by Government of India to provide funding to the non-corporate and non-farm sector, saw bad loans surging in all the three segments - Shishu, Kishore and Tarun, the leading daily reported citing RTI data. The value of the loans grew by 64 per cent, 52 per cent and 42 per cent for Shishu, Kishore, Tarun respectively, as per report.
According to the data obtained under the RTI Act, there was an increase in number of NPA accounts under the scheme from 17.99 lakh on March 31, 2018 to 28.83 lakh as on December 31, 2018. During the nine months of the current year, the bad loan accounts under the Shishu, Kishore and Tarun reportedly stood at 58.33 per cent, 70 per cent and 45 per cent, respectively.
The total credit disbursements were also on the slower side with Rs 2.12 lakh crore disbursed during April-February period as compared to Rs 2.46 lakh crore given in the last full fiscal year 2017-18.
Given the rise in NPA along with muted credit disbursement, it is assumed that the ratio of gross NPA (NPAs divided by credit disbursed) might have increased this year which stood at 3.96 per cent in 2017-18, the leading daily reported.
It is to be noted that loans taken under the Mudra scheme do not require collaterals as they are aimed at boosting the confidence of small businesses, and young, educated and skilled workers to enable them to become first generation entrepreneurs.
Former RBI Governor Raghuram Rajan, who had predicted the global financial crisis of 2008, three years in advance, had raised a red flag on the spike in non-performing assets under Mudra scheme, which was launched in April 2015 by Prime Minister Narendra Modi.
Rajan had warned that loans under the government's popular flagship scheme Pradhan Mantri Mudra Yojana and the Kisan Credit Card needed to be examined "more closely" for potential credit risk. "The Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI [Small Industries Development Bank of India] is a growing contingent liability and needs to be examined with urgency," he had said.
Last year in June, a joint study by SIDBI and credit bureau TransUnion CIBIL, had revealed that while MSME NPA rates had remained stable between March 2017 and March 2018, there was a looming threat.
Edited by Chitranjan Kumar