The country's largest state-owned lender State Bank of India (SBI) has seen a huge spurt in non-performing loans (NPAs) at 23 per cent in its small-ticket Mudra loans in the first pandemic year 2020-21.
The NPAs are up from 20 per cent over the outstanding advances a year ago. Many, however, had expected the stress in the Mudra loans will not be visible in the pandemic year because of the loan moratorium, loan restructuring, and additional working capital loan facility under the government guarantee scheme.
Mudra loans, which are given as business loans to small businesses, have seen a gradual rise in the gross NPAs over the last few years. The higher Mudra loan NPAs at the largest bank in the country clearly indicates a similar kind of asset quality deterioration in other PSBs as well. "The banks have no option but to make the provisions for a much higher loss in Mudra loans," says a market player.
The outstanding Mudra loans in the SBI's books were Rs 26,302 crore against the gross NPAs of over Rs 6,000 crore in 2020-21. The gross NPAs in the Mudra segment are much higher than the traditional NPAs segments like agricultural loans and MSMEs.
The banks, however, haven't applied brakes to Mudra loan lending. The SBI alone is sanctioning as well as disbursing over Rs 30,000 crore loans annually. Since there are redemptions, too, as banks started disbursing loans, the outstanding amount is stable at over Rs 30,000 crore. The first five-year Mudra loan cycle has been completed, as Mudra loans are generally given for tenures of 3-5 years.
In the initial period, the PSBs had the targets, including geographical targets, for disbursing Mudra loans.
The maximum loan amount under the scheme is Rs 10 lakh. An RBI-appointed committee, headed by the former chairman of Securities and Exchange Board of India (Sebi) UK Sinha, had even proposed to increase the limit from Rs 10 lakh to Rs 20 lakh.
Expert, however, suggests a need to overhaul the entire scheme rather than increasing the loan limit.
In the past, the RBI has been advising banks to be cautious. RBI Governor Shaktikanta Das had earlier directed the banks to be careful in lending to small borrowers. Two former RBI governors -- Raghuram Rajan and Urjit Patel -- had also issued a similar warning over growing bad loans in the Mudra segment.
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