NPAs on Mudra loans rise a whopping 92% in one year

In what could snowball into a next big crisis in the banking sector, the bad loans (NPAs), on Prime Minister Narendra Modi's flagship Mudra scheme for budding entrepreneurs, have gone up by 92% in one year since 2016-17.

The non-performing assets on Mudra loans, which were Rs 3,790.35 crore in 2016-17 have gone up to Rs 7,277.31 crore in 2017-18.

Considering that the Mudra scheme is only three years old, the NPAs and their increase year-on-year appears alarming.

Total loan disbursed under the Mudya Yojana since its launch in 2015 is Rs 5.72 lakh crore, data from the Ministry of Finance showed.

It said that 74% of Mudra beneficiaries were women, and scheduled castes/ scheduled tribes (SC/ST) and other backward classes (OBC) categories availed 36% of those loans.

The government has, however, said that the public sector banks have been monitoring these loans for recovery of the overdue amount.

Former RBI governor Raghuram Rajan had in a note to the Lok Sabha Committee on Estimates flagged concerns on Mudra loans saying they be examined “more closely” for potential credit risk.

Rajan had said that credit targets were sometimes achieved by "abandoning appropriate due diligence", which could create a conducive environment for future NPAs.

Under the Mudra scheme, banks finance micro-entrepreneurs with loan requirement up to Rs 10 lakh. Loans are granted under three categories — up to Rs 50,00 come under the ‘Shishu’ category, between Rs 50,001 and Rs 5 lakh under ‘Kishore’ and between Rs 5,00,001 and Rs 10 lakh under ‘Tarun.’

Loans of over Rs 1 lakh crore were sanctioned under the Shishu category in 2018-19, followed by Kishore and Tarun.

Loan disbursals under such schemes usually go up closer to elections. The prime minister had recently announced MSME loans within “59 minutes” scheme which was akin to fast track Mudra loans.