Mudra loan scheme for micro enterprises nears 100 percent disbursal rate

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#covid19 pandemic, #micro enterprises, #MSMEs, #MUDRA loans, #MUDRA Yojana

Representative Image (Source: ShutterStock)

Credit disbursement under Pradhan Mantri Mudra Yojana (PMMY) has neared a 100 percent disbursement level in 7 months in the current fiscal.

Non-banking financial companies (NBFCs), small finance banks and public and private lenders have disbursed Rs. 1.11 lakh crore out of the Rs. 1.17 lakh crore amount sanctioned.

Thus, a little over the first half of the current fiscal, 95.19 percent of sanctioned amount has been disbursed.

The disbursement rate under the previous fiscal stood at 94.7 percent, in FY20 it was  97.6 percent, 97 percent in FY19, 97.14 in FY18, 97.11 in FY17 and 96.73 in FY16.

PMMY was launched by Prime Minister Narendra Modi in on April 8, 2015, with the aim of aiding micro entrepreneurs to access credit from the formal financial system.

The three categories of loans under the scheme are Shishu (less than Rs 50,000), Kishore (between Rs 50,000 and Rs 5 lakh) and Tarun (over Rs 5 lakh and up to Rs 10 lakh).

According to the scheme, over 90 percent of the MSME sector comprises millions of proprietorship or partnership firms including small manufacturing units, service sector units, shopkeepers, fruits/vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas, does not have access to formal sources of finance.

While the high rate of disbursement comes as a large number of small businesses were ravaged due to the Covid19 pandemic, data suggests that a significant proportion of Mudra loans have turned into bad loans or non-performing assets (NPAs).

This, the sector experts attribute to the Covid19 pandemic as it affected the repaying capacity of the borrowers.

As per a report by Financial Express on October 20,  gross NPA under the mudra scheme stood at 11.98 percent as on March 31, 2021 up from 5.38 percent at the end of FY18.

Ramamurthy, member, All India Council of Association of MSMEs (AICA) which represents 170 MSME associations across the country said, “Mudra loans are a must because these for tiny and micro enterprises. If the mudra loans are not there unemployment would arise. Bankers are giving loans under this because they see feasibility under it and they are not giving it blindly or just for the sake of giving. “

“Why the bad loans are rising is something must be studied, analysed and rectified, of course  Covid pandemic has played a role in it. It has crippled everyone particularly the small enterprises,” he added.

Ramamurthy also noted that the disbursal rate under the Mudra scheme is very encouraging and must be continued irrespective of the NPA level.

“The high disbursement of mudra loans shows the significance of government backed credit for SME’s. The only worrying part is whether the right beneficiaries are reaping benefits of these schemes. There is lack of checking mechanism, data and intent from the Government agencies who are disbursing these benefits,” said Yogesh Pawar, Chairman Association of Inspiring Syndicate of Entrepreneurs.

Pawar also observed that the repayment capacity of the borrower’s has gone down due to the Covid19 pandemic.

“Following the covid pandemic, on the ground level it is believed that most the deserved borrower’s struggle to get the loan and there is lack of awareness among the borrowers also. The Government’s intent is clear but the purpose of helping the SMEs is not solved,” he noted.

The Associations works in the space of training and uplifting of MSMEs.

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