The finance ministry on Tuesday said non-performing assets (NPAs) relating to Mudra loans stood at just 3.17% of the credit disbursed as of March 2022.
Lenders, including banks, non-banking financial companies and micro-finance institutions, disbursed Mudra loans of Rs 17.35 trillion between April 1, 2017 and November 25 this year, minister of state for finance Bhagwat Karad said in a written reply in the Rajya Sabha.
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Under the Pradhan Mantri Mudra Yojana (PMMY), meant primarily for budding and small entrepreneurs in the non-corporate and non-farm sectors, loans up to Rs 10 lakh are extended to a beneficiary at affordable rates. The scheme completed seven years in April.
Karad’s statement comes amid growing fears among analysts about possible deterioration of asset quality in the Mudra segment, as most of such loans are collateral-free. Of course, they concede that the PMMY has improved access to credit for people belonging to vulnerable sections.
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While acknowledging the need for better targeting under the scheme, official sources, however, have pointed out that the bad loan ratio in the Mudra segment is still below that in the overall commercial banking system. The gross NPAs in the banking system, which eased to a six-year low in March 2022, stood at 5.9%. Karad said, to contain NPAs in Mudra loans, public-sector banks (PSBs) have been periodically advised to improve underwriting appraisal standards, make granular analysis of the substandard accounts and regularly monitor asset quality for small-ticket loans. The lenders have also been directed to maintain regular contact with borrowers, he added.