Credit and finance for MSMEs: The share of private banks and small finance banks (SFBs) in the total value of Mudra loans sanctioned in the current fiscal continued to be above the share of public sector banks (PSBs) and regional rural banks (RRBs) from last fiscal, indicating the two member lending institutions (MLIs) taking the lead in extending credit support to micro and small enterprises (MSEs) among other MLIs post pandemic.
According to the data shared by the minister of state in the finance ministry Bhagwat Karad in the Lok Sabha on March 13 in a written reply to a question, private banks and SFBs had a combined share of 44.5 per cent with Rs 1.56 lakh crore loans sanctioned to MSEs vis-a-vis 42.6 per cent combined share of PSBs and RRBs amounting to Rs 1.49 lakh crore out of the total loans sanctioned worth Rs 3.51 lakh crore as of February 28 in the current financial year. As of March 10, Rs 3.54 lakh crore Mudra loans were disbursed to MSEs, according to the data from the Mudra portal.
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Private banks and SFBs had surpassed PSBs and RRBs in the share of sanctioned loans by value in FY22. The former duo had sanctioned loans worth Rs 1.46 lakh crore with a share of 43.3 per cent while the latter had sanctioned loans amounting to Rs 1.24 lakh crore with a share of 36.6 per cent in the total loans sanctioned worth Rs 3.39 lakh crore during the financial year.
In contrast, between FY16 — with the launch of the Mudra scheme in April 2015 — and FY21, PSBs and RRBs sanctioned more credit to MSEs than any other MLIs. For instance, Rs 70,998 crore loans were sanctioned by PSBs and RRBs in comparison to Rs 20,424 crore loans sanctioned by private banks and SFBs out of aggregate loans sanctioned worth Rs 1.37 lakh crore in FY16. Similarly, in FY21, PSBS and RRBs sanctioned Rs 1.30 lakh crore loans while private banks and SFBs sanctioned Rs 1.12 lakh crore loans out of the total Rs 3.21 lakh crore loans sanctioned.
In fact, particularly private banks had improved their share in MSMEs loans three times across schemes and government programmes to 69.8 per cent after reducing it to 18 per cent in FY21 and 33 per cent in FY20 amid the Covid pandemic, according to a CRIF High Mark report. On the other hand, even as PSBs had increased their share to 73 per cent in FY21 after Covid from 48 per cent in FY20, it dropped to 19 per cent in FY22.
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Meanwhile, microfinance lenders sanctioned Rs 41,515 crore Mudra loans and non-banking financial companies (NBFCs) sanctioned Rs 3,783 crore Mudra loans till February in the current fiscal with a share of 11.8 per cent and only 1 per cent respectively in the total loans sanctioned.
In terms of asset quality, according to the finance ministry, non-performing assets (NPAs) relating to Mudra loans were 3.17 per cent of the credit disbursed as of March 2022, Karad said in a written reply in the Rajya Sabha in December last year.