Credit and Finance for MSMEs: Non-performing assets (NPAs) for credit disbursed by banks and other lending institutions under the Pradhan Mantri Mudra Yojana (PMMY) have slightly moderated in the financial year 2021-22, according to the government data. Indicating relief from credit schemes such as ECLGS by the government, NPAs as a cumulative percentage of total Mudra loans disbursed in FY22 decreased to 3.17 per cent from 3.61 per cent in FY21 though still above 2.53 per cent in FY20.
The provisional data as of March 31, 2022, shared by Minister of State in the Ministry of Finance Bhagwat Karad in a written reply to a question in Rajya Sabha on Tuesday showed that the share of bad loans in credit disbursed under PMMY by the public sector banks was highest at 4.74 per cent vis-a-vis 1.92 per cent share for small finance banks, 1.14 per cent for private banks, 1.01 per cent for NBFC-microfinance institutions (MFIs), 0.67 per cent for MFIs, and 0.07 per cent for NBFCs.
Importantly, the value of NPAs in Mudra loans had spiked to Rs 34,090.34 crore during the financial year 2020-21, up 30.7 per cent from Rs 26,078.43 crore in FY20, and nearly doubled from Rs 17,712.63 crore in FY19, Karad had informed Parliament in December last year.
Launched in 2015 by Prime Minister Narendra Modi, PMMY is essentially aimed at entrepreneurship promotion among people launching proprietary concerns apart from individual businesses with loans up to Rs 10 lakh offered under the scheme to entrepreneurs. The disbursement rate of Mudra loans in FY22 was 97.54 per cent in comparison to 96.89 per cent in FY21, 97.69 per cent in FY20 and 96.91 per cent in FY19.
Total 5.37 crore Mudra loans amounting to Rs 3,39,110 crore were sanctioned in FY22, of which Rs 3,29 715 crore loans were disbursed in comparison to 5.07 crore loans amounting to Rs 3,21,759.25 crore sanctioned and Rs 3,11,754.47 crore disbursed in FY21. However, Mudra loans had maximum takers in FY20 with 6.22 crore loans amounting to Rs 3,37,495.53 crore sanctioned and Rs 3,29,715.03 crore disbursed.
The overall aggregate gross NPA ratio (public and private banks) in the MSME sector had also declined from 10.8 per cent in March 2021 to 9.3 per cent in March 2022, according to the Reserve Bank of India’s latest Financial Stability report. “They, however, remain relatively high. Moreover, restructuring of (MSME) portfolios to the tune of Rs 46,186 crore constituting 2.5 per cent of total advances under the May 2021 scheme (resolution framework 2.0) has the potential to create stress in the sector,” the central bank had noted.