Mudra loans, which created a major milestone during the first term of the Modi government for supporting the microenterprise sector, has come under the scrutiny of the RBI.

MK Jain, the RBI’s Deputy Governor, on Tuesday cautioned bank officials about the growing stress in Mudra loans. He has asked them to monitor the loans for unsustainable credit growth. The funds get channelised through the Micro Units Development and Refinance Agency Ltd, an NBFC, and it provides refinance support to banks, MFIs, and other NBFCs for lending to micro units having loan requirement of up to ₹10 lakh.

Addressing SIDBI’s national congress on microfinance, Jain said the loans have lifted many out of poverty, but there have been concerns over NPAs among these borrowers, he said.

The central banker also pointed out that the RBI has instituted the UK Sinha committee for the development and sustainability of the MSME sector. The committee has suggested changes in the areas of legislation, institutional framework, capacity building, and new technology intervention for lending to the sector. The recommendations of the committee are being examined for implementation. He said the implementation of GST has hit the informal economy significantly. It resulted in improved the digital footprint and MSMEs have become attractive clients for banks and NBFCs.

He said the goal of universal financial inclusion can be achieved through a synergistic approach of MFIs, fintechs and banks. Fintech companies could help mine the customer data for introducing new customer-centric products.

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