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Small business loans under the Pradhan Mantri Mudra Yojana (PMMY) have slowed down this year. According to the latest government data, total disbursal under the PMMY stood at ₹1.51-lakh crore as on November 29. With four months remaining for the completion of the current fiscal, the amount disbursed is less than half the disbursal of ₹3.21-lakh crore in FY19.
“The Shishu category loans are fast turning into non-performing assets (NPAs) as small businesses set up with these loans have simply vanished. It is almost impossible to recover the loans,” said a senior official of a large public sector (PSB).
Three categories
The PMMY was launched in April 2015 to provide loans up to ₹10 lakh to non-corporate, non-farm small/micro enterprises. There are three categories of loans under Mudra — Shishu, covering loans up to ₹50,000; Kishor (₹50,000 to ₹5 lakh); and Tarun (₹5 lakh to ₹10 lakh).
The RBI has been warning banks over the past year on the trouble brewing in the Mudra loan portfolio. Last week, RBI Deputy Governor MK Jain sounded an alert again, asking banks to go for better due diligence and follow up the loans during the life cycle of the businesses.
Many bankers allege ‘pressure’ in the last two years to meet the `unreasonable’ targets set for them and feel that going slow on these loans augurs well for the banks. From ₹1.37-lakh crore in FY16, the launch year, disbursals rose rapidly to ₹1.80-lakh crore in FY17, ₹2.53-lakh crore in FY18 and ₹3.21 lakh crore in FY19.
A top executive of a South-based PSB disagreed with the RBI’s advice of focussing on the repayment capacity at the appraisal level.
“Most Shishu loans are given to pan shops and cycle shops which wind up in no time. Either you give or don’t give the loan, but no appraisal is possible as per the structure of the scheme,” he said. There are also problems in scaling up many Tarun and Kishore category loans.
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