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Bad Loans Under Mudra Scheme On A Rise, Reveals RTI

File photo of Finance minister Nirmala Sitharaman.

File photo of Finance minister Nirmala Sitharaman.

The data, accessed through RTI pleas, also reveals that State Bank of India and Bank of India wrote off loans worth Rs 125 crore in the last four years under the programme.

New Delhi: The government’s flagship scheme to support micro enterprises in the country, Pradhan Mantri Mudra Yojana, has generated bad loans worth Rs 7,490 crore in three public sector banks between April 2015 and October 2019.

The data, accessed through Right to Information (RTI) pleas, also reveals that State Bank of India and Bank of India wrote off loans worth Rs 125 crore in the last four years under the programme. Canara Bank and Punjab National Bank said they had no data available on this.

Mudra – or Micro Units Development and Refinance Agency – was launched by Prime Minister Narendra Modi in April 2015. The aim was to develop and refinance the microenterprises sector engaged in manufacturing, trading and service activities. Mudra partners with banks, microfinance bodies and other lending institutions at the state and regional level to provide support to small-scale businesses in the country.

Under this programme, banks provide credit to beneficiaries under three verticals: Shishu, Kishore and Tarun. Shishu provides loans up to Rs 50,000, Kishore between Rs 50,000 and Rs 5 Lakh, and Tarun between Rs 5 lakh and Rs 10 lakh. These loans are given by commercial banks, regional rural banks (RRBs), small finance banks, microfinance institutions and non-banking financial companies.

Several experts believe that banks usually don’t have the know-how to assess risks when it comes to microfinance schemes like Mudra loans. “Banking has been in a bit of a flux recently. Microfinance involves small loans and there are specialised institutions to deal with them. However, saying that microfinance is a part of the problem isn’t going to work. If the risk assessment isn’t done efficiently, the number of defaults might go up. The government should make better provisions for microfinancing,” said Shweta Jain, CEO at financial planning firm Investography.

Minister of state (independent charge) for labour and employment Santosh Kumar Gangwar in a written reply to Parliament said that under the Mudra Yojana 20.84 crore loan accounts totaling an amount of Rs 10.24 lakh crore were sanctioned up to November 1, 2019. The ministry, in a report prepared by the labour bureau, earlier said that Mudra loans have created a total of 1.12 crore new jobs between 2015 and 2018.

The data was revealed as a result of series of RTI pleas filed by this reporter with public sector banks in October 2019, and it shows that the programme resulted in 7,90,385 NPA accounts out of a total 9.09 lakh beneficiaries who didn’t return their loans to the four public sector banks.

The State Bank of India lent Rs 1,00,297.62 crore to 69 lakh beneficiaries in the last four years. Out of these, 5.01 lakh accounts were declared non-performing assets (NPAs), generating bad loans worth Rs 5,166 crore. The SBI in the statement said, “Based on the information readily available, as on 31st March, 2019, Rs 94 crore of Mudra loans were written-off.”

Bad loans worth Rs 1,174.57 crore were generated under the programme at the Bank of India. Among the 7.1 lakh beneficiaries of the scheme here, a total of 86,375 accounts were listed as NPAs and Rs 31 crore was written off.

Canara Bank too generated bad loans amounting to Rs 1,150 crore in the last four years, with 1.18 lakh beneficiaries listed as NPAs till October 2019. However, the data of the amount of loans written off was not provided by the bank.

Punjab National Bank in the reply to RTI plea said that a total of 2,02,118 accounts had generated bad loans, but the amount of bad loans wasn’t specified. On the question of the bad loans written off, the bank said, “Yes, bad loans were written off by our bank wherever applicable, but no separate data in respect of written off Mudra loan is being maintained by us.”

Finance minister Nirmala Sitharaman in July informed the Lok Sabha that as many as 2,313 Pradhan Mantri Mudra Yojana accounts with public sector banks reported instances of fraud since the financial year 2016-17, according to a PTI report.

News18.com tried contacting the ministry of finance for a response, but without success, so far. The report will be updated when a reply is received.