The gap between sanction and disbursement under Pradhan Mantri MUDRA Yojana (PMMY) has shrunk to an all lime low at 1.35 per cent at the end of just-concluded FY23. In earlier years, the gap was between sanctioned and disbursement was between 2.2 per cent to 3.3 per cent. Meanwhile, NPA (Non Performing Assets) in MUDRA, as on March 31, 2022 was 3.17 per cent, more than 270 bps lower than overall Gross NPA.
On April 8, the scheme completed eight years of its launch.
Improving disbursements
Data shows that during FY23, sanctions were made amounting to ₹4.48-lakh crore, out of which over ₹4.42-Slakh crore disbursed which is 98.65 per cent of the total sanctions. It means that there is not much gap between loan approved and actual amount that the loan holder got. One of reasons of improving disbursement could be better compliance by the loan applicants in terms of completing paper work.
Also, as this is one of the schemes observed very critically by the government, fund-giving agencies go the extra mile to ensure more sanctions and disbursement. There is no collateral required under the scheme and loans are extended to eligible micro units under the scheme. Additionally, up to ₹10 lakh by banks/ non-banking financial companies (NBFCs)/ micro finance institutions (MFIs)/ other financial intermediaries are covered under Credit Guarantee Fund for micro Units.
Data from government replies to the Lok Sabha questions revealed that as on March 31, 2022, the totalNPAs as a percentage of credit disbursed stood at 3.17 per cent against gross NPA of entire banking sector at 5.9 per cent. The Finance Ministry says public sector banks (PSBs) have been advised from time to time to take pro-active measures to contain NPAs. They have also been informed to include measures such as improve underwriting appraisal standards, making granular analysis of Mudra NPA accounts and initiate preventive measures, regularly monitoring asset quality for small ticket size loans and maintaining regular and intensive connect with Mudra borrowers.
On April 8, the Ministry said that around 41 crore loans amounting to ₹23.2-lakh-crore were sanctioned under the scheme in the last eight years of existence of the scheme. The PMMY was launched on April 08, 2015. According to Finance Minister, Nirmala Sitharaman, about 68 per cent of accounts under the scheme belong to women entrepreneurs and 51 per cent of accounts belong to entrepreneurs of SC/ST and OBC categories. This demonstrates that easy availability of credit to the budding entrepreneurs of the country has led to innovation and sustained increase in per capita income, she said.
Financial inclusion
The scheme aims to facilitate easy collateral-free micro credit of up to ₹10 lakh to non-corporate, non-farm small and micro entrepreneurs for income generating activities. The Ministry’s statement highlighted that the scheme aims to fulfil one of the three pillars of the financial inclusion — ‘Funding the Unfunded’. Other two pillars are ‘Banking the Unbanked’ and ‘Securing the Unsecured’.
Under the scheme, the loans have been divided into three categories based on the need for finance and stage in maturity of the business. These are Shishu (loans up to ₹50,000), Kishore (loans above ₹50,000 and up to ₹5 lakh), and Tarun (loans above ₹5 lakh and up to ₹10 lakh).
Loans under PMMY are provided to meet both term loan and working capital components of various sectors. The rate of interest is decided by lending institutions as per RBI guidelines. In case of working capital facility, interest is charged only on money held overnight by borrower.
