The finance ministry plans to revamp its flagship lending scheme, Pradhan Mantri Mudra Yojna (PMMY), to ensure better access to credit for small firms, boost entrepreneurship and promote financial inclusion.
“There is a plan to revamp the Mudra scheme. We need to see how more people can avail loans under this scheme and also ensure that such loans do not face defaults," a senior government official said, requesting anonymity, adding that the plan which is still in the works could start in the next 3-4 months.
In its budget for 2015-16, the National Democratic Alliance (NDA) government had announced the loan scheme for over 57 million non-farm small and micro enterprises, a sector which generates maximum employment. At a time when India is battling a slowdown,better access to credit can also create more jobs, a key focus area for Prime Minister Narendra Modi besides promoting entrepreneurship.
Micro Units Development and Refinance Agency, or the Mudra scheme, was started to refinance loans of up to ₹10 lakh given by banks and other lending institutions to small borrowers.
Under the scheme, collateral-free loan of up to ₹10 lakh falls under three categories—Shishu, Kishore and Tarun. Shishu accounts for loans of up to ₹50,000, while ₹50,001 to ₹5 lakh are disbursed under Kishore. The third category is for loans of ₹5-10 lakh.
According to the Mudra website, 6.56 million loans worth ₹32,457 crore have been disbursed since 1 April, data updated on 14 June showed.
In 2018-19, loans worth ₹3.11 trillion were disbursed, up from ₹2.46 trillion a year ago. The government expects at least a 10% rise in loan disbursements this financial year.
“More than 17 crore entrepreneurs have availed loans under the Pradhan Mantri Mudra Yojna. We will expand this initiative further to take the number of beneficiaries of Mudra loans to up to 30 crore," the Bharatiya Janata Party (BJP) had said in its elections manifesto.
However, experts are concerned that the Mudra scheme could be the next big source of non-performing assets (NPAs) for public sector banks.
A senior official at a state-run bank, said requesting anonymity that any loan waiver spoils the credit culture. As a result, borrowers often think they can get away by not repaying it, he said, adding the government’s target-driven approach puts immense pressure on banks, to sanction and disburse more loans than necessary.