Gujarat: Rs 384 cr Mudra loans turn NPAs in first three-and-half years

Avinash Nair
A hoarding promoting Mudra scheme hangs outside a building in Ahmedabad on Friday despite the model code of conduct being in force in the state. (Express photo: Javed Raja)

Since its launch three and half years ago, Pradhan Mantri MUDRA Yojana (PMMY) - a central government loan scheme to promote small and micro enterprises - has accumulated NPAs (non-performing assets) to the tune of Rs 384 crore in Gujarat, with over 10 banks reporting loan defaults in the range of 10 to 30 per cent. This has made banks wary of disbursing large volumes of loan.

Of the Rs 8,671 crore loan disbursed to over 11.87 lakh applicants under the scheme in Gujarat, over 4.4 per cent or Rs 384 crore have turned into NPAs as on December 31, 2018, according to the latest State Level Bankers' Committee (SLBC) report released earlier this week.

Read | More than 25 per cent of loans of six banks in Gujarat are NPA: Bankers' report

The scheme was launched by Prime Minister Narendra Modi on April 8, 2015 to promote entrepreneurship and to help small businesses, which have been outside the ambit of mainstream bank. Under the scheme, each bank was given a target to give collateral-free loans up to Rs 10 lakh under three categories - Shishu (up to Rs 50,000), Kishore (Rs 50000-Rs 5 lakh) and Tarun (Rs 10 lakh). These loans are given for business purpose, capacity expansion and modernisation.

According to the SLBC report, the maximum quantum of NPAs - about Rs 181 crore or 47 per cent of total NPAs - are in Kishore accounts.

In Shishu accounts- loans up to Rs 50,000 - NPAs have mounted to Rs 106 crore or 28 per cent of the total.

Of the total 68,691 MUDRA accounts that have been declared as NPAs in Gujarat, a phenomenal 78 per cent are Shishu accounts where borrowings are Rs 50,000 or less.

Tarun accounts, so far, have accumulated NPAs to the tune of Rs 97 crore or 25 per cent.

"The NPAs are more in Shishu and Kishore categories as beneficiaries do not turn up for repayment. Sometimes, we do not even have the necessary staff to follow up on smaller loanees, especially who borrow Rs 50,000 or less," said a senior official of a public sector bank under the condition of anonymity.

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Banks Hit

If NPAs of inpidual banks are taken into account, then the maximum loan defaults have been registered with Bengaluru-based Jana Small Finance Bank Ltd which has seen 30 per cent of its loan turn into NPAs. Of the Rs 229 crore loaned by the bank under PMMY, close to Rs 69 crore have turned into bad loans.

This is even higher than the NPAs reported by a large bank like State Bank of India (SBI). For instance, of PMMY loans to the tune of Rs 958 crore, SBI has clocked a little less than 5 per cent NPAs, which is about Rs 45.46 crore.

Among the nationalised banks, Indian Bank has the highest percentage of NPAs at 21 per cent, followed by Bank of India with PMMY NPAs as high as 20 per cent.

Also read | PM Modi's pet schemes underperforming in Gujarat: Report

Similarly there are a bunch of banks whose percentage of NPAs are in double digits. For instance, Dena Gujarat Gramin Bank with 16 per cent, Andhra Bank with 15 per cent, Dena Bank with 15 per cent, United Bank of India and Saurashtra Gramin Bank with 11 per cent each, and Corporation Bank with 10.6 per cent.

There also a bunch of banks who have reported zero NPAs under the PMMY. These include Punjab & Sindh Bank, Axis Bank, DCB Bank, Yes Bank, Tamilnad Mercantile Bank, Kotak Mahindra Bank, South Indian Bank, Indusind Bank, J&K Bank and Bandhan Bank.

The fallout

Bankers say that with loans turning into NPAs in just three and half years of the launch of the scheme, the banks have become skeptical towards disbursing more.

The latest SLBC report show that banks in Gujarat have disbursed only 49.6 per cent till December 2018, against the targeted disbursal of Rs 8,083 crore for the financial year 2018-19.

"MUDRA being one of the flagship schemes launched by the Government of India, it has been repeatedly advised by Department of Financial Services, Ministry of Finance on various occasions to increase the visibility of the MUDRA scheme by displaying banners in bank branches, ATMs and business locations of beneficiaries," the SLBC report stated as it asked the banks to improve the scheme's performance.