MUDRA loan disbursement likely to rise after lockdowns ease

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The pandemic has resulted in a decline in disbursement of MUDRA (Micro Units Development and Refinance Agency) loans for the first time since its launch in 2015. The drop in FY 21 was by about 20%.

MUDRA loans were launched to encourage grassroots-level entrepreneurship and self-employment in the country

The government thinks that once the lockdowns in different states in response to the raging second Covid wave eases, more small borrowers might go for this loan.

Proactive

After the second wave, the government is planning to make MUDRA more robust.

 “We are considering extending the 2% interest subsidy to the immediate repayment of Shishu loans sanctioned under the Pradhan Mantri Mudra Yojana (PMMY),” a government official told the media.

There are three categories of loans under the MUDRA scheme.

The smallest one titled “Sishu” entitles one to a loan of Rs 50,000.

The next level of loan is between Rs 50,000 to Rs 5 lakh and is called “Kishore”, the third category called “Tarun” is from Rs 5 lakh to Rs 10 lakh.

The loanee does not need to submit collaterals for these loans. The annual rate of interest varies from 8.2% to 9.65%.

Cross-section

The Union Finance Ministry on April 8 tweeted that 68% of the beneficiaries of MUDRA loans are women. About 51% of the loans were given to members of scheduled castes, scheduled tribes and other backward castes.

Borrowers from the minority community got about 11% of the loans.

“We are a bit worried with the dip in disbursement. Considering the lockdown and its impact on small businesses, last year’s disbursement was not bad at all, but still we are looking for some increase this year. Necessary instructions have been given to the concern banks,” a government official told the media.

A branch level manager of Bank of Baroda confirmed it.

“We have received an instruction from Reserve Bank of India that MUDRA loans should be sanctioned aggressively when the situation become normal. We all have a target and central bank is pushing hard to meet the target,” the official told Money9.

Trend

Data on MUDRA website shows that in FY21, disbursements stood at Rs 2.65 lakh crore, down from Rs 3.3 lakh crore in FY20.

Since its launch in 2015, FY21 is the first year when the loan disbursement has witnessed a dip.

In FY19, an amount of Rs 3.11 lakh crore and in FY Rs 2.47 lakh crore was disbursed. Since FY16 MUDRA loans witnessed a sharp increase of 32%, 41%, 27% and 6% respectively.

The total disbursement so far has reached close to Rs 16 lakh crore.

According to data available, till March 2020, cumulative NPAs amounted to Rs 18,835.77 crore on total disbursements of Rs 3.82 lakh crore.