I started a small stationery shop seven years ago and have repaid my loans. I would now like to apply for the bigger Tarun loan to add a copier facility and internet cafe,’’ says N Prameela.
A resident of Boduppal in Hyderabad, she became an entrepreneur with the help of a loan sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) for small businesses, and is excited by the announcement of bigger loan categories in the recent Union Budget.
Under the original PMMY scheme, loans are extended in three categories: Shishu (upto ₹50,000); Kishore (above ₹50,000 and up to ₹5 lakh); and Tarun (above ₹5 lakh and up to ₹10 lakh).
As mentioned by Finance Minister Nirmala Sitharaman in her Budget 2024 speech, the loan limit would be doubled to ₹20 lakh for entrepreneurs who have repaid previous loans under the ‘Tarun’ category.
This increase is expected to multiply the success of businesses built using PMMY loans, especially those run by women, who make up 70 per cent of the beneficiaries.
Steady growth
Loan disbursals under Mudra, the implementing agency for the PMMY scheme, have always been at a steady clip. In the first quarter of FY25, the disbursals crossed the ₹1-lakh crore mark, as against ₹81,957 crore a year ago.
The demand is being driven by the Sishu and Kishore categories as well. The Tarun category is expected to gain more traction after the increment announced in the Budget.
In FY24, PMMY witnessed a record growth in disbursals, crossing the ₹5-lakh crore milestone, as against ₹4.4 lakh crore a year ago, as per Mudra data.
Cumulative data show that Mudra loans exceeding ₹30 lakh crore have been disbursed since the the scheme’s launch in 2015.
While the institution-wise targets were assigned by the central government, these were further sub-allocated state-wise by the respective lending institutions, based on their network and potential to lend.
The state-level performance is being monitored by the respective bankers’ committees. Uttar Pradesh, Bihar and Tamil Nadu currently lead in disbursals.
The public-sector banks have a lion’s share of Mudra loans, with State Bank of India (SBI), Punjab National Bank, and Canara Bank leading in disbursements.
Grassroots impact
The growth in Mudra loans is driven by a range of factors. Public-sector banks are pushing these advances while monitoring the fund utilisation through follow-ups and frequent customer interactions.
An added impetus has been provided by the guarantee from the National Credit Guarantee Trustee Company Ltd (NCGTC) against the eligible micro-units under PMMY, which is helping raise the confidence of lenders.
According to Sivasubramanian Ramann, Chairman, Mudra, the PMMY initiatives have proved that, with access to formal credit, the bottom-most segment can grow and contribute on its own in a self-sustaining manner.
In the past eight years, Mudra has strived to create entrepreneurs at the grassroots level, he says.
“This needs to be taken to newer/ higher level with the involvement of all the stakeholders, including the private sector. There is a huge market for small loans to the underserved segments, which needs to be tapped. Mudra would continue to play its role towards this end,’’ he said in the agency’s latest annual report. Ramann is currently the Additional Deputy Comptroller & Auditor General for the Eastern Region.
Tech support
To achieve wider reach, Mudra is also stepping up its focus on technology by partnering with fintech non-banking financial companies (NBFCs). It recognises the critical role these institutions play in reaching out to the remotest borrower with their strength in technology and innovation.
To enable micro and small enterprises to access working capital at affordable cost, lending institutions have issued PMMY borrowers a debit card, named Mudra Card, on the RuPay platform. The cumulative number of Mudra cards exceeded 20 lakh at the end of FY23.
While the update for FY24 is awaited, the card is expected to have significantly broadened its reach.
Complaints with regard to the implementation of PMMY are redressed in consultation with the respective banks. The complaints received at the Centralised Public Grievance Redress and Monitoring System (CPGRAMS) are also being taken up with the respective banks for redressal within the prescribed timelines.
Eye on overdue loans
The non-performing assets (NPAs), or loans overdue by more than 90 days, are under check in the PMMY portfolio. As of March 31, 2023, the NPA level stood at 2.62 per cent, down from 3.17 per cent a year ago. The data for 2023-24 is awaited.
“The rapid growth in this (PMMY) portfolio and the enhancement of Tarun loans up to ₹20 lakh certainly calls for a robust monitoring mechanism on bad loans. Now, cautious growth in advances is advised,’’ a senior SBI official said.