NPAs under Mudra loans by PSU banks higher than MFIs and private peers, says DFS Secy

Mudra scheme provides collateral-free credit to small and micro enterprises.

The non-performing assets (NPAs) under the Pradhan Mantri Mudra Yojana (PMMY) have continued to improve in FY25, with gross bad loans declining to 2.21 percent overall, however, PSU banks reported a higher average NPA of 3.6 percent, Department of Financial Services (DFS) Secretary M Nagaraju said on April 7.

PSU banks’ higher gross NPA comes at a time when private lenders, micro-finance institutions (MFIs), and non-banking financial companies (NBFCs) are faring better in terms of recovery. “The gross NPA in Mudra loans for FY25 is at 2.21 percent overall. Average NPA in Mudra loan is at 3.6 percent for PSBs. Private sector banks, MFIs, and NBFCs recovery rate is better,” Nagaraju said during a media briefing in New Delhi.

The DFS is currently reviewing the disbursement data of banks to assess their performance against the Rs 5 lakh crore target set for the current fiscal. Nagaraju said that actual disbursements were close to the target. “The DFS is reviewing how the actual disbursement with the banks has been. We are very close to the target in FY25,” he said.

While the FY26 Mudra loan target is yet to be finalised, the department expects it to be marginally higher than last year, in line with government’s continuing focus on micro-credit. Since the scheme’s launch in 2015, over 52.37 crore loans worth Rs 33.65 lakh crore have been sanctioned, with Rs 32.87 lakh crore disbursed to beneficiaries.

Nagaraju highlighted that the average size of Mudra loans has increased significantly over the years. “The average Mudra loan size was Rs 40,000 in 2015, which has now increased to Rs 1,05 lakh currently. NPAs are decreasing,” he added.

Coastal Push amid Global Headwinds

The DFS said Centre is looking to intensify Mudra lending for sectors such as agriculture and aquaculture in coastal areas, in light of trade challenges. “We want to encourage Mudra loans to encourage shrimp, agri in coastal areas,” Nagaraju said.

India exported marine food products worth $2.55 billion to the United States in FY24, with shrimp accounting for 92 percent of the volume. However, the sector has been under pressure following the US decision to impose a 26 percent import duty on marine food items from India.