More trouble for banks, bad loans under Mudra Kishore soar 107% in 6 months: Report

Bad loans under the Pradhan Mantri Mudra Yojana (PMMY) Kishore jumped 107 percent, the Indian Express reports, citing data provided by public sector banks for the March-September 2019 period.

The value of Mudra Kishore bad loans also increased by 71 percent. Its total share of bad loan accounts in PMMY rose to 56 percent in September, up from 42 percent in March. Bad loans by value jumped 61 percent from 56 percent, the paper noted.

The figures were released in response to a Right To Information queries from government-owned State Bank of India, Bank of Baroda, Canara Bank, IDBI Bank, Indian Overseas Bank, Punjab and Sind Bank, Central Bank of India, Corporation Bank, Syndicate Bank, Oriental Bank of Commerce, Bank of Maharashtra and Allahabad Bank.

Till September, Mudra Kishore on average made up 30+ percent of these 12 banks’ loan accounts valued at 43 per cent of the total loans sanctioned.

Moneycontrol could not independently verify the report.

Geared towards non-farm income-generating activities, PMMY allows small borrowers access to loans from banks, MFIs and NBFCs.

Under Mudra Kishore, they can get between Rs 50,000 to Rs 5 lakh, under Tarun between Rs 5-10 lakh. The smallest category is Shishu, capped at Rs 50,000.

RBI Deputy Governor MK Jain had a few days ago expressed  “concerns at the growing level of NPAs among these borrowers”, and stressed the need to “monitor the loans through the life cycle much more closely”.

Also Read our MC Pro piece on Mudra NPA loans: The dangers of directed banking

The initiative is aimed at pulling people out of poverty by setting up small businesses, but lack of due diligence and poor monitoring is posing a problem.

This is particularly evident in the fact that bad loans by value under Tarun have also risen 45 percent, and bad loan accounts increased by 13 percent. Under Shishu too, bad loan accounts increased by 18 per cent, but since the ticket size is small, the NPAs in value increased by 17 per cent for the period.