Rising NPAs in Mudra loan cause of worry for banks

Aurangabad, Aug 12:

There has been a significant jump in the number of loan accounts that have turned Non-Performing Assets (NPA) under the Pradhan Mantri MUDRA Yojana (PMMY) in the district in the past few years. The outstanding loans are increasingly becoming a cause of worry for the banks as the recovery rate has fallen below 30 per cent.

The PMMY scheme was launched by prime minister Narendra Modi in April 2015 to improve access to micro finance for non-corporate, non-farm small and micro enterprises and stimulate job creation in the country. Loans of up to Rs 10 lakh were provided without having to provide any collateral. The scheme is mainly divided into three categories, Shishu, Kishor and Tarun loans. According to bankers, the maximum disbursement of loan was under the Shishu loans in the district. As per data, Rs 380 crore were disbursed to borrowers under Shishu (upto Rs 50,000) category in 2017-18, Rs 650 crore in 2018-19, Rs 800 crore in 2019-20. This is followed by Kishor (Rs 50,000 to Rs 5 lakh) that was eight per cent i.e Rs 300 crore in 2019-20 and and six per cent i.e Rs 109 crore under the Tarun (Rs 5-10 lakh) accounts were disbursed in the district. The banks have already disbursed around Rs 1,107.89 crore till date to almost 4.5 lakh consumers. According to bankers, “The total amount of NPA, including priority sector and non-priority sector, is beyond anybody’s imagination. If performance of individual banks under the PMMY is taken into consideration, then the NPAs of banks like SBI, Bank of Maharashtra, Punjab National Bank (PNB) and Bank of India combined stood at 30 per cent."

EOW probe still pending

In 2019, the Economic Offences Wing (EOW) of city police had carried out an all-out probe in PMMY loans that had been obtained by using forged documents. High number of loans granted under the scheme had turned into NPAs and several complaints were lodged pointing out use of forged documents to obtain loans. The officials have unearthed 2,300 cases of cheating in the Mudra scheme. According to senior bank officials, an estimated loan totally to the tune of Rs 8,000 crore granted under the PMMY had turned bad in the state. However, there was no progress in the case. As per sources, the bank officials ended up giving loans despite knowing that the documents were forged due to political pressure.

Business failure saves quick mortality

Sources in at least two PSU banks told this reporter that many branch managers had resorted to a so-called 60:40 and 70:30 split formula under which borrowers received only 30 to 40 per cent of the loan disbursed with the remaining amount going to the sanctioning authority. The managers used a part of the 60 per cent amount to repay the Mudra loan for a year and pocketed the rest. As the loans had been repaid regularly for a year, the account was saved from going into quick mortality. Later, when repayment stopped, the account was shown as genuine business failure thus protecting the bank officials from scrutiny or penal action with the loanee also hiding behind the business failures.

Loans distributed in district:

Beneficiaries (in lakh) Year Loans

1.51 2017 Rs 801.75 crore

2.90 2018 Rs 1109.82 crore

3.70 2019 Rs 1278.45 crore

3.26 2020 Rs 703.25 crore

Loans distributed in the state:

Sanction amount (in crore)

2019-20 – Rs 27,903

2018-19 – Rs 26,439

2017-18 – Rs 22,751

2016-17 – Rs 17,286

2015-16 – Rs 13,371