Over the past year, Gujarat has seen a 71% increase in the number of accounts that have turned non-performing assets (NPA) under the Pradhan Mantri MUDRA Yojana (PMMY).
Bankers cite “poor solvency” due to factors influenced by Covid as the reason for the rise in bad debt under this flagship scheme by the Government of India, launched to provide loans of up to 10 lakhs to micro and small businesses.
The latest report from the State Bankers Committee (SLBC) in Gujarat said that as of the end of March 2021, a total of 96,415 accounts had been labeled NPA, and bad debts from banks across the state rose to Rs 729.42 crore. These NPA accounted for 6.6% of total loans disbursed under PMMY, a scheme designed to encourage entrepreneurship among youth.
By comparison, at the end of March 2020, NPA on 56,342 accounts in Gujarat were worth Rs 530.34 crore. “The effect of the blocking and restrictions of Covid will undoubtedly be reflected in banks and their lending process. Over the past year, borrowers have faced difficulties in repaying their loans.
There is a general decline in business and everyone can see it. This sparked a surge in NPA. However, NPAs under PMMY are currently managed, ”said a spokesman for Bank of Baroda, which is the organizer of SLBC in Gujarat.
PMMY or Mudra loans are provided as business loans to sellers, traders and store owners to increase income and create jobs. It is also provided as a working capital loan for Mudra cards and to finance equipment for micro-enterprises. These are provided as vehicle loans (for commercial use only) and loans for agricultural-related non-agricultural income-generating activities such as fish farming, beekeeping and poultry farming.
If we take into account the performance of individual banks in the framework of PMMY, then the NPA of such banks as Punjab National Bank (PNB) and State Bank of India (SBI) in the framework of PMMY amounted to 22% and 15%, respectively, for the year. 2020-21. Others, such as Bank of Baroda and Baroda Gramin Bank, also had 11% and 17% NPA, respectively. In comparison, NPA SBI was only 5.18% in 2019-2020, while NPB was 6.64%.
Among the three categories of PMMY loans issued during 2020-2021, about eight percent of Taruna loan accounts (Rs 50,000-5 thousand) were transferred to NPA during 2020-2021. Similarly, six percent of Shishu loan accounts (up to Rs 50,000) and 5.6 percent of Tarun’s accounts (5-10 lakhs) turned into bad debts.
The number of NPAs under PMMY has grown steadily in Gujarat since its launch six years ago.
For example, NPA under the scheme, which stood at Rs 384 crores at the end of December 2018, rose to Rs 516 crores by March 2019. Thereafter, it rose to Rs 530 crore by the end of March 2020.