Mudra Regime: Sanctioned Loans Disbursed to Micro and Small Enterprises in FY22 Lowest in Four Years
Credit and financing for MSMEs: The number of loans issued to micro and small enterprises (MSEs) under Pradhan Mantri Mudra Yojana (PMMY) fell below 5 crores in the 2021-22 financial year, the lowest in the past four years, according to official data . Loans of 4.89 crore amounting to Rs 3,10,563.84 crore were sanctioned in FY22, of which Rs 3,02,948.49 crore was disbursed. The amount sanctioned and disbursed in FY22 was also the lowest in the period, according to data from the Mudra portal.
In FY21, loans of Rs 3,21,759.25 crore worth 5.07 crore were sanctioned while loans of Rs 3,11,754.47 crore were disbursed. In comparison, the largest number of loans were sanctioned in FY20. Loans of 6.22 crore amounting to Rs 3,37,495.53 crore were sanctioned, of which 3,29,715.03 crores of rupees were disbursed during the year. Finally, in the financial year 2019, loans of 5.98 crore amounting to Rs 3,21,722.79 crore were sanctioned. The amount disbursed was Rs 3,11,811.38 crore.
The reason for the drop in Mudra sanctions and disbursements is likely related to the government’s Emergency Credit Line Guarantee (ECLGS) scheme. “The Mudra program is aimed at both new customers of the bank (NTB) and existing customers of the bank. However, as the scope of lending began to broaden with the growth of support offered to existing clients through the ECLGS, it became the preferred choice for these borrowers. For banks too, it was easier to lend more to their existing SME customers through ECLGS,” Sujit Kumar, Chief Economist, Union Bank of India, told Financial Express Online.
In terms of reaching out to NTB clients through Mudra loans, the lenders had already covered a larger beneficiary base in previous years up to around FY19 and FY20 which was then reduced during pandemic years, Kumar added.
PMMY is essentially a self-employment and entrepreneurship promotion program launched by Prime Minister Narendra Modi in 2015. It targets micro-enterprises, which are usually owner-operated businesses, and sole proprietorships at the bottom of the entrepreneurial pyramid at looking for loans up to Rs 10 lakh. In terms of disbursement rate in FY22, it was 97.54%, compared to 96.89% in FY21, 97.69% in FY20 and 96.91 % in fiscal year 19.
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Despite the lowest disbursements in four years, lending institutions were able to meet the disbursement target of Rs 3-lakh-crore set by the government for FY22. However, the target was sharply reduced by the government vis-à-vis FY21 sanctions and disbursements. further to Rs 5 lakh crore this year.
“A lot of MSME borrowers have actually gone to the ECLGS with the increased support. However, we should not see a further drop in Mudra loans as the ECLGS is nearly exhausted for those who qualified for the program during of its launch, while the latest versions of the program are aimed at other dedicated sectors,” Madan Sabnavis, Chief Economist, Bank of Baroda told Financial Express Online. last year to cover businesses in the hospitality, travel and tourism, leisure and sports sectors, while version 4.0 was announced in May for hospitals, nursing homes, clinics and medical schools are setting up on-site oxygen production plants following the second wave of the pandemic.
Meanwhile, lenders had reported an increase in the amount of Mudra loans becoming non-performing assets (NPA). The value of gross NPA or bad debts surged to Rs 34,090.34 crore in FY21, up 30.7% from Rs 26,078.43 crore in FY20, and almost doubled from Rs 17,712.63 crore in FY19, according to data shared by the Minister of State for Finance. Bhagwat Karad on November 30, 2021 in Rajya Sabha. NPA’s share of total disbursements also increased from 2.51% in FY19 to 2.53% in FY20 and 3.61% in FY19. exercise 21.
Credit rating agency Crisil said in a statement last October that banks’ gross NPAs would rise 8-9% in FY22 while stressed assets would hit 10-11% due to the impact of the pandemic. “The retail and MSME segments, which together account for around 40% of bank credit, are expected to see a higher increase in NPAs and stressed assets this time around,” said Krishnan Sitaraman, Senior Director and Deputy Director. ratings, Crisil Ratings.