Credit and Finance for MSMEs: The number of loans sanctioned to micro and small enterprises (MSEs) under Pradhan Mantri Mudra Yojana (PMMY) has slipped below 5 crores in the financial year 2021-22, the lowest in the past four years, official data showed. 4.89 crore loans amounting to Rs 3,10,563.84 crore were sanctioned in FY22 out of which Rs 3,02,948.49 crore loans were disbursed. The amount sanctioned and disbursed in FY22 was also the lowest during the period, according to the data from the Mudra portal.
In FY21, 5.07 crore loans involving Rs 3,21,759.25 crore were sanctioned while Rs 3,11,754.47 crore loans were disbursed. In comparison, the highest number of loans were sanctioned in FY20. 6.22 crore loans amounting to Rs 3,37,495.53 crore were sanctioned, of which Rs 3,29,715.03 crore were disbursed during the year. Lastly, in FY19, 5.98 crore loans amounting to Rs 3,21,722.79 crore were sanctioned. The disbursed amount was Rs 3,11,811.38 crore.
The reason for the drop in Mudra sanctions and disbursements is likely linked to the government’s Emergency Credit Line Guarantee Scheme (ECLGS). “Mudra scheme has been for both new to bank (NTB) and existing bank customers. However, as the scope of lending started to widen with the growth in the support offered to the existing customers through ECLGS, it became the preferred choice for such borrowers. For banks also, it was easier to lend more to their existing SME customers via ECLGS,” Sujit Kumar, Chief Economist, Union Bank of India told TheSpuzz Online.
With respect to reaching out to NTB customers through Mudra loans, lenders had already covered a greater base of beneficiaries in previous years till around FY19 and FY20 that was later reduced during the pandemic years, added Kumar.
PMMY is essentially a self-employment and entrepreneurship promotion scheme launched by Prime Minister Narendra Modi in 2015. It targets micro enterprises, which are generally proprietary concerns, and individual businesses at the bottom of the entrepreneurial pyramid seeking loans up to Rs 10 lakh. In terms of the disbursement rate in FY22 was 97.54 per cent in comparison to 96.89 per cent in FY21, 97.69 per cent in FY20 and 96.91 per cent in FY19.
Subscribe to TheSpuzz SME newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises
Despite the lowest disbursements in four years, the lending institutions were able to meet the Rs 3-lakh-crore disbursement target set by the government for FY22. However, the target was reduced sharply by the government vis-a-vis FY21 sanctions and disbursements. This again, according to experts, was due to the increase in ECLGS limits by the government last year to Rs 4.5 lakh crore and further to Rs 5 lakh crore this year.
“Lot of MSME borrowers actually went into ECLGS with the increased support. However, we shouldn’t see a further decline in Mudra loans as ECLGS is almost exhausted for those who qualified for the scheme when it was launched while the latest versions of the scheme are for other dedicated sectors,” Madan Sabnavis, Chief Economist, Bank of Baroda told TheSpuzz Online. The government had launched ECLGS 3.0 in March last year to cover enterprises in the hospitality, travel & tourism, leisure and sporting sectors while 4.0 was announced in May for hospitals, nursing homes, clinics, medical colleges to set up on-site oxygen generation plants following the second wave of the pandemic.
Meanwhile, lenders had reported an increase in the amount of Mudra loans becoming non-performing assets (NPAs). The value of gross NPAs or bad loans had jumped to Rs 34,090.34 crore during FY21, up 30.7 per cent from Rs 26,078.43 crore in FY20, and nearly doubled from Rs 17,712.63 crore in FY19, according to the data shared by the Minister of State for Finance Bhagwat Karad on November 30, 2021, in Rajya Sabha. The NPA share against total disbursements had also increased from 2.51 per cent in FY19 to 2.53 per cent in FY20, and 3.61 per cent in FY21.
Credit rating agency Crisil had said in a statement last October that banks’ gross NPAs would rise to 8-9 per cent in FY22 while stressed assets would touch 10-11 per cent due to the pandemic impact. “The retail and MSME segments, which together form around 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around,” said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings.