MUDRA loan scheme: Negating Chidambaram, ex CEA KV Subramanian says impact of MUDRA loans has been positive

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Days after former Finance Minister P. Chidambaram criticized the Centre’s MUDRA loan scheme, saying it was “virtually worthless” for business promotion, former chief economic adviser Prof. KV Subramanian, replied that it was surprising that the former minister questioned the impact as data. shows up close how much of a positive impact it has had on beneficiaries.

Launched in 2015, Pradhan Mantri Mudra Yojana (PMMY) was launched to promote entrepreneurship among people, where loans up to Rs 10 lakh were offered under the scheme to entrepreneurs. Since the introduction of the scheme, many experts including former RBI governor Raghuram Rajan had warned of the possibility of high non-performing assets (NPA) under the scheme.

Subramanian said the MUDRA loan, which has completed 7 years of its operations, has extended a cumulative amount of Rs 18.83 lakh crore to Rs 34.93 crore loan accounts, mainly benefiting borrowers from weaker sections of the city. society.

Chidambaram, who was finance minister under the UPA government, had written that the MUDRA loan scheme had failed to promote business. “I have long argued that the MUDRA Loan Scheme is virtually worthless for promoting businesses,” Chidambaram said on Twitter. He added, “State Bank of India is proud that in the Tamil Nadu-Puducherry area, the bank has distributed Rs 1,000 crore to 26,750 MUDRA beneficiaries in 2021-22.”

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Impressive numbers until you do the math, Chidambaram said, adding that the average loan size to 26,750 beneficiaries is only Rs 3.73 lakh. “How much new business can be started with Rs 3.73 lakh and how many jobs can be created with Rs 3.73 lakh,” he asked.

Over the past few years, Public Sector Banks (PSBs), which have been the main channel for distributing MUDRA loans, have seen an increase in their bad debts in FY20, even as disbursements have experienced a significant increase, according to reports. NPAs, as a percentage of MUDRA loans disbursed by PSOs, fell from 3.75% in FY19 to 4.80% in FY20, according to government data.

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But Gov. Narendra Modi maintained that the loan scheme had helped many beneficiaries and the percentage of bad loans had decreased in FY22. In a written response to the Rajya Sabha during this monsoon session, the ministry of Finance Bhagwat Karad said NPLs under PMMY as a cumulative percentage of total MUDRA loans disbursed in FY22 decreased to 3.17% from 3.61% in FY21 , although they are still above 2.53%. cent in fiscal year 20.

Provisional data shared by the Ministry of Finance showed that the share of bad loans in loans disbursed under the PMMY by public sector banks was highest at 4.74% compared to 1.92% for small banks. financial institutions, 1.14% for private banks, 1.01% for NBFC-microfinance institutions (MFIs), 0.67% for MFIs and 0.07% for NBFCs, as of March 31, 2022.

It should be noted that the volume of bad debts under MUDRA loans increased to Rs 34,090.34 crore in the financial year 2020-21, which is 30.7% higher than Rs 26,078.43 crore. rupees in FY20, and nearly doubled from Rs 17,712.63 crore in FY19, Karad had briefed Parliament during the December session.

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