Pradhan Mantri Mudra Yojana was launched on 8th April 2015. Categorised as Shishu, for loans upto Rs.50000/-, Kishore for loans upto Rs. 5 lakhs and Tarun for Loans upto Rs. 10 lakh, the scheme wrapped in attractive names was pushed by the Government, forcing banks to give credit for micro, small and medium enterprises. Until June 2019, banks have given Rs. 19 crore loans.

This is the second avatar of loan mela (Janardhan Poojary fame is first) out of which Rs. 3.63 crore accounts are in default as on March 2019. According to a RTI reply, NPA in Mudra loans increased by 126% in FY19 from Rs. 9202.14 crore in FY 2018 to Rs. 16481.45 cr in FY 19. Now RBI Dy. Governor M.K.Jain has cautioned the level of risk in Mudra loans and increasing NPA.

The main reasons are political pressure for these loans, no climate of support system to sustain these enterprises and poor economic growth. In Israel which is called the start-up nation, new enterprises are supported by the Govt with finance, market information and Technology. So their success rate is high. In China, Govt takes care of the Banks which finance startups in case of failure. In our country, though there is a credit guarantee scheme that has many riders, banks are getting into a risk that has forced the RBI Dy. Governor to come out in open.

It appears that MUDRA loans are going to be another avalanche for Banks which are already saddled with huge corporate NPAs. Unless the Govt provides support for the MSMEs, like in Israel, they can’t succeed. Mr.Piyush Goyal had stated that it’s good that unemployment is increasing because these youth can become entrepreneurs. Enterprises can succeed only if the Govt provides an ecosystem for them and not allow every import into the country.

Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.

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