RBI deputy governor directs banks to keep a close watch on Mudra loans

RBI

Banks should monitor Mudra loans closely amidst inflating non-performing assets (NPAs) under the scheme, Reserve Bank of India (RBI) deputy governor MK Jain said.

RBI

“There is a need to focus on repayment capacity at the appraisal stage and monitor the loans through the life-cycle much more closely,” said Jain.

While Mudra loans had given a major help in a bid to lift the beneficiaries out of poverty, there have been concerns pertaining to the growing level of NPAs, he added.

Non-corporate, non-farm small/micro enterprises can avail loans up to Rs 10 lakh from commercial banks, regional rural banks, small finance banks, micro-finance institutions (MFIs) and non-banking finance companies (NBFCs), under the Pradhan Mantri Mudra Yojana.

 At the end of March 2019, NPAs in Mudra loans inflated to 5.28 percent of disbursements made under the scheme from 3.96 percent year ago.

Jain further said that the recommendations of the UK Sinha committee, created to suggest long-term solutions for the economic and financial sustainability of the micro, small and medium enterprises (MSME) sector, were examined for the implementation. Recommendations of the committee include creating  a Rs 5,000-crore stressed asset fund for domestic MSMEs.

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