Prime Minister Narendra Modi and Finance Minister Arun Jaitely at Mundra event. (Source: Bloomberg)

Delinquencies For Mudra Loans Below Industry Average, Shows Annual Report

Despite concerns that increased lending under the Prime Minister’s Mudra Yojana could lead to a spurt in bad loans, delinquencies in this portfolio remain lower than the prevailing industry averages.

The three-year-old scheme provides refinance for loans up to Rs 10 lakh given out by banks and non-bank lenders.

Loans worth Rs 2.54 lakh crore were classified as Mudra loans in 2017-18, according to the scheme’s annual report. This is an increase of 41 percent over the Rs 1.80 lakh crore of loans sanctioned in this category. For 2018-19, a target of Rs 3 lakh crore has been set. Refinance to commercial banks increased from Rs 1,886.73 crore in 2016-17 to Rs 4,405.73 crore in 2017-18, according to the annual report.

The non-performing assets ratio in the portfolio currently stands at 5.38 percent, showed the annual report. This is the first time that the agency released the bad loan data. In its last annual report, the agency had said that it is initiating the process of tracking bad loans in the portfolio of Mudra loans.

While gross NPA (non-performing assets) in India across all sectors crossed 10 percent in 2017-18, NPA level under PMMY is only 5.38 percent as on March 31, 2018.
Mudra Annual Report (2017-18)

The incidence of bad loans reported by the agency is lower than those reported by TransUnion CIBIL in its MSME Pulse report. That report had shown the NPA ratio of about 8 percent for loans below Rs 10 lakh.

Who’s Doing The Lending?

A bulk of the loans classified as Mudra loans continue to be on the books of government-owned banks. However, the share of private bank and non-bank lenders have risen marginally.

The share of private banks remained steady at about 20 percent. The combined share of small finance banks and microfinance institutions rose to 27 percent from 21 percent last year.

The share of NBFCs jumped to 11 percent compared to just 1 percent last year. Over Rs 27,000 crore in loans from these non-bank lenders were classified under the Mudra scheme.

Private banks and NBFCs have successfully competed with public sector banks in getting a larger share of the lucrative MSME pie. Micro and SME exposure (less than Rs 25 crore) accounts for around 20 percent of PSBs total commercial outstanding credit as of March 2018, compared to 28 percent in private banks and 30 percent in NBFCs as of March 2018.  
Mudra Annual Report (2017-18)

States That Saw Lending Increase

The top 10 states where Mudra loans are bunched up remained the same in 2017-18 compared to the previous year but growth across states varied.

The sharpest increase in the Mudra portfolio was seen in Rajasthan, where a jump of 54 percent was reported. Gujarat, Odisha and Madhya Pradesh saw growth in excess of 40 percent each.

Growth in Rajasthan is mainly coming from improved performance of public sector banks, while in Gujarat private sector banks and NBFCs contributed significantly to growth.  
MUDRA Annual Report (2017-18)