NEW DELHI: Among the welfare programmes the government touts as a success story is the Pradhan Mantri Mudra Yojana, a financial initiative to provide loans to micro-units to help them develop their business and generate employment.Interacting with Mudra beneficiaries in May this year, Prime Minister Narendra Modi had said that the scheme had fulfilled people’s dreams of setting up small businesses and generating jobs for others.
Similarly, talking at an event last year, BJP president Amit Shah said 7.28 crore people had become self-employed under the Centre’s Mudra loan scheme in the past three years. But what is left unsaid is that nearly Rs 11,000 crore loan given to 13.85 lakh account holders have turned into bad loan, a Right to Information application by The New Indian Express has for the first time revealed.
The PMMY was launched on April 8, 2015. Under the scheme, banks are required to finance micro-entrepreneurs with loan requirement up to Rs 10 lakh. Loans are granted under three categories — up to Rs 50,00 come under the ‘Shishu’ category, between Rs 50,001 and Rs 5 lakh under ‘Kishore’ and between Rs 5,00,001 and Rs 10 lakh under ‘Tarun.’
About 13.47 crore account holders have been sanctioned loan amounting to more than Rs 6.37 lakh crore as on August 3 this year, the RTI revealed.But the data has also disclosed that Rs 10,915.07 crore worth of loan has turned into NPA and the highest number of defaulters are those who have taken loan under the Shishu category, or taken loan up to Rs 50,000.
While experts do not question the objective of the Mudra scheme, they cited two reasons for the NPAs. The first is that loans are being given without any collateral, making it difficult for banks to go after defaulters. The second is the over-emphasis on banks to meet loan disbursal targets. In the race to meet targets, credentials of loan seekers are often not verified.
On the lack of security, Devinder Sharma, a policy expert, said the government had not learnt from the failure of similar government schemes in the past. “I remember a similar scheme was launched by Haryana CM Devi Lal and a major portion of the scheme had turned into NPAs. In this scheme also the government has just doled out money to people without any security and lakhs of the accounts turned into NPAs,” he said.
Bank officials admitted that there were some flaws in the policy. Ashwini Rana, vice president of the National Organization of Bank Workers, blamed the unsecured loans for the NPAs. “Banks want to help, but people have misused it,” he said. According to Rana, the scheme shouldn’t be target-driven — a view shared by many others.
“It should not have any target. But, a target was fixed and banks started fulfilling the target,” said Rana.
Many other senior bank officials agreed with Rana. “There used to huge pressure on branch managers of public sector banks. You can say it was like a race. In the process loans were given to people without any purpose. Many banks even invited existing account holders to take loan below Rs 50,000 under the Shishu category simply to meet the target,” an official said.
Government data about achieving targets appear to support what the bankers said. In the three years since the scheme was launched, banks have always exceeded the loan disbursal target, never under-achieved.
In 2015-16, while the target was to disburse Rs 1,22,188 crore in loans, banks gave out Rs 1,37,449 crore as loans. In 2016-17, the corresponding figures were Rs 1,80,000 and Rs 1,80,529 and in 2017-18 (as of September) they were Rs 2,44,000 crore and Rs 2,53,677 crore.
(Tomorrow: 90% beneficiaries got less than Rs 50,000)