Reserve Bank flags rising bad assets from Mudra loans

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News:The Reserve Bank of India (RBI) has expressed concern over rising bad loans from Pradhan Mantri MUDRA Yo­jana(PMMY).

Facts:

About Rising Bad loans in MUDRA Yojana:

  • The RBI Deputy Governor said that MUDRA was launched with the objective of lifting many beneficiaries out of poverty.
  • However,there have been concerns at the growing level of non-performing assets(NPAs) among these MUDRA borrowers.
  • The data has shown that non-performing assets ratio or bad loans as a percentage of MUDRA loans were at 2.68% in 2018-19 from 2.52% in the 2017-18.
  • Hence, the RBI has asked the Banks to focus on repayment capacity at the appraisal stage and monitor the loans through the life cycle much more closely.

Additional information:

About Pradhan Mantri MUDRA Yo­jana(PMMY):

  • Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Prime Minister in 2015.
  • It aims for providing loans up to 10 lakh to the non-corporate, non-farm small/micro enterprises. 
  • These loans are given by Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs.

Categories of Loans:

  • The loans under Mudra are given under different categories viz. ‘Shishu’, ‘Kishor’ and ‘Tarun’.These categories are based on the stage of growth or development and funding needs of the beneficiary.
  • Sishu covers loans up to Rs. 50,000.Kishore covers loans above Rs. 50,000- and up to 5 lakh and Tarun covers loans above Rs. 5 lakh and up to Rs.10 lakh.

About Non Performing Asset(NPA):

  • A non performing asset (NPA) is a loan or advance for which the principal or interest payment remains overdue for a period of 90 days. 
  • The banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.