New Delhi: Government research institute Niti Aayog has said that it will prepare a guideline for assessing the eligibility of loan takers under the Pradhan Mantri Mudra Yojana (PMMY) and for verification of their background.

In a report titled 'Assessing the Impact of PMMY', the Commission has suggested encouraging e-KYC verification for loan approval. This will increase the effectiveness of assessment checks.

Guidelines for background verification

Niti Aayog said in a report released on its website that there is no guarantee for this loan, hence proper risk investigation and assessment plays an important role in the results and success of this scheme.

In such a situation, a set of guidelines for loan eligibility and background verification should be listed to provide security to the banks.

Most of the borrowers under PMMY are small entrepreneurs who have very limited documentation and this makes it difficult for banks to conduct verification checks as it requires more staff.

The commission gave this suggestion

The Commission also suggested that there is a need for an appropriate reward system for different banks based on the scale of their operations and performance.

A portal enabling real-time upload of beneficiary data will help streamline beneficiary data collection

PMMY has provided loan support of Rs 18.39 lakh crore to 34.93 crore accounts since its inception in 2015.

According to the report, compared to before the pandemic, loan disbursement to MSMEs has doubled across all sectors, indicating support for increasing credit demand by the industry.

At the same time, the number and amount of NPA accounts have been increasing year-on-year at a CAGR of 22.51 per cent and 36.61 per cent respectively since FY 2017.

The Micro, Small and Medium Enterprises (MSME) sector plays a pivotal role for entrepreneurs and is a key driver of socio-economic development in India.

The sector contributes about 33 per cent (FY15 to FY19) to the gross value of the country's total manufacturing output.

It contributes over 40 per cent of exports and over 28 per cent of India's GDP, while generating employment for around 111 million people.