New Delhi: The Finance Ministry has announced to increase the maximum limit of loan under the Pradhan Mantri Mudra Yojana from Rs 10 lakh to Rs 20 lakh in the budget for the current financial year 2024-25. So that more and more small entrepreneurs can take advantage of this loan without mortgage. But on the other hand, NITI Aayog has expressed concern over the increasing non-performing assets (NPAs) or stuck loans under Mudra loans.

The commission has said in its report that to prevent the increase of NPAs, there is a need to prepare a mechanism by collecting information of entrepreneurs from e-KYC, MSME's enterprise portal, through which the background of small entrepreneurs can be ascertained accurately. Their enterprise performance can be monitored. Only then the risk of banks will be reduced because this loan is given without any mortgage. The success of the Mudra scheme will depend on the reduction in the risk associated with this loan.

The scheme was started 9 years ago

Mudra Yojana was launched in the year 2015, so that MSMEs can take loans up to Rs 10 lakh without any mortgage. Under this scheme, loans are given in three categories Shishu (loan up to Rs 50,000), Kishor (loan from Rs 50,000 to five lakhs) and Tarun (loan from five lakhs to ten lakhs). According to government data, till the financial year 2022-23, loans of Rs 22.89 lakh crore have been given in 41.16 crore accounts.

In the last eight years, except for the financial year 2020-21, Mudra loans have been given in more than the target in all the financial years. In the financial year 2022-23, a target of giving loans of 4.40 lakh crores was set while loans of 4.50 lakh crores were given during this period.

Why is Niti Aayog worried?

Niti Aayog is concerned that from 2017 to 2022, the number of NPA accounts is increasing by 22.51 percent and the NPA amount is increasing by 36.61 percent. Government banks have the highest NPA. In the financial year 2016-17, 2394,509 accounts were in the NPA category. Their number increased to 17,99,028 in the financial year 2017-18, 36,96,019 in the financial year 18-19, 38,23,311 in the financial year 19-20, 54,13,216 in the financial year 20-21 and 66,08,103 in the financial year 2021-22.

Microfinance institutions, private banks, non-banking financial companies, government banks and small finance banks provide Mudra loans. The commission said in its recommendation that to make Mudra loans widespread, its promotion and advertising is needed so that people can directly contact the bank for this loan. People wishing to take a loan are not aware of the basic necessary documents. Mudra loans are rejected mainly due to lack of CIBIL score and necessary documents.