RBI raises flag as Bad Loans rise to ₹11,000 crore under PM Modi’s pet project ‘Pradhan Mantri Mudra Yojana’

The Prime Minister, Shri Narendra Modi addressing at the launch of the Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana, in New Delhi on April 08, 2015.


The Reserve Bank of India (RBI) has raised a red-flag on the spike in non-performing assets (NPAs) under the government’s flagship scheme to support micro enterprises in the country, the Pradhan Mantri Mudra Yojana (PMMY).

The PMMY was launched on 8th April, 2015. Under the scheme, banks are required to finance micro and small entrepreneurs for up to Rs. 10 lakh. Loans can be granted under three categories –

  1. Up to Rs. 50,000 under ‘Shishu
  2. Rs. 50,001-Rs. 5 lakh under ‘Kishore
  3. Between Rs. 5,00,001 & Rs. 10 lakh under ‘Tarun‘ category

As per some sources in the Finance Ministry, the RBI has cautioned the ministry that the scheme might turn-out to be the next big source of NPAs, which have plagued the banking system.


  • The central bank data indicates how bad loans rose to Rs. 11,000 crore under the scheme


  • As per the annual report of PMMY, 2017-18, total disbursements under the scheme stood at Rs. 2.46 trillion in FY 18


  • Out of this, 40% were disbursed to women entrepreneurs and 33% to social categories. More than 4.81 crore micro-borrowers have benefited through PMMY during the year FY 2017-18

Image result for rbi NPA

Prashant Kumar, CFO and deputy MD of State Bank of India (SBI), shared his views on the same with CNBC-TV18 on Monday. He quoted:


“Mudra scheme is for small micro, small and medium enterprises (MSME) loans. I think we see even in the past, MSME is a little higher NPA percentage, always in the MSME. This is not like this issue is very critical. All the banks need to improve in terms of financing MSME sector.”


“Our book is a very small percentage of the total book and NPA levels are still higher, almost 8-10 percent in the MSME sector. So we are not expecting any further increase in the NPAs in this. Rather we would be in a position to control it better.”

Prashant Kumar – CFO & Deputy MD of SBI

Talking about the bank’s provisioning, Kumar further said,


“We are not expecting any further higher defaults and we are making adequate provisioning. Last quarter, we were 54 percent for the provision coverage ratio and the corporate book was 58 percent. So we will make adequate provisions during the coming quarters. So depending on the requirement, we would align with this.”

“For MSME sector, our total book is something around Rs 2 lakh crore out of a total book size of Rs 21 lakh crore. So it is hardly 10 percent of our total loan book. Number for Mudra scheme, I don’t have it with me right now,” he said.

The RBI’s caution comes at a time when the country’s financial system in reeling under severe stress due to the IL&FS crisis which continues to hurt banks with impairments, the most recent case being IndusInd Bank.

On 9th January, IndusInd Bank in its quarterly earnings result statement, without naming the IL&FS Group, said:

“Advances granted to various companies and SPVs belonging to a Group in the infrastructure sector against certain identified cash flows and pertaining to specific assets are ‘Standard’ as at December 31, 2018 on the basis of the conduct of the accounts till date.


“Since October 1, 2018, certain governance and management changes have taken place in the Group and measures to turn it around through a Resolution Plan are underway.”

The bank said it was monitoring the developments and implications of the ‘Resolution Plan’.




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