Monitor Mudra Loans closely

The Reserve Bank of India Deputy Governor M K Jain has told that NPA loans have been mounting in the recent days and that the same should be closely monitored.

1. He advised that the repayment capacity should be focused at the appraisal stage itself through its life cycle which is not being done effectively.
2. Of course he added that Mudra loans had given a leap towards removal of poverty, the same has equally contributed for the increase in NPAs also.
3. Under the Pradhan Mantri Mudra Yojana, non-corporate, non-farm small/micro enterprises can avail loans upto Rs 10 lakhs from Commercial banks, Rural banks, Small Finance Banks, Micro Finance Institutions (MFIs) and Non-Banking Finance companies (NBFCs).
4. The March 2019 end figure the NPA loans had shown an increase of 5.28% of the disbursements made under the scheme which was 3.96% a year ago.
5. Also, the Deputy Governor added that the recommendations of UK sinha Committee which was formed to give suggestions for economic and financial sustainability of the micro, small and medium enterprises (MSMEs) were being examined for implementation.
6. The said committee has also recommended for setting up of Rs. 5000 crore stressed asset fund for domestic MSMEs.
7. Also he added that enabling customers in the low income group should not only be offered products and services, but demand them according to their needs.
8. Need for Informal sources of funds has been reduced, after introduction of Goods and Services Tax.
9. Since lending would be shifting from collateral based lending to cash flow based lending, the cost of credit for micro and small enterprises would also come down meaningfully he added.

The Deputy Governor who was inaugurating the National Microfinance Congress 2019 at Small Industries Development Bank of India (SIDBI) also suggested that SIDBI also should take lead in providing handholding for microfinance providers in rural areas such as alternate credit scoring models and thus produce a defined regulatory sandbox and reduce the turnaround time to achieve robust risk mitigation.