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Empty gesture in Mudra loans

Anticipated to help small entrepreneurs obtain bank loans, the Mudra loan scheme in Goa is hit a road-block of defaults and non-takers, finds out Shoma Patnaik

In its third year of existence the Prime Minister Mudra Yojana (PMMY) scheme in the state is faring badly.

Loan disbursements under the scheme have gone for a toss in 2017-18, plunging 40 per cent to Rs 148.8 crore. Further the slowdown in lending is accompanied by mounting non-performance assets (NPAs) reflecting significant shortcoming in the scheme.

According to banks, the sluggishness in Mudra loans is likely to continue in the current year also as there is very little enthusiasm to improve progress.  Several bankers said that, loans under the scheme are expected to shrink further in 2018-19 showing further loss of ground.

Bankers claim that the scheme is giving them a headache due to the large number of defaults in repayment by borrowers. Further it is difficult to find fresh entrepreneurs to finance each year because of which the loan portfolio remains thin.

The maximum number of defaults in loan payments is by small borrowers who take Shishu loans under Rs 50,000, according to bankers. The loans in the segment are to vegetable vendors, garment sellers, small shopkeepers, juice stall owners, etc.

“Borrowers in this segment have not understood the concept of cash credit. They are supposed to deposit a part of their income every day in the account towards repayment of the cash credit. But they do minimum transactions,” complained the manager in charge of advances of a Panjim based bank.

He said that, for Shishu borrowers at least seven to eight calls have to be made each day to follow up on repayments. Despite the repeated follow-ups calls there are defaults which makes the scheme a pain to implement, according to the manager.

All nationalised and private sector banks in Goa provide Mudra loans. Banking sources say that, among the various types of loans, defaulters under Sishu loans are highest while the repayment track record is better in case of Kishore and Tarun loans.  The borrowing limit in case of Kishore and Tarun is Rs five lakh and Rs 10 lakh respectively and the loans are taken by a higher bracket of customers.

“Loans under the Kishore and Tarun segments are to taxi, auto drivers, transporters and small unit owners most of who make timely repayment,” say bankers.

Goa’s has 11,244 Mudra loan accountholders as on March 31 2018, according to state SLBC data. The total loan disbursed to them was Rs 148.86 crore as on March 31 2018. The bulk of the borrowers are takers of Shishu loans (68 per cent) while the percentage share of Kishore and Tarun borrowers are 35.9 per cent and 7.1 per cent respectively.

The SLBC data reveals 572 Mudra accounts classified as NPAs which in value terms works out to 5.6 per cent of the loans given under the scheme.

On the other hand, borrowers are not happy either with the loan scheme. They say that the interest rate is high and the loan is hardly attractive. The current interest rate ranges between 10.85 per cent and 11.01 per cent which means the coupon loan is more or less on par with other loan products.

Marginal borrowers point out that, availing bank finance remains tough despite the presence of a Mudra loan scheme. The demand for security and the complex paper-work is a big deterrent to borrowers in taking the loans.

Launched on April 8 2015, the Pradhan Mantri Mudra Yojana (PMMY) loan scheme was envisaged with the aim of bringing unbanked people under mainstream banking and to make a neglected segment of the population self-reliant. The scheme provides for micro finance to small businesses to fund their day-to-day working capital needs.

The loans are to make the small borrower to stand on his own feet, earn income and run a productive business enterprise. In reality bankers point out that most of the small borrowers utilize the loans as one-time facility. “They find it difficult to repay and few graduate to becoming a full-fledged entrepreneur,” said a banker. “Sure there are success stories in Mudra too but the numbers of such stories are few in Goa,” he said.

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