Banks Told To Mount Vigil On Mudra Loans

RESERVE Bank deputy governor MK Jain on Tuesday red-flagged the growing stress in Mudra loans to small businesses and asked bankers to monitor such loans closely as unsustainable credit growth poses a systemic risk.

Prime Minister Narendra Modi had launched the Mudra scheme in April 2015 with much fanfare to offer speedier credit up to Rs 10 lakh to small businesses which normally do not get bank funds due to their poor and mostly no credit rating.

These loans are extended by banks, NBFCs, cooperative banks and small finance banks.

While the massive push for Mudra loans would have lifted many beneficiaries out of poverty, there has been some concerns at the growing level of non-performing assets among these borrowers, Jain said at a Sidbi event on microfinance.

He said banks need to focus on the repayment capacity at the appraisal stage itself and monitor loans through the life cycle of the account much more closely.