Mudra loans: PM Modi’s pet scheme disburses 87% of sanctioned amount to micro enterprises in Q1 FY22

PMMY scheme is responsible for refinancing all last-mile financiers such as NBFCs, microfinance institutions, societies, trusts, Section 8 Companies, small finance banks, and regional rural banks. (Express File/Gurmeet Singh)

Credit and Finance for MSMEs: Self-employment and entrepreneurship promotion scheme Pradhan Mantri Mudra Yojana (PMMY), launched by Prime Minister Modi in 2015, has disbursed 87 per cent of the loan amount sanctioned during the first quarter of the financial year (FY) 2021-22. Out of Rs 44125.74 crore loan amount involved in 76,69,969 Mudra loan applications, Rs 38668.03 crore loan amount was disbursed in a little over the three-month period from April 1 till July 9, 2021, according to the provisional data available with PMMY. The disbursement rate for the preceding financial year FY21, however, had dropped to 94.7 per cent from 97.6 per cent in FY20 that had increased marginally from 97 per cent in FY19.

“There was almost no business activity in the initial three-four months of the previous financial year because of the lockdown. Even after that, people didn’t want to start their new business amid the prevailing uncertainty in the ecosystem. Despite that, the number of loans sanctioned remains significant and the dip is very marginal due to Covid and lockdown,” Mukesh Mohan Gupta, President, Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) had told Financial Express Online.

PMMY was launched on April 8, 2015, to provide credit up to Rs 50,000 under Shishu cover followed by Rs 50,000 – 5 lakh worth loans under the Kishor cover and Rs 5 lakh – Rs 10 lakh under the Tarun cover to non-corporate, non-farm micro and small enterprises. The scheme was launched to address the challenge of lack of financial support in the growth of the non-corporate small business sector. According to the scheme, over 90 per cent of the sector, which comprises millions of proprietorship or partnership firms including small manufacturing units, service sector units, shopkeepers, fruits/vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas, does not have access to formal sources of finance.

Importantly, the share of MSEs in India’s gross bank credit stood at only 9.7 per cent in April this year — declining for the fourth straight month from 12.11 per cent in December 2020, the MSE share contracted to 12.09 per cent in January 2021, 11.8 per cent in February, 11.3 per cent in March. The overall gross bank credit as of April 2021, stood at Rs 108.60 lakh crore, according to the RBI’s June bulletin. Moreover, bank credit deployed to MSEs in April had witnessed negative growth, for the first time since Covid struck last year, to Rs 10.60 lakh crore, down 2.2 per cent from Rs 10.84 lakh crore in April 2020.

PMMY scheme is responsible for refinancing all last-mile financiers such as non-banking finance companies, microfinance institutions, societies, trusts, Section 8 Companies [formerly Section 25], small finance banks, and regional rural banks involved in lending to small businesses in manufacturing, trading, services, and agri-allied activities.