RBI Deputy Governor asks banks to monitor Mudra loans closely

New Delhi, Nov 27 (KNN) Reserve Bank of India's (RBI's) Deputy Governor MK Jain has asked lenders to monitor Mudra loans closely amidst growing non-performing assets (NPAs) under the scheme.

While speaking at the inaugural session of the Small Industries Development Bank of India (SIDBI) National Microfinance Congress 2019, on Tuesday, Jain said, “It’s time to focus on repayment capacity at the appraisal stage and monitor the loans through the life-cycle much more closely. Though, Mudra loans had given a “massive push” to lift beneficiaries out of poverty, but there have been concerns about the growing level of NPAs.''

While commenting on the recommendations of the UK Sinha committee, which recommended to include setting up of a Rs 5,000-crore stressed asset fund for domestic MSMEs, he said, they are being examined for implementation.

Lauding GST, Jain said that with the introduction of the Goods and Services Tax (GST), has reduced the need for informal sources of funds.

“The cost of credit for micro and small enterprises will also decrease meaningfully, as lending will shift from collateral-based lending to cash flow-based lending,” he said.

Later, Jain suggested that SIDBI could “hand-hold” microfinance providers in areas such as alternate credit scoring models and in predicting probability of default.

"SIDBI should also take the lead in hosting an ecosystem within a well-defined regulatory sandbox to create infrastructure to reduce the turnaround time and achieve robust risk mitigation," he added.

---------------------