Sharp Rise In NPAs Under Mudra Yojana Since 2018

New Delhi, Aug 20 (KNN) The non-performing asset (NPA) ratio against outstanding loans under the Pradhan Mantri Mudra Yojana (PMMY) for Scheduled Commercial Banks has climbed to 9.81 percent as of March 2025, compared with 5.47 percent in March 2018, Finance Minister Nirmala Sitharaman informed the Rajya Sabha on Tuesday.

By contrast, the NPA rate calculated against the total disbursed loan amount under the scheme stood at 2.19 percent in March 2025, slightly lower than 2.71 percent at the end of March 2018. 

Sitharaman noted that the PMMY primarily targets borrowers outside the formal credit system—often first-time entrepreneurs without collateral or significant business experience. 

As a result, defaults under the scheme are structurally higher than the average NPA rate for the micro, small and medium enterprises (MSME) sector, which stood at 3.60 percent against outstanding loans as of March 2025.

The minister said the incidence of NPAs across Mudra loans and MSME lending is influenced by multiple factors, including the performance of borrowing entities, broader macroeconomic conditions, sectoral challenges and the global business environment. 

To strengthen implementation, the government has introduced measures such as credit guarantee cover, nodal officers, simplified application processes, publicity campaigns, and periodic reviews involving banks and ministries.

On gold-backed lending, Sitharaman said that loans against gold jewellery in the personal loan segment grew by 71.3 percent year-on-year in December 2024. 

However, their share in incremental non-food credit expansion during the same period was limited to 4.06 percent. 

She underlined that gold loans, extended by both banks and NBFCs, have been critical in providing affordable credit access to rural households, MSMEs and financially underserved groups—helping borrowers avoid informal lending channels.

She further observed that gold prices, shaped by global supply-demand factors, inflation and macroeconomic trends, continue to influence household demand patterns. 

While higher prices may constrain jewellery purchases, they simultaneously enhance collateral value for borrowing and encourage households to explore diversified investment options.

(KNN Bureau)