Loan Mela: PSBs Dole Out Over Rs2.82 Lakh Crore under Mudra Yojana; SBI Tops the List with 55.96 Lakh Proposals Worth Rs86,293 Crore
As if taking a clue from the loan melas organised during Congress regime, public sector banks (PSBs) have doled out crores of rupees under the Pradhan Mantri Mudra Yojana (PMMY), reveals a reply received under Right to Information (RTI). State Bank of India (SBI) has sanctioned loans worth Rs86,293.37 crore, followed by Bank of Baroda, which granted loans of Rs14,974.32 crore. While the state-run banks are on a spree to provide loans under PMMY, the Reserve Bank of India (RBI) had raised a red flag on spike in non-performing assets (NPAs) under the scheme. 
 
In addition, all these loans under PMMY are collateral free loans and to mitigate the issue MUDRA or Micro Units Development and Refinance Agency Ltd, offers credit guarantee fund for micro units (CGFMU).  
 
Interestingly, most of the PSBs who have replied to the RTI application have stated that they have no information or do not maintain data on total number of loan proposals received under the PMMY. United Bank of India, however, replied that it had received 3.04 lakh applications under the loan scheme. Here are the points on which information was sought from PSBs under RTI.
  • Total number of loan proposals received under the Prime Minister Mudra Yojana (PMMY)
  • Total number of loans sanctioned out of the loan proposals received
  • Cumulative amounts of the loans sanctioned under PMMY
  • Maximum amount of loan sanctioned under PMMY to a single beneficiary 
  • Minimum amount of loan sanctioned under PMMY to a single beneficiary
 
So far, seven lenders have replied to the RTI. All banks have made sure to follow the rules of loan under PMMY and sanctioned loans ranting from Rs5,000 to Rs10 lakh to an individual borrower.
 
Here are the questions asked and replies received from seven PSBs under the RTI Act…
 
 
 
According to Mudra.org.in, during FY18-19, a total loan worth Rs2,82,594.30 crore was sanctioned for 5.41 crore proposals. Out of this sanctioned loan, so far an amount of Rs2,73,748.57 crore has been disbursed to borrowers by lenders, the portal says.
 
 
RBI Not Happy with Increasing NPAs in PMMY
 
In January this year, RBI cautioned the ministry of finance that the PMMY scheme might turn-out to be the next big source of NPAs which have plagued the banking system. The central bank has flagged that bad loans under PMMY have risen to Rs11,000 crore.
 
As per the annual report of PMMY, 2017-18, total disbursements under the scheme stood at Rs2.46 lakh crore in FY2018. 
 
Out of this, 40% were disbursed to women entrepreneurs and 33% to social categories. More than 4.81 crore micro borrowers have benefited through PMMY during the year FY2017-18.
 
The PMMY was launched on 8 April 2015. Under the scheme, banks are required to finance micro and small entrepreneurs for up to Rs10 lakh. Loans can be granted under three categories - up to Rs50,000 under 'Shishu'; Rs50,001-Rs5 lakh under ‘Kishore' and between Rs5,00,001 and Rs10 lakh under ‘Tarun' category.
 
In addition, RBI's caution comes at a time when the country's financial system in reeling under severe stress due to the IL&FS crisis, which continues to hurt banks with impairments.

 

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COMMENTS

S KINGSLEY MARTIN

4 months ago

Even after these loans, the economy is not doing well! So we've a long road to recovery!!

Bhuvaneswaran K

4 months ago

11 Thousand Crore out of 2.46 Lakh crore is big amount, yes... One party has promised 72 Thousand crore... which will definitely not come back! We are doomed! ROFL! :-(

Ramesh Poapt

4 months ago

future NPA 20000+cr ?

REPLY

GLN Prasad

In Reply to Ramesh Poapt 4 months ago

Maybe in future a political party may try to offer a loan waiver scheme exclusively for these borrowers.

v subramanian

4 months ago

Sucheta Dalal taunted that the government goes after small fries when big industrialists and businessmen fly away. Now this article on directed lending. Media will bash the government either way.

REPLY

Sucheta Dalal

In Reply to v subramanian 4 months ago

The sheer numbers don't worry you? I wonder why Indira Gandhi's loan melas were criticised in the 1970s? That too by the BJP/ Janata which used to be the main opposition.

GLN Prasad

4 months ago

This is not new in the Banking sector. First, it was Gramodaya, then bottled as PMRY and now in new brand PMMY, and it is known to all bankers that in the very first year itself they treat it as NPA and loss assets, and no auditor/inspecting official even care to go through end use of funds. Some enlightened public and parties question on Banks' role with Mallaya or Nirab as though it is a license that because the bank has not acted on them, banks should not proceed against these PMMY beneficiaries though recovery can be done using Revenue process or filing a police complaint about misuse/abuse. Fortunately, there is AADHAR linking and rating now which gives a scope to avoid such borrower in the future. Bank as a whole has to consolidate and provide a statement zone wise/state wise on the grounding of these schemes and it is far from the truth to say that no data is available. If no data is available, RBI may not come to know of the impending dangers. They are also not serious and because they have to make a comment on paper it was reduced in writing without any seriousness on personal accountability. Because the Government is earnest in promoting entrepreneurship, this is is not a free license for delivery of credit without any responsibility by bankers.

V ganesan

4 months ago

comparing with corporate npa this npa is miniscule in nature.This mudra loan is driving growth engine.For every thing to blame psb is not fair.

SANDESH PAWAR

4 months ago

I think Mr. Modi wanted to please Small nd micro companies after the demobilisation and GST application they were not happy.
Pure politics, as always PSB’s had to take the blunt.

K V RAO

4 months ago

Mudra scheme was totally unnecessary when all the PSBs had their own schemes for financing small scale industries and small business units. But the main issue is banks inability to identify the needy borrowers. They just achieve the targets. This is where we need to redefine the role of finance ministry. It should not get into bank loan policy issues. It should leave such aspects to RBI. But alas, even RBI is a helpless and spineless spectator.

Further one may be surprised to know even after massive disbursements, a huge numbers of small industries/business have been left out. That is the paradoxical situation. Most of the issues pertain to seriousness in implementing such schemes. Bank soldiers have not been doing their jobs efficiently.

SuchindranathAiyerS

4 months ago

Lakhs of Crores doled out for wannabe chai wallas, pakora wallas and paan wallas. Like Indira-Sanjay SEEUY (Poojari Loans). My savings will evaporate in Modi-Jaitley inflation

BV SUDHANVA

4 months ago

bad debts of Rs. 11000 crores is for what period? since the beginning of the scheme or for the fy 2018-19?. And if we take the total sanction amount of Rs 245000 crores the npa amounts to 4.5%.

75 companies have debt of Rs2.24 lakh crore: Petitioners
As many as 34 power companies have accumulated Rs 1.4 lakh crore of NPA for Indian banks while 41 corporates across sectors, including those from infrastructure, textile, telecom, sugar, steel, energy, power and fertilisers have Rs 84,000 crore piled up NPAs which have taken the bad loan total to astronomical Rs 2.24 lakh crore, petitioners opposing RBI's February 12 circular on resolutions of debts have submitted to the Supreme Court.
 
Quoting a report of the 37th Standing Committee on energy giving NPA details of 34 power plants, the petitioners said these plants which have number of banks ranging from 2-19, have accumulated over Rs 1.40 lakh crore . The power companies are seeking Supreme Court intervention in setting aside or quashing an RBI order of February 12 last year where the apex bank laid down strict norms for NPA resolutions within 180-days among other rules. 
 
"75 companies have a debt of Rs 2.24 lakh crore", the petitioners stated. The RBI has already contested the claims of these corporates's petitions saying 180 days is a reasonable period for achieving implementation of Resolution plan.
 
Power, shipping and sugar companies have challenged the Reserve Bank of India's (RBI) February 12 circular which has identified about 30 companies, which have loans over Rs 2,000 crore and are stressed. Many of them were power companies and they have already challenged the RBI's circular in various courts. 
 
Earlier this month RBI defended the February 12 circular, telling the SC that intention behind the circular was to give banks more powers in resolving stress and the 1-day default rule is to ensure banks & borrowers put a risk management framework in place. SC has reserved its verdict. 
 
The 1-day default rule of RBI states if a deafulter fails to pay even 1 day after the deadline of loan payment, then banks have to come up with a resolution plans and, if they don't, approve the resoluion plan within 180-days, then the banks will have to take the company to insolvency. This rule was mostly criticised by companies.
 
The prominent corporates where payments are due are Adani Power Maharashtra (Rs 9,463.29 crore), Damodar Valley Corpora (Rs 9,756.42 crore), Jaiprakash Power Ventures (Rs 8,719.16 crore), KSK Mahanadi Power Company (Rs 14,165.12 crore), Jindal Thermal Power (Rs 5,594.21 crore), Prayagraj Power Generation (Rs 9,883.28 crore), Jaiprakash Power Ventures (Rs 8,719.16 crore), GNR Chhatishgarh Energy (Rs 5,325.28 crore) and DB Power (Rs 5,930.56 crore) among a host of others. 
 
Among the consolidated NPA list of other corporates VOVL, an oil company having a 17-bank consortium of lenders owes Rs 21,657.54 crore to them. Matrix Fertiliser and Chemicals owes 11 bankers Rs 4135.12 crore. Essar Bulk Terminal, an infra company owes Rs 1,088.82 crore and Rolta India has a debt of Rs 3,400 crore. 
 
The new framework of RBI prescribed a strict 180-day timeline over which banks are required to unanimously agree on the resolution plan, failing which the stressed account would have to be referred for resolution under the Insolvency and Bankruptcy Code (IBC).
 
Power companies argued that the circular would push even power assets that were close to achieving loan restructuring in to insolvency.
 
Power ministry officials also spoke out against the February 12 circular seeking some relaxation in norms, especially with respect to the one-day default rule, attributing the stress in the sector to delayed payments by electricity distribution companies of India (discoms), lack of power purchase agreements and irregular coal supply.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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NPA recovery target in jeopardy on Essar Steel
The delay in actual realisation from the resolution of the big-ticket cases like Essar Steel has put the non-performing assets (NPAs), or bad loans, recovery target by banks of Rs 1.8 lakh crore in jeopardy.
 
A section of the Finance Ministry, however, believes the target of Rs 1.8 lakh crore could be deemed to have been achieved as the decision of National Company Law Tribunal (NCLT) on the sale of the Essar company to ArcelorMittal for Rs 42,000 crore was taken in the current fiscal.
 
A senior ministry source said the public sector banks (PSBs) have recovered close to Rs 1.33 lakh crore by the third week of March, leaving a gap of Rs 47,000 crore in meeting this year's target.
 
The achievement of Rs 1.8 lakh crore mainly depended on the resolution of the Essar Steel insolvency case before March 31, which has happend, but the distribution of the funds to financial creditors has not taken place as operational creditors have taken up the issue of their dues in the appellate tribunal (NCLAT).
 
Earlier NCLAT had directed the Essar Steel Committee of Creditors (CoC) to reconsider the distribution of Rs 42,000 crore as announced by NCLT Ahmedabad, which had suggested a 85:15 distribution between the financial and operational creditors against the 90:10 ratio as proposed in the resolution plan.
 
The NCLAT was informed last week that a decision by CoC on the issue of whether StanChart, an unsecured financial creditor which had moved the NCLAT against the resolution distribution formulae, should get higher a payout for its dues from Essar Steel, is being discussed. The next hearing on the matter at NCLAT has been adjourned to April 9.
 
Unsecured lender Standard Chartered Bank, which had made the highest claim of Rs 3,400 crore, has been excluded from the offer. As per the plan submitted by ArcelorMittal, the bank will receive only 1.7 per cent, or Rs 60 crore, of its dues.
 
The total of claims admitted by the financial creditors in Essar Steel and Bhushan Power & Steel, the two big-ticket cases of the RBI's first 12 list of NPAs, are Rs 49,479 crore and Rs 47,145 crore, respectively.
 
Earlier this month, NCLAT directed NCLT to decide on JSW's bid for Bhushan Power & Steel by March 31 after dismissing the plea of Tata Steel. But this case also has not moved further and, so far, no decision has come from NCLT.
 
This has raised worries about the recovery from this case being pushed to the next financial year.
 
Earlier, the Department of Financial services officials had met the senior management of PSBs via video conferencing and reviewed the recovery target for 2018-19. The meeting discussed the recoveries made by PSBs through the Debt Recovery Tribunals (DRTs) and the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act), along with a presentation on the Insolvency and Bankruptcy Code by the Corporate Affairs Ministry. But the recoveries through SARFAESI and DBTs are not huge.
 
A Boston Consulting Group and Indian Banks' Association joint report says that PSBs have recovered a total of Rs 2.87 lakh crore between April 2014 and December 2018. They have recovered close to Rs 80,000 crore from cases resolved under the Insolvency and Bankruptcy Code.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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