public-sector-mudra-loan-npas-fall-to-3-4-in-fy24

Finance Minister Nirmala Sitharaman announced on Monday that non-performing assets (NPAs) associated with Mudra loans from public sector banks have fallen to 3.4 % for the fiscal year 2023-24. This marks a notable decrease from 4.77 % in 2020-21, 4.89 % in 2019-20, and 3.76 % in 2018-19.

Sitharaman addressed concerns about NPAs in Mudra loans during the Question Hour in the Lok Sabha. She highlighted the improvement over recent years, reflecting enhanced financial stability within the banking sector.

The Minister also reported a decline in NPAs for private sector commercial banks, which decreased to 0.95 % in 2023-24 from a peak of 1.77 % in 2020-21 and 0.67 % in 2018-19.

NPAs, defined as loans or advances where the principal or interest payment is overdue for 90 days, serve as a critical indicator of the banking sector's health. High levels of NPAs suggest increased risk of default, potentially leading to financial instability.

Sitharaman noted that interest rates for Mudra loans vary across different banking sectors, with public sector banks offering rates between 9.15% and 12.80%, while private sector banks range from 6.96% to 28%. 

She assured that mechanisms are in place to ensure fair recovery processes and to address any instances of recovery harassment. "Recovery harassment is closely monitored, and we welcome reports of any such instances so that they can be promptly addressed," she stated.

Annual data collection on NPAs ensures diligent follow-up by both public and private sector banks on their recovery processes. Sitharaman also shared NPA figures for other financial institutions involved in Mudra loan disbursements.

Regional Rural Banks' NPAs fell from 3.86% in 2018-19 to 2.47% in 2023-24, while Small Finance Banks and State Cooperative Banks also reported improvements. Notably, Non-Banking Financial Companies (NBFCs) saw a reduction in NPAs from 0.47% in 2018-19 to 0.22% in 2023-24.

Overall, the NPA on disbursements for Mudra loans has decreased to 2.10%. The Mudra loan scheme, part of the Pradhan Mantri Mudra Yojana (PMMY) launched in 2015, aims to provide financial support to micro and small enterprises.