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Thursday, Oct 17, 2019

Mudra loans suffer from poor recovery in Bengal, says lead banker of the state

The bad loans in the Shishu segment have exceeded 16% in Bengal.

kolkata Updated: Oct 10, 2017 15:44 IST
Sumanta Ray Chaudhuri
Sumanta Ray Chaudhuri
Hindustan Times
The Shishu loans under the Mudra umbrella is disbursed mainly on the basis of trust.
The Shishu loans under the Mudra umbrella is disbursed mainly on the basis of trust.(HT Photo)

Mudra loans, Prime Minister Narendra Modi’s pet project for financing small and micro enterprises, has done well in terms of disbursements but fell short on recovery in West Bengal.

This category of loans were announced by Union finance minister Arun Jaitley while presenting the budget for 2016-17 and was launched in the last financial year.

Read: Mudra loans to small borrowers tops Rs 1.8 lakh crore in 2016-17

Banking representatives in the State level Bankers’ Committee (SLBC), West Bengal, blamed absence of proper backup support from the state government in recovering loans from wilful defaulters under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. This act empowers banks to recover loans by confiscating mortgaged assets and auctioning them quickly.

Speaking on behalf of SLBC, West Bengal, N K Kapoor, general manager of United Bank of India (UBI), the lead bank in West Bengal, said during 2016-17,the total disbursement under Mudra loan in Bengal was as high as Rs 15,149.06 crore covering 46.70 lakh individuals. 

 “During the first quarter of 2017-18, Mudra loan scheme in Bengal disbursed another Rs 1902.10 crore covering 5.35 lakh individuals. The figure is extremely high compared to the other Indian states,” said Kapoor. 

Read: Adding to the bad-loan book: Does Mudra’s success have a flip side?

A majority of the disbursements are under the Shishu Loan sub-segment, where the maximum loan amount is Rs 50,000 and cater to micro entrepreneurs like small cycle-repair shops or roadside fruit vendors, among others. 

“However, the high disbursements on Mudra loan has been marred by an alarmingly high gross NPA figure of 16% in the Shishu segment,” said Kapoor. The recovery rates in the micro category is usually higher than 90%.

Read: Budget 2017: Mudra loans miss targets, FM quotes old figures, Shah overstates numbers

According to Kapoor, apart from lack of administrative support, the reason for the low repayment is the lack of due diligence before disbursing loans under the Shishu segment, which does not require any collateral security. “This loan depends on the trust factor, where banks have to keep faith on the borrowers,” he said.

Kapoor also admitted that despite getting clearance from respective boards, banks are not getting clearance from Reserve Bank of India (RBI) to open new branches in West Bengal. “NPA is a major problem and probably that is why RBI is worried. I won’t say this is a problem only in West Bengal but it is really acute here,” Kapoor said.

First Published: Oct 10, 2017 15:44 IST

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