For the first time since the Covid-19 pandemic, loan disbursals under the Pradhan Mantri Mudra Yojana (PMMY) have seen a slight dip in the first half of the current financial year. As of September 2024, disbursements stood at Rs 1,86,284 crore, compared to Rs 1,91,863 crore in the same period last year, according to reports. The decline is attributed to a high base effect, as the first half of the previous fiscal year saw a record 40% growth in disbursals.
The 2023-24 financial year marked a milestone for PMMY, with loan disbursals surpassing Rs 5 lakh crore for the first time since the scheme’s launch in 2015.
Despite the dip in the first half of FY25, bankers are optimistic about the full-year disbursal figures. The government’s recent decision to increase the loan cap from Rs 10 lakh to Rs 20 lakh for borrowers with a solid repayment history is expected to drive disbursals in the second half of the year and stimulate economic activity.
PMMY loans are divided into three categories: Sishu (up to Rs 50,000), Kishore (Rs 50,000 to Rs 5 lakh), and Tarun (above Rs 5 lakh and up to Rs 10 lakh). This year, banks have been granted the discretion to offer loans of up to Rs 20 lakh to eligible borrowers with a proven repayment record.
Improvement in NPA levels
In addition to disbursal trends, the non-performing assets (NPAs) under PMMY have shown a consistent decline. Public sector banks’ NPAs related to Mudra loans decreased to 3.4% in the 2023-24 fiscal, down from 4.89% in 2019-20 and 4.77% in 2020-21. Private sector banks have also seen an improvement, with Mudra loan NPAs falling to 0.95% in 2023-24 from 1.77% in 2020-21.
This improvement reflects a positive trend in asset quality for banks, suggesting better repayment behaviour among borrowers under the PMMY scheme.
The 2024 Union Budget increased the limit of Mudra loans from Rs 10 lakh to Rs 20 lakh for individuals who have previously repaid loans under the Tarun category. This is intended to provide greater financial assistance to entrepreneurs and small businesses.
