Mudra loan sanctions in FY21 drop 21% YoY to 2.7 Trillion (Lakh Crore) as Covid-19 weighs

The PMYY (Pradhan Mantri Mudra Yojna) initiative, an initiative led by the government, was launched in 2015. It has been of immense aid as it aims to offer easier financing options to micro-enterprises and small enterprises. The main channel through which such financial help is facilitated is the MUDRA (Micro Units Development and Refinance Agency) loan scheme. Under this loan scheme, up to Rs. 10 Lakhs is offered to micro and small businesses in the non-farming and non-corporate segments of businesses.

The funding offered under the PMMY initiative is typically quite high collectively. However, in the previous financial year FY 20, the sanctioned loan amount for these companies under the PMYY scheme was Rs. 3.4 Lakh Crores. Similarly, in FY 19, the loan amount that was sanctioned for the micro and small companies under the PMYY initiative was Rs. 3.2 Lakh Crores. However, in the year 2020, as a result of the pandemic, the entire financial and economic situation of the country took a hit and performed the lowest it has in years. Hence, during the financial year of 2020-2021, the amount of loan that was sanctioned dropped by 21% Rs. 2.7 Lakh Crores.

An Overview About PMMY’s Loan Allocations

The PMYY offers funds for micro and small establishments across varying industries. The amount of loan that is offered varies across 3 broad ranges: Shishu, Kishore, and Tarun. The Shishu category allows businessmen and entrepreneurs to borrow up to a maximum of Rs. 50,000. Meanwhile, the Kishore and Tarun categories allow entrepreneurs to borrow up to a maximum of Rs. 5 Lakhs and Rs. 10 Lakhs respectively. In FY 2021, nearly 88% of the sanctioned loans were disbursed to companies who requested capital up to a maximum of Rs. 50,000. This falls under the Shishu category of loans.

Several loans were also handed out to new entrepreneurs. Nearly 24% of the loans were granted to new entrepreneurs with 68% of the loans being given to women entrepreneurs. During the previous year, up until the 19th of March 2021, the average ticket size of the loans that were sanctioned was Rs. 52,000.

Concerns of the NPA

Ever since the launch of the PMYY scheme in 2015, nearly 287 million loans have been sanctioned disbursing a loan amount of Rs. 14.9 Lakh Crores. However, the pandemic caused several businesses to shut down and reduce operations thereby not bringing in the profits and revenue they expected. This resulted in the number of NPAs in the PMYY scheme going down from 2.56% in 1029-20 to 2.51% last year.

The Application Process

The Mudra Loan has several features and benefits that can be beneficial for micro and small businesses across industries. You can apply for the Mudra Loan through a simple and easy process through Finserv MARKETS. Finserv MARKETS also facilitates the E-Mudra Loan application process through an online portal.

With the pandemic affecting micro and small businesses, the Mudra Loan sanctions have gone down drastically by 21% as there are fewer operational businesses. However, these numbers can be expected to increase once the economy stabilizes.