Mudra loan NPAs decline to 3.4% in FY24, says finance minister Nirmala Sitharaman

Public sector banks' non-performing assets associated with the Mudra loan category have declined to 3.4 percent in the 2023-24 fiscal, Finance Minister Nirmala Sitharaman said on Monday. This marks an improvement from 4.77 percent in 2020-21, 4.89 percent in 2019-20, and 3.76 percent in 2018-19, she said in response to a query in the Lok Sabha during the Question Hour.

Sitharaman addressed questions regarding the non-performing assets (NPA) associated with Mudra loans, highlighting a significant reduction in NPA rates over the past few years. The finance minister informed the House that the NPA for public sector banks on Mudra loans has decreased to 3.4 percent in the financial year 2023-24.

She further said Mudra loan NPAs in private sector commercial banks fell to 0.95 percent in 2023-24 from a peak of 1.77 percent in 2020-21 and 0.67 percent in 2018-19. Non-performing assets (NPAs) are loans or advances for which the principal or interest payment remains overdue for 90 days.

NPAs are a critical indicator of the health of the banking sector, as high levels of bad loans indicate a higher risk of default, leading to financial instability. Regarding interest rates for Mudra loans, Sitharaman said they vary across different banking sectors. Public sector banks offer rates between 9.15 percent and 12.80 percent, while private sector banks range from 6.96 percent to 28 percent.

Despite these variations, she emphasized that monitoring mechanisms are in place to ensure fair recovery processes and address any instances of harassment. "Recovery harassment is closely monitored, and we welcome reports of any such instances so that they can be promptly addressed," Sitharaman said.

She highlighted that data collection on NPAs is conducted annually, ensuring that public and private sector banks follow up on their recovery processes diligently. The minister also shared NPA figures for other financial institutions involved in disbursing Mudra loans. Regional Rural Banks' (RRBs) NPAs dropped from 3.86 percent in 2018-19 to 2.47 percent in 2023-24.

Small Finance Banks and State Cooperative Banks also showed improvements. Notably, NBFCs reported a decline in NPA from 0.47 percent in 2018-19 to 0.22 percent in 2023-24. "Overall, the NPA on disbursement for Mudra loans has come down to 2.10 percent," Sitharaman said. The Mudra loan scheme, launched in 2015 under the Pradhan Mantri Mudra Yojana (PMMY), aims to provide financial support to micro and small enterprises