- Non-performing Asset (NPA) rate under Pradhan Mantri Mudra Yojana (PMMY) rose to 9.81% by March 2025, showing challenges in MSME lending.
- Government efforts include awareness campaigns, credit guarantee schemes, and focused monitoring to improve Mudra Yojana implementation.
- Growth in gold loans supports financial inclusion, especially among women borrowers, by providing formal credit access.
Pradhan Mantri Mudra Yojana (PMMY) plays an important role in supporting Micro, Small and Medium Enterprises (MSMEs) by offering collateral-free loans to entrepreneurs who often don’t have access to traditional funding. However, the rising Non-performing Asset (NPA) rate under Mudra Yojana has raised concerns about the sustainability of MSME lending. This article looks into the reasons behind the increase in NPAs, government steps to improve the scheme, and how gold loans are helping financial inclusion, especially for women borrowers.
The NPA rate against the outstanding amount under Pradhan Mantri Mudra Yojana for Scheduled Commercial Banks went up from 5.47% in March 2018 to 9.81% by March 2025. This increase points to challenges in loan recovery and shows the risks involved in lending to new and small entrepreneurs who often lack collateral and business experience.
Government Steps to Improve Mudra Yojana Implementation
To tackle these challenges, the government has taken several steps to make Mudra Yojana more effective. These include:
- Awareness campaigns to spread the word about the scheme.
- Making the loan application process simpler.
- Introducing a Credit Guarantee Scheme to lower lender risk.
- Appointing Mudra Nodal Officers for better coordination.
- Regular reviews by government and banks to track progress.
- Setting state-wise targets for Member Lending Institutions (MLIs) based on potential.
Reasons Behind Higher NPA Rates in Mudra Loans
Several reasons explain the higher NPA rates under Mudra Yojana. Since loans are collateral-free, lenders take on more risk. Many borrowers are first-time entrepreneurs without prior business experience, which can lead to repayment problems. Also, overall economic conditions, challenges in specific sectors, and global business factors affect how well borrowers perform.
How Mudra Yojana Helps Financial Inclusion for MSMEs
Mudra Yojana has helped bring underserved entrepreneurs into the formal credit system. By offering collateral-free loans, it allows many small businesses and startups to get finance that was hard to find before. This helps protect borrowers from informal lenders who often charge very high interest rates.
Impact of Gold Loans on Financial Inclusion and Women Borrowers
Loans against gold jewellery, a part of personal loans, have grown by 71.3% from December 2023 to December 2024. Although this makes up about 4.06% of the overall increase in Non-Food credit, gold loans have played a big role in promoting financial inclusion, especially in rural areas and among MSMEs.
Gold loans help new-to-bank customers get formal credit, reducing their need to rely on informal lenders. Women borrowers, in particular, have shown more participation in gold loans due to better awareness and the chance to use their gold assets when needed. This trend shows women’s growing role in the economy and their varied credit needs, from starting businesses to personal finance.
The government supports women borrowers through schemes like Mahila Samriddhi Yojana, Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme for Women, and Stand-Up India, offering alternative funding sources.
Gold prices, affected by global demand, inflation, and government policies, influence the value of gold loans. While rising gold prices can reduce household buying power, they also increase collateral value, encouraging investment diversification.
| Parameter | Value | As of |
|---|---|---|
| NPA Rate under PMMY (Scheduled Commercial Banks) | 9.81% | March 2025 |
| NPA Rate under PMMY (Loan Disbursed Amount) | 2.19% | March 2025 |
| NPA Rate for MSMEs | 3.60% | March 2025 |
| Growth in Loans against Gold Jewellery | 71.3% | Dec 2023 to Dec 2024 |
| Absolute Increase in Gold Loans | Rs 71,858 crore | Dec 2023 to Dec 2024 |
| Share of Gold Loans in Incremental Non-Food Credit | 4.06% | Dec 2023 to Dec 2024 |
Knowing these details can help you better understand the opportunities and challenges within Mudra Yojana. Staying updated about government efforts and credit options like gold loans can help you make smart financial choices for your business or personal needs.