Govt cuts Mudra loans target in FY22, rules out fresh PSB merger proposal

Mudra scheme target set at Rs 3 trillion for FY22 as against Rs 3.21 trillion sanctioned in FY21

The government has set the loans disbursement target under the PM Mudra Yojana (PMMY) at Rs 3 trillion for the current financial year as compared to Rs 3.21 trillion sanctioned in FY21. Experts attribute the lower target to increased allocation under the credit guarantee scheme for small businesses.

Out of the Rs 3.21 trillion worth loans sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) in the last financial year, Rs 3.12 trillion were disbursed to entrepreneurs, according to official data. The figure was even higher in the financial year 2019-20 with total loans sanctioned at Rs 3.37 trillion, out of which loans worth Rs 3.29 trillion were disbursed.

Under PMMY, credit up to Rs 10 lakh is provided by banks and non-banking financial companies for entrepreneurial activities to small business units, including for new enterprises in sectors such as manufacturing, trading, services and activities allied to agriculture. The central government allocates annual targets for sanctioning of loans under the scheme. In FY22, loans worth Rs 3,804 crore have been sanctioned by 13 public sector banks (PSBs) as on June 25. 

Mudra loans are given to small businesses which is part of the priority sector lending of banks, said Madan Sabnavis, chief economist at ICRA. Last year, the government's intervention through the Rs 3 trillion ECLGS scheme pushed up the credit disbursals, Sabnavis said.

“This year the target for Mudra has been set at Rs 3 trillion which is lower than last year, but this year the guarantees provided under ECLGS scheme have been increased by an additional Rs 1.5 trillion. Therefore, the target is not really low as it goes along with a smaller quantum of support from the government,” Sabnavis said.

In FY21, loans worth Rs 9.5 trillion were disbursed to MSMEs, which was significantly higher than FY20 when Rs 6.8 trillion in loans were disbursed, according to SIDBI - TransUnion CIBIL MSME Pulse Report. Government interventions like ECLGS scheme was the major factor in driving this significant surge in credit disbursement to MSMEs, the report said.

The government has also informed the Parliament that Rs 167 crore has been sanctioned by public sector banks under the Stand Up India scheme in the current financial year as on June 28. Stand Up India scheme provides credit of Rs 10 lakh to Rs 1 crore for setting up greenfield enterprises in manufacturing trading or services sector and activities allied to agriculture. In financial year 2020-21, about Rs 2,155 crore was sanctioned under the scheme by 12 PSBs, which was about 38 per cent lower than the amount sanctioned by such banks in the year ago period.

Minister for State for Finance Pankaj Chaudhary, in response to a separate query in Lok Sabha, has said that loans worth Rs 3,918 crore have been guaranteed to hospitality, sports, leisure, travels and tourism industry under the Emergency Credit Line Guarantee Scheme (ECLGS) as on July 2, 2021. The loans have been guaranteed after the ECLGS scheme was extended to the Covid-19 affected sectors in March 2021 which involved extension of credit of up to 40 per cent of total credit outstanding across all lenders as on Feb 29, 2020 with the tenor being 6 years, including a two-year moratorium.

No PSB Merger Proposal

The government is not considering any new proposal to amalgamate more public sector banks MoS Finance Bhagwat Karad said.

The government had amalgamated Vijaya Bank and Dena Bank into Bank of Baroda from April 1, 2019 and Oriental Bank of Commerce and United Bank of India into Punjab National Bank, Andhra Bank and Corporation Bank into Union Bank of India, Syndicate Bank into Canara Bank, and Allahabad Bank into Indian Bank from April 1, 2020.

No Formal Proposal from Cairn to Settle Dispute

The Centre has not received any formal proposal under the country’s legal framework from Cairn Energy to settle the tax dispute, MoS Chaudhary informed lawmakers.

An order has been passed by a French court freezing certain properties of the Indian government in the case pertaining to Cairn Energy, Chaudhary said. Permanent Court of Arbitration at The Hague had pronounced its award on December 21, 2020 in favour of Cairn Energy Plc. It has asked India to pay Cairn an award amount of $1.2 billion plus interest and $22.38 million towards arbitration and legal costs.