Vishwakarma scheme faces challenges with loan approval rate at just 28%

While a total of 13.93 lakh loan applications were submitted to PSBs, only 3.9 lakh were approved, highlighting a significant gap in the disbursement process

The PM Vishwakarma scheme, designed to provide financial support and skill development for artisans in India’s informal sector, is struggling with a low loan approval rate from public sector banks (PSBs). According to senior government officials familiar with the data, only 28 per cent of applications have been cleared. 

Launched on Prime Minister Narendra Modi’s birthday in 2023, the scheme targets workers in trades such as blacksmithing, goldsmithing, pottery, carpentry, and sculpting. It was allocated ₹13,000 crore from 2023–24 to 2027–28. Of the 1.39 million loan applications submitted to PSBs, just 390,000 were approved — highlighting a wide gap in disbursement. 

“The remaining 777,000 applications were turned down for various reasons, including mismatched loan purposes, untraceable applicants, and previous defaults. Another 157,000 didn’t comply with the scheme’s criteria, while 158,000 artisans declined the loans offered,” said one of the officials. 

Officials added that while 80 per cent of applicants could be traced, 60 per cent of them, despite needing loans, were turned away by banks. The rejection rate has raised questions about the screening process and triggered calls for reforms. 

“No application should be dismissed at the branch level. Rejections must be escalated for further review. Banks should return rejected cases for re-processing, and branch managers are expected to re-engage with applicants to explore every option,” the official said. 

The government is reviewing operational tweaks. “The number of attempts to upload interest subvention data should be raised from four. The deadline for submitting monthly claims should shift from the sixth to the tenth of the following month,” the official said. 

“There are also proposals to capture more core banking solutions data through the portal — such as disbursement details, closure dates, non-performing asset (NPA) status, and disbursed amounts. Faster processing of interest subvention and Credit Guarantee Fund Trust for Micro and Small Enterprises claims, and tagging applications as ‘withdrawn’ when artisans decline loans, are also being considered to ease implementation,” the official added. 

Despite the low approval rate, officials remain hopeful that these fixes will help the scheme deliver on its promise — supporting artisans, improving their skills, and strengthening financial access in the informal economy. 

“The high rejection rate is largely due to disqualifications stemming from applicants’ prior loans. A history of NPAs, inadequate documentation, and unmet eligibility conditions are major red flags. The scheme is intended to assist those with relatively sound financial records. Applicants with poor credit are considered high risk, which reduces their chances of being accepted into the programme,” said a senior official from a PSB.