Mudra Bank may miss loans target amid weak demand

Mudra Bank may miss loans target amid weak demand 

MUMBAI: Micro Units Development & Refinance Agency (MUDRA) Bank, has managed to sanction just about 30% of its annual target in the first half of the fiscal as the demand for loans remains muted, raising doubts whether the government's ambitious target of Rs 1.22 lakh crore could be achieved. 

The absence of suitable products from the banks themselves could be a hindrance to achieving the target as refinance also is on the slow lane, said an official from the bank. 

"I agree that credit has been growing at a slow pace, but only 5% of the MUDRA segment has access to formal credit,'' Jiji Mammen, MD & CEO, MUDRA Ltd. told ET in an interview. "Even if we don't manage to reach the Rs 1.22 lakh crore target there would be a significant growth over the previous year." 

In the first 6 months of the current year, banks have sanctioned nearly Rs 38,000 crore to over 60 lakh entrepreneurs, Mammen said. 

MUDRA was established as a subsidiary of the Small Industries Development Bank of India ( SIDBI) by Prime Minister Narendra Modi in April this year. The agency was set up with an initial corpus of Rs 5,000 crore to provide capital to all banks seeking refinancing of small business loans under Pradhan Mantri Mudra Yojna. 

The special effort of the government was to take care of the most jobs creating small and medium enterprises which were getting squeezed due to collapse in trade credit since big companies were delaying payments, or were not providing enough time for small firms to pay up. 

In the first six months MUDRA has sanctioned Rs 1000 crore under the refinancing scheme and tied up additional Rs 600 crore with a few banks last month. 

"There is a long way to go for the refinancing scheme to pick up. Refinance has been slow as banks don't have products which provides lending at base rates, we are working towards increasing refinancing." Mammen said. 

Of the planned disbursement of Rs 1.22 lakh crore, the public sector banks would disburse Rs 70000 crore, followed by Rs 30000 crore by private banks and Rs 22000 crore by Regional Rural Banks. 

State-run banks have so far disbursed Rs 17488 crore, which is only one third of the projected target. Private Banks have been lagging as well and have managed to disburse a total of Rs 8613 crore under this scheme so far.