Twitter
Advertisement

India's next banking crisis could come from MUDRA loans given to MSMEs: Raghuram Rajan

Last month, an experted pointed that MSMEs would be the worst affected due to the declining rupee.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Former Reserve Bank of India governor Raghuram Rajan has warned that the next crisis involved the country's banking sector could come from MUDRA loans i.e. loans given to micro and small businesses.

According to a report in the Hindu, Rajan wrote in a note on bank non-performing assets that the government should refrain from setting ambitious credit targets or from waiving loans. “Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk,” he explained.

In May this year, Prime Minister Narendra Modi said that loans worth Rs 6 lakh crore have been given to 12 crore beneficiaries under the Mudra scheme as he accused the previous governments of tokenism and not enough for small businesses.

Unlike the loan melas organised by previous governments, he said that the Pradhan Manrti Mudra Yojana (PMMY) has helped and encouraged people to tread the unconventional path, fulfil their dreams and generate jobs for others by setting up small businesses.

PMMY was launched by the Prime Minister on April 8, 2015, for providing loans of up to Rs 10 lakh to the non-corporate, non-farm small/micro enterprises.

Last fiscal, the government extended Rs 2.53 lakh crore credit under the Mudra Yojana, while Rs 5.73 lakh crore has been extended in last 3 years.

However, at the end of last month, an experted pointed that MSMEs would be the worst affected due to the declining rupee.

Jasmin Vasa, president of Gujarat Chamber of Commerce said that rising input cost has reduced the capacity utilization of companies and if things continue in this fashion, many companies may shut down resulting in job losses.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement