“A set of guidelines for assessing the creditworthiness and background verification must be enlisted to provide a security net to the banks, considering the loans are collateral free and a proper risk check and assessment has a critical role to play in the sustainability of results and success of the scheme,” the Aayog has said in its report submitted to the finance ministry and the Ministry of Micro, Small and Medium Enterprises (MSMEs).
As per the report, ‘Assessment of PMMY’, done by professional services firm KPMG on behalf of the Niti Aayog, e-KYC authentication may be encouraged for loan underwriting to ensure proper assessment checks. ET has seen the report. “A proper reward mechanism is needed for different banks based on their scale of operation and performance to help incentivise well-performing member lending institutions to perform better,” the Aayog has suggested.
According to the report, with the promise of serving to help MSMEs, the Mudra scheme has a huge scope to fund unfunded small entrepreneurs and improve the access of credit to micro enterprises.
“Schemes like PMMY serve as an important tool for small businesses to access commercial capital. However, its success hinges on its design and with the right mechanism and risk management processes alongside the efficient administration and governing bodies, can further make the Mudra scheme financially sustainable, generating positive additionalities,” the Aayog said. The other recommendations include real-time upload of beneficiary data, digitisation of the lending process, interventions by banks for digital promotions, awareness on GST enrolment and online advertising to enhance lending under the scheme. The government has disbursed ₹27.75 lakh crore in loans to more than 470 million small and new entrepreneurs under the scheme since its inception in 2015. Under the scheme, the loans are divided into three categories based on the need for finance and the stage in maturity of the business. These are Shishu (loans up to ₹50,000), Kishore (above ₹50,000 and up to ₹5 lakh) and Tarun (above ₹5 lakh and up to ₹10 lakh).
Loans under the PMMY are provided to meet both term-loan and working capital components of financing for income-generating activities in manufacturing, trading and service sectors, including activities allied to agriculture such as poultry, dairying and beekeeping.