Agartala: Government-sponsored loan schemes, introduced to promote self-employment and entrepreneurship, are increasingly being flagged as the primary drivers of Non-Performing Assets (NPAs) in Tripura.
A detailed review of the quarterly report published on the official website of Tripura’s State Level Bankers Committee reveals a worrying upward trend in bad loans across both private and public sector banks.
Despite being a small state with eight districts and 23 subdivisions, Tripura has a wide banking coverage with 603 branches of different banks. For every 6,103 persons, Tripura has one bank branch. Punjab National Bank is operating as the lead bank in all state districts.
The report, covering the status till September 2024, shows that the gross NPA has risen to ₹1,249.75 crore against total gross advances of ₹21,782 crore. This translates to a 5.74% NPA rate, up from 5.12% in June 2024 and 5.23% in March 2024.
The outstanding amount under written-off accounts (shadow register) stands at ₹163.66 crore. When added to the existing NPAs, the gross NPA balloons to ₹1,413.41 crore or 6.49% of gross advances.
“Percentage of gross NPA as against gross advance increased from 4.52% as of Sept 2023 to 5.73% as of September 2024. Amount in absolute terms increased to ₹1,249.75 crores as of September 2024 from ₹946 crores as of September 2023. The outstanding amount under written-off accounts (Shadow Register) is around ₹163.66 crores which if added with the outstanding NPA, the total amount would be ₹1,413.41 crores which seems to be high,” the report stated.
Among the leading contributors to this alarming trend are four government-backed credit schemes: the Kisan Credit Card (KCC), Pradhan Mantri Mudra Yojana (PMMY), Prime Minister’s Employment Generation Programme (PMEGP), and the Swavalamban Loan Scheme.
What are PMEGP, PMMY and Swavalamban schemes?
PMEGP (Prime Minister’s Employment Generation Programme)
This is a credit-linked subsidy scheme run by the Ministry of Micro, Small and Medium Enterprises (MSME). It aims to help people set up small businesses in non-farm sectors. Under PMEGP, the government provides a subsidy on the loan to start a business—ranging from 15% to 35% of the project cost depending on your category and location (urban or rural). It’s mainly for first-time entrepreneurs.
PMMY (Pradhan Mantri MUDRA Yojana)
Launched to support micro and small businesses, especially non-corporate and non-farm small enterprises. Under this, loans up to ₹10 lakh are provided by banks, NBFCs, and other financial institutions. The loans are divided into three categories: Shishu (up to ₹50,000), Kishor (₹50,001 to ₹5 lakh) and Tarun (₹5 lakh to ₹10 lakh).
No collateral is required, and the aim is to boost self-employment and small-scale industry.
Swavalamban Scheme
The Swavalamban Loan Scheme (note the different spelling from the discontinued pension scheme) is a credit-based initiative encouraging self-employment, particularly among economically weaker sections, unemployed youth, and small entrepreneurs. Several Indian states and banks have used Swavalamban or a similar variation for their schemes. So depending on the region or bank, the details might differ slightly. Loans generally range from ₹25,000 to ₹1 lakh or more, depending on the scheme. The loans are often collateral-free, especially for smaller amounts.
Why are loans turning bad?
The sources in different banks have one complaint in common. In the disbursement and beneficiary selections of these loans, the government plays a big role. Often candidates selected by the government are considered fit for receiving the loan, which means the scope of political selection is wider here. People with political connections often get the benefit of these loans and recovery from them also becomes tough.
Speaking on the issue, Kiran Bhowmik, an economics research scholar at Tripura University, said the NPA issue must be addressed to ensure the lion’s share of the population is brought under credit coverage.
“In Tripura, Non-Performing Assets (NPAs) are a matter of concern due to their increasing trend. This growing issue could become problematic for small and marginal sections of society in availing banking services such as loans and other government-provided financial facilities through banks in the state,” he said.
He also reminded the banks about the growth of NBFCs and fintech companies emerging as competitors in credit disbursement.
“Non-banking financial institutions are also increasing in number in Tripura, driven by the growing demand for loans among certain sections of the population. Bankers need to engage in close monitoring and follow-up to ensure the recovery of loan amounts along with interest. It has been observed that bankers generally prefer to sanction large loan amounts to a limited number of big business owners. However, greater focus should be placed on sanctioning loans to a larger number of individuals from marginal sections, to promote financial inclusion and equality,” he pointed out.
Scheme-wise and Sector-wise NPA data
The report findings further established that government-sponsored lending schemes such as KCC (Kisan Credit Card), PMMY (Pradhan Mantri Mudra Yojana), Swavalamban and PMEGP have emerged as the major contributory factors behind the rise of bad loans in Tripura banks.
The report said, as of June 2024, the percentage of NPA under KCC is 26%, PMMY is 18%, under PMEGP is 29% and Swavalamban is 27%.
Compared to September 2023, the gross NPA has increased by ₹303 crore in one year. And, it should be noted here that the loans accounts worth ₹163 crore outstanding had been written off which if added with the existing bad loans, the figures do not draw a very healthy picture of the state’s loan repayment system.
The gross NPA as of September 2024 stands at ₹1,249.75 crore against the gross advance of ₹21,782 crore till September 30, 2024.
The report also sheds light on the performance of private and public sector banks in terms of NPA. “Gross NPA in public sector banks stands at ₹464.44 crore while private sector banks recorded NPA worth ₹344.33 crore. In terms of RRB (Rural Regional Bank), the NPA stands at ₹225.34 crore. It should be noted here that in Tripura, Tripura Gramin Bank is the only RRB. The cooperative banks also make a high contribution to the state’s overall gross NPA. The NPA amount in cooperative banks stands at ₹215.63 crore with the total standing at ₹1,249.75 crore.”
In the Education sector, ₹615.42 lakh has been flagged as NPA, while in the housing scheme, ₹2,396.79 lakh is earmarked as non-performing. In Mudra Yojana, the NPA stands at ₹4,047.53 crore.
The major flagship schemes announced by the government are generating a larger share of NPAs in the banks.
Under the PMEGP scheme, 9,919 loan accounts were opened of which 2,470 accounts have a total of ₹59.49.61 crore are flagged as NPA. As per the report, 29 per cent of the loans have turned into NPAs.
Under the Swavalamban scheme, as many as 18,618 accounts had been created out of which 4,268 turned NPA. The amount involved is recorded to be ₹6,912.44 lakh and the percentage of total advances under the head stands at 27 percent.
Kisan Credit Card (KCC), which serves as one of the key tools for the government to provide financial backing to farmers, also has a sizable share in the bad loans.
Under the KCC loans, farmers are given collateral-free loans up to ₹1.6 lakh for agricultural activities.
In KCC, 45,455 accounts had been flagged as NPA with a total amount of ₹22,789.89 lakh. Overall, 21 per cent of the loans have turned into NPAs.
Also Read: What does the future of India’s eastern corridor following the end of FMR?
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