NPA ratio for Mudra Yojna loans rose to 9.81% in FY25

New Delhi, Aug 19 – The Non-performing Asset (NPA) ratio for loans given under the Pradhan Mantri Mudra Yojana (PMMY) has gone up significantly. The  Finance Minister, Nirmala Sitharaman, informed Parliament on Tuesday that the NPA rate against outstanding loans given under PMMY, for Scheduled Commercial Banks, has gone up from 5.47% in March 2018 to 9.81% as of March 2025.

Higher Defaults in Collateral-Free Loans

The finance minister highlighted that PMMY aims to provide collateral-free loans to first-time entrepreneurs and borrowers outside the traditional credit system. As the loans are collateral-free, there is an absence of security, which makes the loans have a higher risk profile, continue in higher NPAs PMMY as compared to the average MSME NPA ratio.

Sitaraman further explained it by making a comparison, highlighting that NPAs in the overall MSME sector stood at 3.60% against outstanding amounts as of March 2025. The finance minister also explained that the defaults also happen due to various other factors, including borrower performance, macroeconomic conditions, sectoral challenges, and global trade dynamics.

Strengthen PMMY

As the Yojna is crucial to ensure development, the government has undertaken several steps to strengthen it. Most crucial aspects that the government is working towards are to launch awareness campaigns, simplify application processes, have a Credit Guarantee Scheme, appoint Mudra Nodal Officers to ensure smooth execution of the Youjna, and regular reviews by banks and ministries.

Gold Loans Expand Rapidly

The finance minister also informed the Rajya Sabha about the significant growth in the loans against gold jewellery in another update. The loans fall under the personal loan segment, and according to Reserve Bank of India data, they grew sharply by 71.3% in December 2024 as compared to December 2023. The total increase in gold loans amounted to ₹71,858 crore, which makes the 4.06% of the overall incremental non-food credit.

Women Borrowers Driving Growth

During the update, Sitharaman noted that women account for a relatively higher share of gold loans, reflecting increased awareness and confidence in monetising household gold during financial needs. This trend highlights women’s expanding role in entrepreneurship, household financial management, and credit participation, especially in rural India. Understanding the significant role of females in the sector, the government has introduced several initiatives to give more financing options to women. Some of the most popular schemes under it include Mahila Samriddhi Yojana, TREAD Scheme, and Stand-Up India.

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