The Non-Performing Asset (NPA) rate against the outstanding amount under the Pradhan Mantri Mudra Yojana (PMMY) for Scheduled Commercial Banks rose to 9.81 per cent as of March 2025, up from 5.47 per cent at the end of March 2018, Parliament was informed on Tuesday.
Finance Minister Nirmala Sitharaman, in a written reply in the Rajya Sabha, said the NPA rate against the amount of loan disbursed under PMMY for Scheduled Commercial Banks stood at 2.19 per cent in March 2025, compared with 2.71 per cent in March 2018.
She said PMMY primarily caters to sections of society that have traditionally remained outside the formal credit system due to a lack of collateral and business experience.
The NPA rate under the scheme is higher than the average MSME NPA rate because loans are collateral-free and often extended to new entrepreneurs with limited expertise, she added.
As of March 2025, the NPA rate for MSMEs stood at 3.60 per cent against the outstanding amount, Sitharaman said. She noted that factors contributing to NPAs in MSME lending, including PMMY, include the performance of borrowers, macroeconomic conditions, sector-specific challenges and the global business environment.
The government has introduced several measures to strengthen the implementation of the Mudra Scheme. These include awareness campaigns, simplified application processes, the Credit Guarantee Scheme, appointment of Mudra Nodal Officers, and frequent reviews by the government and banks.
Sitharaman also said the government assigns targets to Member Lending Institutions (MLIs), which then allocate state-wise lending targets based on local potential.
Replying to another question, the finance minister said loans against gold jewellery under the personal loan segment rose by 71.3 per cent in December 2024 compared with December 2023, citing Reserve Bank of India (RBI) data on “Deployment of Gross Bank Credit by Major Sectors”.
She said the absolute increase in loans against gold jewellery stood at Rs 71,858 crore between December 2023 and December 2024. This represented 4.06 per cent of the total incremental Non-Food credit of Rs 17,67,929 crore during the same period.
According to the minister, gold-backed loans have helped promote financial inclusion and expanded access to credit, especially for rural communities, MSMEs and underserved segments. Such lending also prevents borrowers from turning to informal channels that often charge usurious interest rates.
Sitharaman said regulators have placed necessary guardrails and supervisory measures to ensure credit growth, including gold loans, remains within risk tolerance levels.
She also highlighted that a relatively larger share of gold loans is taken by women borrowers, who increasingly recognise gold as a monetisable asset in times of need.
She said this trend reflects women’s growing economic participation, particularly in rural areas, and diversifying credit needs ranging from entrepreneurship to personal finance.
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The government, she added, has launched various schemes such as the Mahila Samriddhi Yojana, the Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme for Women, and Stand-Up India to provide additional funding avenues to women borrowers.
Sitharaman also said global gold prices are influenced by demand and supply, inflation, government policies and wider geopolitical developments. Gold is considered a stable hedge against inflation and continues to hold cultural importance in India, which remains one of the largest consumers of the precious metal.
Rising gold prices, she said, enhance collateral value for raising debt but also affect household purchasing power, particularly in rural and middle-class segments. This often encourages households to diversify their investments into alternative assets.
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