Draw norms to assess background of Mudra loan applicants: Niti Aayog
Niti Aayog has proposed that the government formulate guidelines for assessing the creditworthiness and background verification of those availing of loans under the Pradhan Mantri Mudra Yojana (PMMY), besides putting in place a reward mechanism to incentivise lending institutions to increase the scale of lending.
«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
