Dhananjay Kumar, 38, who runs a small flower shop at Kathari Bagh in Chhapra, Bihar, needed some money to enhance his business. He applied for a loan under the Mudra Yojana of the central government in a nearby bank, but did not get any loan. The loan application of a dozen flower traders, including Dhananjay Kumar, was rejected on grounds that loans cannot be extended to the ‘florists’ as it is a raw business.

Kiran Gupta, 34, a resident of Rudankheda village in Lucknow, about 500 kms away from Chhapra, had also tried to take a loan for her business, but the banks refused to give her a loan and said it would be difficult for her to pay the high interest. Kiran runs a small business from home, along with her husband, of making cartons for sweets.

Likewise, Satendra Maurya, 42, of Belhara village in Barabanki district in Uttar Pradesh needed about Rs 1 lakh to develop his mobile and recharge shop, but the bank gave sanctioned him a loan of only Rs 50,000 under the Mudra scheme. Satendra says the bank did not give him any valid reasons for this. He was simply told that his plan didn’t merit giving loan of more than Rs 50,000. 

On April 8, 2015, the Narendra Modi government had launched the Mudra (Micro Units Development and Refinance Agency) Scheme. It was said that this would help small and medium-level businessmen and traders to start new business or develop old business. They will be able to get easy loans without any guarantee or any particular paperwork hurdle at subsidized and low interest. 

However, when probed further, it shows that it is not as easy for small businessmen to take loans under the scheme as the government had proposed and as mentioned on the official website. 

The actual needy people are kept deprived of the scheme for want of information and awareness. While some are shown the fear of interest and loans, some are denied loans by citing their project and the business as weak. 

The Prime Minister, while inaugurating the scheme, had said: “The biggest capital of the poor is their honesty and the combination of capital with their sincerity will be the key to the success of small entrepreneurs.”

Before the start of the Budget Session, on January 31, President Ram Nath Kovind, in his address, had enumerated it among the achievements of the government. He had said: “During the 2018-19 financial session, the scheme benefited more than five crore people, under which loans worth more than Rs 10 lakh crore were given.”

The government claims that the scheme is benefiting the street vendors and small shopkeepers like juice, pakoras and paan vendors and who are not able to increase their business for want of capital.

According to the Mudra scheme website, the loan-taking process should only take 7 to 10 days. For a large loan, the period may be up to a maximum of one month. But during the reporting we came across many people whose loan-seeking experience was not good.

Hanuman, 48, a resident of Mall Market in Lucknow, runs a small shop of automobile servicing in the market itself. He had applied for a loan under the scheme in June 2019, but received it only by December 2019. Sanjay had also applied for a loan under the Mudra Scheme with his friend Hanuman. Just four days ago they have come to know that their loans are approved whereas the application of yet another friend, Abhinandan, was rejected.

Hanuman informed: “In the meantime, more than Rs 50,000 and a lot of time were spent, and our business was also affected. We had to pay numerous visits from the block office to the district, the form had to be filled up several times and verified, and only then the loan was received.” He said that if only he knew that there would be so much hassle and expense involved in this, he wouldn’t have applied for the loan.

During the reporting, we also found some people who got this loan very easily and within the stipulated time. These were the people who live around the bank or were rather well-known in the area.

In Uttar Pradesh, a young man who has set up a rusk factory at Pisanwan block in Sitapur district said that he was able to receive a loan of Rs 1 lakh quite easily, that too, within a month after the Mudra scheme was launched. He added that it may have to do with his brother being a local journalist who has good relations with the bank official. 

On the other hand, there are people like Satendra, a mobile phone dealer working in Barabanki district in Uttar Pradesh, who had applied for a loan of Rs 1 lakh and got only Rs 50,000. Earlier, he had taken a loan of Rs 25,000 under the Mudra scheme and had repaid the loan well in time without defaulting. He is upset that despite good past records, his loan application was rejected by the bank, while Prime Minister Narendra Modi has said many times that the Mudra Scheme is for small traders and businessmen like Satendra. 

In response to an RTI (Right to Information) in the year 2018, the Ministry of Micro, Small and Medium Enterprises had also confirmed that more than 90% of the loans under Mudra scheme are of Rs 50,000 or less. Only 1.45% of the people had been given loans of more than Rs 5 lakh. 

The bank manager of a government bank informed Gaon Connection on the condition of anonymity: “The bank extends loans based on individual’s requirements. Mostly medium and small businessmen come under this scheme whose requirement doesn’t exceed Rs 50,000. This is why loans up to Rs 50,000 have been disbursed. “

Another bank official, on the condition of anonymity, told Gaon Connection: “However accessible and easy norms the government may make, but the bank does not issue loans unless it is sure of its recovery. For this, the history of the borrower, his assets, state of business are all scrutinized.”

He added: “The Non-Performing Assets (NPAs) of most of the banks are continuously increasing and the banks are under pressure from these growing NPAs. The government schemes like Kisan Credit Card (KCC), Mudra, Pradhan Mantri Employment Generation Programme (PMEGP) are further increasing the NPAs. The government extends loans and then some loans are also waived. But all this puts pressure on the banks, which nobody pays attention to.”

During the reporting, we came across dozens of villages and thousands of people who were ignorant of the scheme. Under the Mudra scheme, it has been provided that field officers will also be appointed in the bank to sensitize the people about the scheme by organizing camps and loan melas in the villages. But the villagers say they never had witnessed any such camps or fairs.

(Ankit Kumar Mishra from Bihar contributed to this story)