Rising NPAs and Gold Loans: A Double-Edged Sword in India's Financial Landscape

The Non-performing Asset (NPA) rate under the Pradhan Mantri Mudra Yojana (PMMY) for Scheduled Commercial Banks has escalated significantly, while gold loans have surged as a key financial instrument, promoting economic inclusion. The government outlines various strategies to mitigate rising NPA rates and expand financial avenues for underserved communities.

The Non-performing Asset (NPA) rate for the Pradhan Mantri Mudra Yojana (PMMY) under Scheduled Commercial Banks has soared from 5.47% in March 2018 to 9.81% by March 2025, according to official parliamentary disclosures.

Finance Minister Nirmala Sitharaman reported that the NPA rate for PMMY loans stands at 2.19% as of March 2025, down from 2.71% in March 2018, but remains higher than average due to the collateral-free nature of these loans aimed at nascent entrepreneurs.

In tandem, 'Loans against Gold Jewellery' saw a 71.3% year-on-year increase by December 2024, reflecting the financial sector's adaptation to broader economic trends and growing credit demands among rural and female borrowers.