PM extended some old schemes and finally said yes to one that was legally mandated for past 2 years, reveal Nitin Sethi and Karan Choudhury.
Prime Minister Narendra Modi made a slew of announcements in his speech on December 31. Business Standard did a status and fact check on some of the key schemes announced and how they link up to existing schemes of the National Democratic Alliance government and its achievements against each of them.
‘We are introducing a nation-wide scheme for financial assistance to pregnant women. 6,000 rupees will be transferred directly to the bank accounts of pregnant women who undergo institutional delivery and vaccinate their children.‘
‘This will help ensure nutrition before and after delivery, and improve the health of mother and child. So far, pregnant women in 53 districts were being given financial assistance of 4000 rupees, under a pilot project.’
The National Food Security Act, 2013 (NFSA) passed by the previous government made it a legal obligation on the government to provide a minimum of Rs 6,000 to be provided pregnant women universally.
A scheme along these lines — the Indira Gandhi Matritva Sahyog Yojana (IGMSY) — has been running since 2013.
Even after the NFSA came in to force the NDA government continued to run this scheme for 2 years in only select districts and provided Rs 6,000 (not Rs 4,000 as the prime minister announced) but under multiple restrictive conditions.
The NDA government allocated only Rs 400 crore (Rs 4 billion) for the scheme in 2016-2017.
The conditionalities linked to the benefits under the scheme, which were not there in the law, restrict the benefits of the scheme to potentially less than 20% of the pregnant women, as per research published by Dipa Sinha and others in Economic and Political Weekly in August 2016.
The prime minister’s announcement on December 31, while finally extending the scheme countrywide puts yet another conditionality — limiting the benefits to women who undergo institutional delivery.
The government has claimed the conditions are meant to induce behavioural change but the lack of facilities in rural health outposts constricts hope of such changes.
Back of envelope estimates suggest that if the NDA government provided benefits to all women the budgetary expend would range between Rs 15,000 crore to Rs 18,000 crore (Rs 150 billion to Rs 160 billion) every year.
But the multiple restrictions allow the government to curtail its budgetary spend substantially to the disadvantage of women in the poorer states where the conditions put on the scheme are more difficult to meet.
RuPay card against Kisan Credit Card scheme
‘The government has decided, that 3 crore farmers who have Kisan Credit Cards, will be given RuPay debit cards within three months.’
‘Kisan Credit Cards were launched in 1998, but so far, it was essential to go to a bank, to use them. Now, farmers will have RuPay Debit Cards, which they can use anywhere.’
The provision for Rupay and other debit cards against KCC has existed since 2012. but it has not been mandatorily provided to all farmers taking credit.
The RBI has since May 2012 provided that banks can give debit cards to farmers to withdraw credit through ATMs.
In November 2012 the UPA finance minister announced that 19 banks would provide RuPay cards to farmers availing KCC.
A reply in the Lok Sabha shows that 56.60 lakh RuPay (5.66 million) cards against KCC were issued in 2013-2014.
It could not be ascertained how many total RuPay cards have been issued till now against KCC.
On December 6 the Advisory Board of Financial Inclusion fund at NABARD, as a special case, has decided that RRBs and co-operative banks may be supported for procuring chip and PIN-based RuPay KCC cards, up to a maximum of Rs 25.00 or 80% of the cost, whichever is less.
Underwriting loans to small enterprises
‘Government of India underwrites loans given by banks to small businesses through a trust. So far, loans were covered upto one crore rupees. This limit is now being enhanced to 2 crore rupees.’
‘Earlier the scheme only covered bank loans. Hereafter it will cover loans given by NBFCs as well.’
The goverhnment runs a Credit Gaurantee Fund Trust for micro and small enterprises since 2000. It gave loans to eligible beneficiaries up to Rs 50 lakh (rs 5 million) from RRBS and Financial Institutions and up to Rs 1 crore (Rs 10 million) from commercial banks.
It provides guarantee to lenders for up to 75% to 85% for sums up to Rs 50 lakh and 50% for loans above Rs 50 lakh.
Loans above Rs 50 lakh have to be rated at Investment grade.
Up to May 2016, the fund had guaranteed loans worth Rs 23,986 crore (Rs 239.86 billionA) between April 2014 to May 2016.
Credit to micro and small industries
‘Government has also asked banks to raise the credit limit for small industry from 20% of turnover to 25%.’
‘Banks have also been asked to increase working capital loans from 20% of turn to 30%, for enterprises that transact digitally.’
In August 2015 the RBI advised banks to fix additional working capital limits ‘specifically for meeting the temporary increase in working capital requirements arising mainly due to unforeseen/seasonal increase in demand for products produced by them. Banks have since confirmed to us having put such a policy in place.’
After demonetisation, on December 29 the RBI asked banks to use this facility of providing ‘additional working capital limit’ temporarily up to March 31, 2017 to overcome the difficulties arising out of such cash flow mismatches also.
It said, ‘This would be a onetime measure up to March 31, 2017 and should thereafter be normalised in fresh working capital assessment cycle.’
The RBI is yet to issue any notification on working capital lines linked to digital transactions.
NABARD support to co-operative banks and societies
‘NABARD created a fund of Rs 21,000 crore rupees last month. Now, government is adding Rs 20,000 crore rupees more to this.‘
‘The loss that NABARD suffers by giving loans to cooperative banks and societies at low interest rates, shall be borne by the Government of India.‘
On November 22 the RBI said it is estimated that about Rs 35,000 crore (Rs 350 billion) would be required by the district co-operative central banks (DCCBs) for sanction and disbursement of crop loans to the farmers at the rate of Rs 10,000 crore (Rs 100 billion)per week.
It asked NABARD to utilise its cash credit limits up to about Rs 23,000 crore (Rs 230 billion) to enable the DCCBs to disburse the required crop loans.
During 2015-2016 NABARD sanctioned credit limits aggregating Rs 71,497 crore (Rs 714.97 billion) to state co-operative banks, RRBs and DCCBs under the short-term refinance portfolio.
NABARD’s long-term refinance disbursement was Rs 48,064 crore (Rs 480.64 billion).
‘The progress of the MUDRA Yojana has been very encouraging. Last year, nearly 3.5 crore people have benefited from this.’
‘The government now aims to double this, giving priority to Dalits, Tribals, Backward Classes and Women. A new scheme is being launched for pregnant women.’
The scheme was launched in 2015. So far this financial year MUDRA scheme has benefitted 2,1 crore (21 million) people as per official claims.
The scheme had benefitted more than 3.5 crore people (35 million) in the last year, not the current year as the PM claimed.
A report prepared by MicroSave in August 2016 said, ‘Both banks and NBFC-MFIs have built huge MUDRA loan portfolio, but only a small part of these loans appear to be “new MUDRA loans”, extended to “first-time borrowers” — financially excluded.’
It also noted that the ministry of finance informed Parliament that MUDRA Ltd had refinanced NBFC-MFIs and banks with only Rs 32.87 billion for the year 2015-2016.
This refinancing added up to be only 2.5% of the total MUDRA loans disbursed (Rs 1,329.5 billion) during the same period.
Urban housing benefits
‘Two new middle income categories have been created under the Pradhan Mantri Awaas Yojana in urban areas.’
‘Loans of up to Rs 9 lakh taken in 2017, will receive interest subvention of 4%. Loans of up to 12 lakh rupees taken in 2017, will receive interest subvention of 3%.’
The PMAY is a revised version of the Indira Awas Yojna that ran prior to the NDA regime.
It is the schematic version of Housing For All commitment of the government under which it wants to build 20 million houses by 2022.
Besides other components of the scheme, so far the interest subsidy of 6.5% was available under several conditions for loans up to Rs 6 lakh.
For those earning incomes up to Rs 3 lakh annually a house of 30 square metre was allowed and for those earning between Rs 3 lakh and Rs 6 lakh per annum a house of 60 square metre is permitted.
The announcement is an enhancement of existing benefits.
Under all the three components of the scheme, between April 2015 and December 6, 2016 only 6,716 houses have been completed.
Another 152,686 have been ‘grounded for construction and work is yet to start on 558,229 houses.
The Centre has so far released Rs 4,275 crore (Rs 42.75 billion) against its share of Rs 18,854 crores (Rs 188.54 billion) so far.
Data was not separately available for houses built using the credit subsidy component of the scheme
Rural housing benefits
‘The number of houses being built for the poor, under the Pradhan Mantri Awaas Yojana in rural areas, is being increased by 33%.’
‘In addition to this, another scheme is being put in place for the neo middle and middle class in rural areas. Loans of up to 2 lakh rupees taken in 2017, for new housing, or extension of housing in rural areas, will receive an interest subvention of 3%.’
The rural component of the Prime Minister’s Awas Yojna has a target of building 10 million pucca houses of up to 25 square metre between 2016 and 2019 through a 60:40 sharing of the cost of the scheme in the plain areas.
The component announced to help build or expand additional pucca houses by providing subsidy subvention is new.
For this year the ministry of rural development had set a target of 3.2 million houses under the rural component of PMAY.
So far 30 houses have been completed and inspected as per Union rural development ministry.
In another part of its report, the ministry states that 1.96 million houses that began construction prior to 2016-2017 were completed in the current fiscal year, but none that began this year have been completed under the Indira Awas Yojna’s new component.