Policy planners expect some repayment stress to affect small-ticket loans disbursed under two flagship government schemes—PM SVANidhi Scheme and Pradhan Mantri Mudra Yojana—in the next few quarters as a fallout of the war in West Asia, according to three people aware of the issue.
The PM SVANidhi Scheme provides working capital term loans to urban street vendors, while the Pradhan Mantri Mudra Yojana funds micro enterprises and small businesses. Many of the loan beneficiaries of these schemes are vulnerable to economic disruption and rising living costs.
“We are expecting some stress in the PM SVANidhi Scheme portfolio as it directly caters to street vendors, who form an important part of the informal urban economy. Street vendors play a critical role in the urban supply chain by providing convenient access to goods and services across neighbourhoods and communities,” one person said on condition of anonymity.
The reduced footfall in offices is likely to impact the earnings of street vendors and their repayment capacity, the person added.
“We run a food stall in New Delhi and had taken a loan of ₹10,000. Rising LPG cylinder prices had already put pressure on our earnings and now fewer people are visiting the stall as many employees have shifted to work-from-home arrangements,” said Anand Kumar (name changed), a street vendor in south Delhi. “We may face difficulties in repaying the loan and it will also put pressure on managing our family’s livelihood.”
Mint earlier reported that the finance ministry would carry out a high-level review of the Centre’s key flagship welfare and financial inclusion schemes.
In August last year, the Union Cabinet restructured and extended the lending period of the PM SVANidhi Scheme from 31 March 2024 to 31 March 2030. The total outlay for the scheme was ₹7,332 crore. The restructured scheme targets 11.5 million beneficiaries including 5 million new vendors.
Three tranches
Under the scheme, implemented jointly by the ministry of housing and urban affairs and the Department of Financial Services, loans are disbursed in three tranches. The first tranche loan limit has been increased to ₹15,000 from ₹10,000 and the second tranche loan to ₹25,000 from ₹20,000 while the third tranche remains unchanged at ₹50,000.
As of 30 July 2025, over 9.6 million loans amounting to ₹13,797 crore have been disbursed to more than 6.8 million street vendors, the government said in a statement on 27 August last year.
Under the PM Mudra Yojana, easy, collateral-free loans up to ₹20 lakh are offered to support small-scale business ventures for non-corporate and non-farm income-generating activities such as stitching units, tea stalls, salons, mechanic shops and mobile-repair businesses.
More than 577.9 million loans have been sanctioned, amounting to over ₹40 trillion of disbursements. Two-thirds of the loans were sanctioned to women entrepreneurs, the finance ministry said on 8 April.
Queries emailed to the spokespersons of the ministries of finance and housing and urban affairs, the Prime Minister’s Office, the Indian Banking Association and the Reserve Bank of India on Monday evening remained unanswered till the time of publishing.
Experts called on the government to offer relief measures for loan beneficiaries and small businesses. According to Vinod Kumar, president of the India SME Forum, the emerging stress signals in the PM SVANidhi and Mudra portfolios should be seen as a reflection of the extraordinary pressures faced by India’s smallest entrepreneurs and not as a failure of the schemes themselves.
Successive shocks
“Street vendors, nano businesses, artisans and micro enterprises operate with extremely thin margins and limited financial buffers. Over the last few years, they have faced successive shocks, from the pandemic and supply chain disruptions to inflationary pressures, logistics volatility and now the economic fallout of the West Asia conflict, which is impacting fuel prices, consumption patterns and local market demand,” Kumar said.
The SME Forum said the Framework for Revival and Rehabilitation of MSMEs should be urgently operationalized and extended across all major financial support schemes for micro and small entrepreneurs, including PM SVANidhi and Mudra beneficiaries. A mechanism with faster restructuring approvals, temporary liquidity support, and rehabilitation pathways for viable borrowers can help prevent large-scale financial distress at the bottom of the pyramid while preserving credit discipline and economic activity, Kumar said.
“Access to formal credit through banks and microfinance institutions to skilled youth and micro enterprises and small vendors remains critical now,” said Dharanidhar Tripathy, CEO of the Business Correspondent Resource Council, a non-profit, independent think tank in New Delhi. “Collateral free loans with handholding support, close follow-up and rehabilitation, if needed, are important to address the current situation.”