The BJP-led Uttar Pradesh government is looking to revive lending to minority communities through some central government schemes that offer concessional credit for setting up small ventures or for education. Lending under these schemes had stopped some years ago after the Centre froze funds due to low recovery.
Assembly polls are due in the state early next year.
The state’s minority department has now demanded Rs 100 crore from the Centre to resume lending under financial assistance schemes of the National Minorities Development and Finance Corporation (NMDFC), a senior government official of the department told ET on conditions of anonymity.
The state had disbursed Rs 21 crore to a total of 2,400 beneficiaries in FY21 for term loans and micro-finance, and Rs 10 crore in FY20, after a gap of at least 10 years, according to NMDFC data.
The NMFDC implements credit financing to promote economic empowerment, especially among the backward sections of minorities. It offers schemes such as term loans of up to Rs 30 lakh for business ventures, for job oriented education and micro-finance, taking care of 90% of the finance at subsidised interest rates.
West Bengal and Kerala have been at the forefront of disbursing funds under the scheme–Rs 305 crore and Rs 241 crore, respectively, in FY21 alone. However, UP, which also has a Muslim population of 20%, has lagged.
The official said recovery rate for these loans have been low–only about 1-2%–and lack of coercive action against defaulters has also failed to change the situation. It is now looking at floating a one-time settlement scheme by which it will waive interest on existing loans to encourage defaulters to repay.