MUMBAI: Reserve Bank of India deputy governor MK Jain on Tuesday raised red flags over rising non-performing assets (NPAs) in loans disbursed under the government’s Mudra loan scheme and urged banks to monitor the repayment capacity of borrowers before disbursement.The Pradhan Mantri Mudra Yojana is a central government scheme under which small businesses can avail collateral-free working capital loan up to Rs 10 lakh. The scheme was flagged off in 2015 by PM Modi to ease the credit flow to India’s MSME sector.“The Mudra is a case in point-…while such a massive push would have lifted many beneficiaries out of poverty, there has been some concern at the growing level of non-performing assets among these borrowers,” Jain said while addressing an industry gathering here. Interestingly, this is the second such warning by a senior central banker this year to banks over rising delinquencies in these loan accounts.Governor Shaktikanta Das, in July, told chief executives of all state-run banks, in a closed-door meeting, to be cautious while disbursing to Mudra beneficiaries to avoid a pile-up of NPA accounts. Separately, former RBI governor Raghuram Rajan had also warned the banking system of these building toxic loans in November last year.As per the latest data available on the Mudra website, banks have disbursed 2.9 crore loans in the ongoing fiscal worth nearly Rs 1.41 lakh crore. In the previous fiscal year, banks had disbursed working capital loans worth over Rs 3 lakh crore.“Banks need to focus on repayment capacity at the appraisal stage and monitor the loans through the life cycle much more closely,” Jain said.The regulator was speaking at an event organised by Small Industries Development Bank of India (SIDBI) on the microfinance industry. The deputy governor during his speech also emphasised the growing need for banks to harness technology to not just improve their underwriting capacities, but also to create personalised financial products accessible for all.“We must now focus on the demand side, which is to focus on enhancing capabilities so that individuals in low-income groups are in a position to not merely avail the offered services but also demand preferred products and services suitable to their needs and choices,” said Jain.As per data released by MicroFinance Institution Network (MFIN), the loan portfolio of India’s microfinance industry grew by 48% in the September quarter as against the same period last year and now stands at Rs 2.01 lakh crore.“Tailored products for credit to those without a credit score, entrepreneur, and consumption credit, hand-holding, financial literacy, social occasion credit and insurance are all waiting to be tapped in scale and size. Limited forays have been made but are yet to achieve their full potential,” he said.