The Prime Minister Narendra Modi launched the promised Micro Units Development and Refinance Agency Ltd (MUDRA) Bank on 8 April, 2015 with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore.

By on 13-11-2018

MUDRA BANK TO BE A GAME CHANGER FOR SMALL BUSINESSES

The Prime Minister Narendra Modi launched the promised Micro Units Development and Refinance Agency Ltd (MUDRA) Bank on 8 April, 2015 with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The launch was the fulfillment of an announcement made earlier by the Finance Minister Arun Jaitley in his FY 15-16 Budget speech.
MUDRA will have an initial corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The initial corpus would be provided by banks from their priority sector lending shortfall.

To be an Non-banking financial company (NBFC) and a part of Sidbi, MUDRA will later take the form of a bank through a Bill, which the government will present in Parliament within the next one year, according to financial services secretary Hasmukh Adhia. With this, the long-awaited Bill on MFIs would not come and some of its provisions would be incorporated in the Bill on MUDRA, Adhia added. "It will also put in place entire mechanism as to how much interest rate can be charged for micro sector," he said.

 THE PRINCIPAL OBJECTIVES OF THE MUDRA BANK ARE:

•  Regulate the lender and the borrower of microfinance and bring stability to the microfinance system through regulation and inclusive participation.
• Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money to small businesses, retailers, self-help groups and individuals.
• Register all MFIs and introduce a system of performance rating and accreditation for the first time. This will help last-mile borrowers of finance to evaluate and approach the MFI that meets their requirement best and whose past record is most satisfactory. This will also introduce an element of competitiveness among the MFIs. The ultimate beneficiary will be the borrower.
• Provide structured guidelines for the borrowers to follow to avoid failure of business or take corrective steps in time. MUDRA will help in laying down guidelines or acceptable procedures to be followed by the lenders to recover money in cases of default
• Develop the standardised covenants that will form the backbone of the last-mile business in future.
• Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
• Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed capital.
• Build a suitable framework under the Pradhan Mantri MUDRA Yojana for developing an efficient last-mile credit delivery system to small and micro businesses.

 MAJOR PRODUCT OFFERINGS

 MUDRA Bank has rightly classified the borrowers into three segments: the starters, the mid-stage finance seekers and the next level growth seekers.
To address the three segments, MUDRA Bank has launched three loan instruments:

 SHISHU: covers loans upto Rs 50,000/-
KISHOR: covers loans above Rs 50,000/- and upto Rs 5 lakh
TARUN: covers loans above Rs 5 lakh and upto Rs 10 lakh

Initially, sector-specific schemes will be confined to “Land Transport, Community, Social & Personal Services, Food Product and Textile Product sectors”. Over a period of time, new schemes will be launched to encompass more sectors.

SOME OF THE OFFERINGS PLANNED FOR THE FUTURE:
MUDRA Card
Portfolio Credit Guarantee
Credit Enhancement