The Micro Units Development and Refinance Agency (known as the MUDRA Bank) launched in April 8, 2015 which would primarily be responsible for regulating micro and small enterprise financing business, and supporting them.Prime Minister Narendra Modi will launch the 20,000 crore ( INR 200 billion) MUDRA Bank that aims to provide refinancing to small and medium enterprises, particularly those belonging to members of scheduled castes and scheduled tribes.According to Narendra Modi, the bank would help over six crore families. The bank would also get an additional 3,000 crore (INR 30 billion) in the budget to create a credit guarantee corpus for guaranteeing loans being provided to the micro enterprises.
MUDRA Bank will offer loans under three schemes-Shishu-upto INR 50,000,Kishor upto INR 5 Lac and Tarun upto INR 10 Lac – based on stage of micro business.
MUDRA Bank will also register MFIs and be responsible for accreditation and rating of MFI. It will also lay down policies for proper last mile practices to be followed by MFI to prevent indebtedness and provide proper client protection.
10 Facts :
1) The bank will be an agency to refinance micro-finance institutions and will also act as regulator for the sector.
2) Finance Minister Arun Jaitley in his first full-year Budget in February had proposed the creation of MUDRA bank with a corpus of Rs 20,000 crore and credit guarantee corpus of Rs 3,000 crore.
3) MUDRA bank is expected to benefit about 5.77 crore small business units.
4) Among others, the bank will benefit small manufacturing units, shopkeepers, fruit and vegetable sellers, beauty parlour owners, truck operators, hawkers, artisans in rural and urban areas with financing requirements up to Rs 10 lakh.
5) MUDRA bank will be responsible for regulating and refinancing all micro-finance institutions (MFIs) which are in the business of lending to micro or small business entities engaged in manufacturing, trading and services activities.
6) MUDRA bank would lay down policy guidelines for micro/small enterprise financing business, registration of MFI entities, regulation of MFI entities and accreditation /rating of MFI entities.
7) “The initial products and schemes under this umbrella have already been created and the interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth/development and funding needs of the beneficiary micro unit/entrepreneur,” the Finance Ministry said.
8) ‘Shishu’ would cover loans up to Rs 50,000 while ‘Kishor’ above Rs 50,000 and up to Rs 5 lakh. ‘Tarun’ category will cover loans of above Rs 5 lakh and upto Rs 10 lakh.
9) The Finance Ministry said measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs.
10) Banks, particularly dominant state lenders who are already under pressure over bad loans, have largely held back from lending to a sector where debt repayment installments can often be less than the cost of pursuing the payment.
Here are 11 things you must know about Mudra Bank and how it will benefit you:
What does it stand for?
Mudra Bank stands for Micro Units Development Refinance Agency (MUDRA). Also, Mudra, in Hindi, means currency.
Mudra Bank is being set up through a statutory enactment and will be responsible for developing and refinancing through a Pradhan Mantri MUDRA Yojana.
Last mile financiers
Since small entreprenuers are businssess are often cut off from banking system because of limited branch presence, Mudra Bank will partner with local coordinators and provide finance to “Last Mile Financiers” of small/micro businesses.
The Finance Ministry said measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs.
The bank will cater to 5.77 crore small business units that are spread all across India who currently find it difficult to access credit from the regular banking system.
Mudra Bank will ensure clients are properly protected and will lay down principles and methods of loan recovery in case of a default. The Bank will also rigidly follow “responsible financing practices” so deter borrowers from indebtedness.
The Bank will be set up with a corpus of Rs 20,000 crore and a credit guarantee fund of Rs 2,000 crore.
The Bank will nurture small businesses through different stages of growth and development of businesses termed as Shishu, Kishor and Tarun.
This is will be the first step when the business is just starting up. The loan cover in this stage will be upto Rs 50,000.
In this stage, the entrepreneur will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh.
This last and final category will provide loans for upto Rs 10 lakh
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