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Short Note: MUDRA Bank/ Indian Budget/2015--------Micro Finance Development Refinance Agency) will strengthen financially the micro

finance institutions
and extend their reach.
---- After 'banking the un-banked' with the Jan Dhan Yojana, it's time to 'fund the unfunded
Millions of common men and women in this country, who run small businesses, have almost remained
outside the net of formal institutional finance, in spite of their large contributions to the economy

Setting up
Launched in April 8th, 2015; the bank would primarily be responsible for regulating micro and small
enterprise financing business, and supporting them.
--- Mudra Bank is being set up through a statutory enactment and will be responsible for developing and
refinancing through a Pradhan Mantri MUDRA Yojana.


The Bank will be set up with a corpus of Rs 20,000 crore and a credit guarantee fund of Rs 2,000 crore.

Roles of the Bank

Laying down policy guidelines for micro enterprise financing business

Registration of MFI entities
Accreditation /rating of MFI entities
Laying down responsible financing practices to ward off over indebtedness and ensure proper client
Protection principles and methods of recovery
Development of standardised set of covenants governing last mile lending to micro enterprises
Promoting right technology solutions for the last mile
Formulating and running a Credit Guarantee scheme for providing guarantees to the
loans/portfolios which are being extended to micro enterprises
Support development & promotional activities in the sector
Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of
Pradhan Mantri MUDRA Yojana
Providing access to institutional finance to such micro and small business units and enterprises will
not only help in improving the quality of life of these entrepreneurs, but also turn them into strong
instruments of growth and employment generation,

Highlights of the Project- Prime Minister Narendra Modi launched the Rs. 20,000 crore ( INR 200 billion) MUDRA Bank
This will primarily be aimed at providing-- refinancing to small and medium enterprises,
particularly those belonging to members of scheduled castes and scheduled tribes
The move is aimed at benefiting some 58 million small businesses in the country, who account for
a mere four percent of institutional funding, despite employing over 120 million people, many from
unprivileged strata of society,
Coverage of six crore Indian 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
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 [According to the NSSO Survey of

2013, there are some 5.77 crore small business units, mostly individual proprietorship, which run
manufacturing, trading or services activities.]
Own Account enterprises financing--- myriad of small manufacturing units, shopkeepers, fruits /
vegetable vendors, truck & taxi operators, food-service units, repair shops, machine operators, small

industries, artisans, food processors, street vendors and many othersmainly belonging to people
from the Scheduled Caste, Scheduled Tribe or Other Backward Classes. The biggest bottleneck of
this sector is financial support which will now be channelized through MUDRA Bank.
MFI (Micro Finance Institutions) Policies---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
Last Mile Financiers-- small entrepreneurs are businesses 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.
Recovery methodthe Bank will ensure that the 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 Finance Ministry said measures to be taken up by MUDRA are targeted towards mainstreaming
young, educated or skilled workers and entrepreneurs including women entrepreneurs.

Loan Schemes undertaken-MUDRA Bank will offer loans under three schemes-The bank will nurture small businesses through
different stages of growth and development of business termed as Shishu; Kishor and Tarun
1. Shishu- This will be the first step when the business is just starting up. The loan cover in this stage is
Rs. 50, 000
2. KishoreIn this stage, the entrepreneur will be eligible for a loan ranging from Rs 50,000 to Rs 5
3. TarunThis last and final category will provide loans upto Rs 10 lakh

Initial Offerings/Products
Sector/activity specific schemes, such as schemes for business activities in Land Transport,
Community, Social & Personal Services, Food Product and Textile Product sectors. Schemes
would similarly be added for other sectors / activities.
Micro Credit Scheme (MCS)
Refinance Scheme for Regional Rural Banks (RRBs) / Scheduled Co-operative Banks
Mahila Uddyami Scheme
Business Loan for Traders & Shopkeepers
Missing Middle Credit Scheme
Equipment Finance for Micro Units

Other proposed offerings of the MUDRA which are yet to be launched

Portfolio Credit Guarantee
Credit Enhancement

Apart from crediting MUDRA has also proposed some developmental activities as listed under

Supporting financial literacy

Promotion and Support of Grass Root Institutions
Creation of Framework for Small Business Finance Entities
Synergies with National Rural Livelihoods Mission
Synergies with National Skill Development Corporation
Working with Credit Bureaus

Working with Rating Agencies