MUDRA Bank

 

Prime Minister Narendra Modi is launching Mudra Bank on Wednesday which will  benefit small entrepreneurs and will also act as a regulator for ‘Micro-Finance Institutions (MFIs).

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.

 

Points to Note about MUDRA Bank

 

What does it stand for? 
 
  • Mudra Bank stands for Micro Units Development Refinance Agency (MUDRA). Also, Mudra, in  Hindi, means currency.
Setting up
 
  • 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.
Targets
 
  • 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.
5.77 crore
 
  • 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.
Recovery method
 
  • 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.
Corpus
 
  • The Bank will be set up with a corpus of Rs 20,000 crore and a credit guarantee fund of Rs 2,000 crore.
Shishu/Kishor/Tarun
 
  • The Bank will nurture small businesses through different stages of growth and development of businesses termed as Shishu, Kishor and Tarun.
Shishu
 
  • 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.
Kishor
 
  • In this stage, the entrepreneur will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh.
Tarun
 
  • This last and final category will provide loans for upto Rs 10 lakh.
 

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