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.
How Can MUDRA Bank Make a Difference to the Economy?
Most individuals, especially those living in rural and interior parts of India, have been excluded from the benefits of formal banking system. Therefore, they never had access to insurance, credit, loans and other financial instruments to help them establish and grow their micro businesses. So, most individuals depend on local money lenders for credit. The loan comes at high interest and often with unbearable conditions, which make these poor unsuspecting people fall in a debt-trap for generations. When businesses fail, the borrowers become vulnerable to the lender’s strong-arm tactics and other forms of humiliation.
As per NSSO Survey of 2013, there are close to 5.77 crore small-scale business units, mostly sole proprietorships, which undertake trading, manufacturing, retail and other small-scale activities. Compare this with the organised sector and larger companies that employ 1.25 crore individuals. Clearly, the potential to harness and nurture these micro businesses is vast and the government recognises this. Today, this segment is unregulated and without financial support or cover from the organised financial banking system.
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.
MUDRA operates as a refinancing institution through State/Regional level intermediaries. It refinances NBFCs/MFIs and also banks, primary lending institutions etc.
Some of the Offerings Planned for the Future:
- MUDRA Card
- Portfolio Credit Guarantee
- Credit Enhancement
Mudra Loan Mela
The government is organising MUDRA loan melas in different parts of the country. These melas are organised for few days where loans for small business funding could be applied. In the melas, loans are granted ranging from Rs. 50,000 to Rs. 10 lakh.
To know more about the process of loan you can contact the Nodal officer of your area. http://www.mudra.org.in/Nodal-Officers-MUDRA.pdf
Can MUDRA Really Be a Game Changer for India?
Yes it can. See the existing demographics. Majority of Indians are poor and live in rural and interior parts of India. Most are excluded from getting facilities that would be termed very basic, even by Indian standards.
Most people do not have access to farmland and in the absence of jobs, are left to their own creativity to feed themselves and survive. They figure out ways to do odd jobs in exchange of money or barter their services. Most of these people belong to scheduled castes, scheduled tribes and other backward classes. It is to be noted that most of the micro enterprises, retail or trading activity, are initiated and controlled by women, with no exposure to education, formal training or access to any form of banking support.
Now visualise this. If India could harness this free spirit of enterprise and offer some guidance, support, training and financial assistance, the potential to get an immediate jump in GDP is there for the asking. Narendra Modi recognises this and was clear of the potential of this low-hanging fruit.
If MUDRA can continue to retain focus on the underprivileged and extend its reach to the interiors, it can well emerge as a bigger success story than what Grameen Bank of Bangladesh ever was or will be.
There is an old saying that goes like this: “Give a man a fish you feed him for a day, teach him how to fish and he will never go hungry”. MUDRA Bank is a step by the government that can be a game changer in giving birth to a new set of entrepreneurs, some of whom may scale heights not imagined today. This is far better than giving subsidy, which may seem welcoming at first, but does little to help an individual strive for a better life. MUDRA is the way to go.
The modalities of functioning of MUDRA Bank are in place and it has been decided that the funding activity will be carried out by microfinance institutions. However, the small businesses have to wait to get full information on Mudra Bank and have a clarity on who all are eligible for loans and how to get the benefits of this scheme.
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