Prime Minister Narendra Modi on Wednesday launched Micro Units Development Refinance Agency, MUDRA Bank, which will provide credit of up to Rs 10 lakh to small entrepreneurs and act as a regulator for Micro-Finance Institutions (MFIs).
The roles envisaged for MUDRA include laying down policy guidelines for micro enterprise financing business and registration of MFI entities as well as their accreditation and rating.
The bank will also lay down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery, besides development of standardised set of covenants governing last mile lending to micro enterprises.
The Finance Ministry said in a statement that providing access to institutional finance to such small business enterprises will not only help in improving the quality of life of these entrepreneurs but also turn them into strong instruments of GDP growth and employment generation.
It said that 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 and funding needs of the beneficiary. It said that Shishu would cover loans up to 50,000 rupees while Kishor would cover from 50,000 up to Rs 5 lakh. Tarun category will cover loans of above Rs 5 lakhs and upto Rs 10 lakh.
Finance Minister Arun Jaitley had, in his budget speech, proposed MUDRA with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore . The Finance Minister had said that while there are 5.77 crore small businesses in India, mostly individual proprietorships, these bottom-of-the-pyramid entrepreneurs found it difficult, if not impossible, to access formal systems of credit.
MUDRA will certainly benefit 5.77 crore small entrepreneurs across the country.