Prime Minister Shri Narendra Modi launches MUDRA Bank to fund small businesses

Prime Minister Narendra Modi  on Wednesday launched the Micro Units Development and Refinance Agency Ltd (MUDRA) in New Delhi.

With a corpus of Rs 20,000 crore, and a credit guarantee corpus of Rs 3,000 crore, MUDRA will be responsible for developing and refinancing, through the Pradhan Mantri MUDRA Yojana, all microfinance Institutions (MFIs) in the business of lending to micro and small business entities in manufacturing, trading and service activities.

MUDRA will also partner with states and regional level coordinators for providing funding to last-mile financiers of small and micro business enterprises.

For now, MUDRA will work as part of SIDBI, a principal financial institution for the micro, small and medium enterprises.

In his address at the launch, Modi said: "People think big industries and corporate houses provide higher employment. The truth is  only 12.5 million people are employed by big corporate houses, against 120 million by the MSME sector. We need to understand the energy of the bottom of the pyramid of individuals and provide them with means for upliftment. We want to study and adopt best practices on micro financing."

He said he believed the established banking system would also adopt the MUDRA model in a year's time.

On the plight of the country's farmers, the prime minister assured they would get all help required and announced a compensation of 33 per cent of their lost production. ”Farmers are suffering due to nature. I have taken a detailed report for ministers who went and spoke to farmers suffering due to unseasonal rains, as well as banks, to help restructure their farming model,” he said. 

Finance Minister Arun Jaitley said the announcement of MUDRA was aimed at helping 57.7 million MSME entrepreneurs and industries. "Close to 20 per cent of India's population depends on this sector. MUDRA will help provide resources to this large section of the society."

Jayant sinha, minister of state for finance, also present at the event, believed MUDRA would help revolutionise the MSME sector, like NABARD did for the agricultural sector. 

MUDRA's approach  is not limited to credit alone; it offers a credit-plus solution for such enterprises across the country.

MUDRA's role will include:

• 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 loans and portfolios being extended to micro enterprises.
• Support development and promotional activities in the sector.
• Creating a good architecture for last-mile credit delivery to micro businesses.
• The measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs, including women entrepreneurs.
• The primary product of MUDRA will be refinance for lending to micro businesses and units. The initial products and schemes under this umbrella have already been created and the interventions have been named:

Shishu: Covering loans upto Rs 50,000

Kishor: Covering loans above Rs 50,000/- and upto Rs 5 lakh

Tarun: Covering loans above Rs 5 lakh and upto Rs. 10 lakh