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Prime Minister launched MUDRA Bank under PM Jan Dhan Yojana to fund small entrepreneurs

Apr 8, 2015 14:55 IST

Micro Units Development and Refinance Agency Ltd. (MUDRA) BankPrime Minister Narendra Modi on 8 April 2015 launched the Micro Units Development and Refinance Agency Ltd. (MUDRA) Bank to fund the small entrepreneurs.

The Bank was launched under the ambitious Pradhan Mantri Jan Dhan Yojana (PMJDY). The bank will provide credit of up to 10 lakh rupees to small entrepreneurs and act as a regulator for Micro-Finance Institutions (MFIs).

It was set up through a statutory enactment. It would be responsible for developing and refinancing all Micro-finance Institutions (MFIs) which are in the business of lending to micro / small business entities engaged in manufacturing, trading and service activities.

The concept of MUDRA Bank goes beyond credit only approach and offers a credit plus solution for these enterprises spread across the country.

The role of MUDRA Bank

  • Lay down policy guidelines for micro enterprise financing business
  • Registration of MFI entities
  • Accreditation/rating of MFI entities
  • Lay 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
  • It would partner with State/Regional level coordinators to provide finance to Last Mile Financiers of small/micro business enterprises.

Products offered by MUDRA Bank

The bank will initially offer products like Shishu, Kishor and Tarun to differentiate the stage of growth and funding needs of the beneficiary entrepreneur.

  • Shishu will cover loans up to 50000 rupees
  • Kishor will cover loans above 50000 rupees and up to 5 lakh rupees
  • Tarun will cover loans above 5 lakh rupees and up to 10 lakh rupees

 Background

Union Finance Minister Arun Jaitley had proposed the creation of a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of 20000 crore rupees and credit guarantee corpus of 3000 crore rupees during the presentation of Union Budget 2015-16 on 28 February 2015.

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