MUDRA Bank: All about it

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08 Apr, 2015

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Prime Minister Narendra Modi launched the ambitious MUDRA Bank on 8 April 2015 at a function held at New Delhi. This bank would primary be a lending entity to micro and small business entities engaged in manufacturing, trading and service activities.

Following are the primary highlights and facts associated with Mudra Bank:

What MUDRA stands for:

The term MUDRA stands for Micro Units Development Refinance Agency (MUDRA). In Sanskrit and Hindi MURDA also means currency.


What will be the main objective?

MUDRA Bank will be responsible for developing and refinancing all microfinance Institutions (MFIs) in the business of lending to micro and small business entities in manufacturing, trading and service activities. In Prime Minister Narendra Modi’s words “It will be the bank for the unbanked people and businesses.” 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.


What will the main roles to be played by MUDRA Bank?

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


Which scheme will be the primary support for MUDRA Bank?

The Pradhan Mantri MUDRA Yojana will be the main support system for MUDRA Bank.


MUDRA Bank will work under which entity?

MUDRA Bank will be the part of Small Industries Development Bank of India (SIDBI), which is a principal financial institution for the micro, small and medium enterprises in India. The bank will also partner with states and regional level coordinators for providing funding to last-mile financiers of small and micro business enterprises.


What is the initial corpus of MUDRA Bank?

MUDRA Bank has been started with an initial corpus of Rs. 20,000 crore. Apart from this, Rs. 3,000 crore has been earmarked as credit guarantee corpus.


What will be the expanse of MUDRA Bank’s operations?

MUDRA Bank will cater to the financing needs of over 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.


What are the names given to 3 financing stages for MUDRA Bank?

Shishu, Kishore and Tarun

Shishu : It will be the first financing stage for MUDRA Bank and will include the time when a business entity is just starting its operations. The loan cover in this stage will be upto Rs 50,000.

Kishore: It will be the second financing stage for MUDRA Bank and the entreprenuer will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh under this stage.

Tarun: It will be the third and final financing stage for MUDRA Bank and maximum loan up to Rs. 10 lakh can be provided under this stage.


 

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