Mudra Banks, an innovative financial institution introduced by the Government of India, serve as a catalyst for fostering entrepreneurial endeavors and empowering the micro, small, and medium enterprises (MSMEs) sector. Launched under the Pradhan Mantri Mudra Yojana (PMMY) initiative in April 2015, Mudra Banks have emerged as a crucial pillar in facilitating access to finance for aspiring entrepreneurs, especially those belonging to the economically marginalized sections of society. With a primary objective of promoting entrepreneurship and job creation, Mudra Banks operate on the principle of extending financial assistance in the form of loans, credit guarantees, and other financial services to micro-enterprises across various sectors. By providing financial support tailored to the unique needs of small businesses, Mudra Banks play a pivotal role in driving inclusive growth, fostering economic development, and realizing the vision of a financially inclusive India.
MUDRA Banks and Pradhan Mantri Mudra Yojana (PMMY):
1. Pradhan Mantri Mudra Yojana (PMMY):
- PMMY is a scheme designed to provide collateral-free loans to small and micro-business enterprises and individuals in the non-agricultural sector.
- The loans are extended by Banks, Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs).
- The objective is to empower individuals to set up or expand their business activities, fostering self-employment.
2. Micro Units Development and Refinance Agency Ltd. (MUDRA):
- MUDRA is an NBFC (Non-Banking Financial Company) that supports the development of the micro-enterprise sector in India.
- It operates as a wholly-owned subsidiary of the Small Industries Development Bank of India (SIDBI), with SIDBI contributing 100% of the capital.
- The authorized capital of MUDRA is ‘1000 crores, and the paid-up capital is ‘750 crores, entirely subscribed by SIDBI.
3. MUDRA’s Role:
- MUDRA is responsible for developing and refinancing the entire micro-enterprise sector by providing support to financial institutions engaged in lending to micro and small business entities.
- It partners with banks, MFIs, and other lending institutions at the state and regional levels to offer microfinance support to the micro-enterprise sector.
4. Functions of MUDRA:
- Provides refinance support to financial institutions.
- Monitors PMMY data through a web portal.
- Facilitates guarantees for loans granted under PMMY.
5. Funding for Non-Corporate Small Businesses:
- MUDRA aims to provide funding specifically to the non-corporate small business sector, emphasizing financial inclusion and support for micro-enterprises.
6. Regulatory Role:
- MUDRA serves not only as a refinance institution but also as a regulator for Micro Finance Institutions (MFIs).
The combination of PMMY and MUDRA is a comprehensive approach by the Government of India to empower small and micro-businesses, generate self-employment, and facilitate financial inclusion at the grassroots level.
MUDRA Bank’s Responsibilities:
- Policy Guidelines:
- Laying down policy guidelines for micro/small enterprise financing businesses.
- Registration and Regulation:
- Registration and regulation of Micro Finance Institution (MFI) entities.
- Accreditation/ Rating:
- Accreditation/rating of MFI entities.
- Technology Solutions:
- Promoting the right technology solutions for the last mile.
- Credit Guarantee Scheme:
- Formulating and running a credit guarantee scheme for providing guarantees to the loans extended to micro-enterprises.
- Last Mile Credit Delivery:
- Creating a robust architecture of last-mile credit delivery to micro-businesses under the Pradhan Mantri Mudra Yojana (PMMY).
Financial Aspects:
- Corpus: Union Budget 2015-2016 proposed the creation of MUDRA with a corpus of 20,000 crores from the shortfalls of priority sector lending.
- Credit Guarantee Corpus: There is a credit guarantee corpus of ‘3,000 crores to guarantee loans provided to micro-enterprises.
Operational Model:
- MUDRA Bank operates through financing institutions, which, in turn, connect with last-mile lenders. These last-mile lenders include Micro Finance Institutions (MFIs), Primary Credit Cooperative Societies, Self-Help Groups (SHGs), NBFCs (other than MFI), and other lending institutions.
Priority Areas:
- Targeted Sections: In lending, MUDRA gives priority to enterprises set up by underprivileged sections of society, particularly those from Scheduled Caste/Tribe (SC/ST) groups, first-generation entrepreneurs, and existing small businesses.
Micro Finance and Economic Development:
- Objective: Microfinance is an economic development tool aimed at providing income-generating opportunities to people at the bottom of the pyramid.
- Range of Services: Microfinance covers a range of services, including the provision of credit and additional credit-plus services, financial literacy, and other social support services.
Financial Resources:
- Sources: The financial resources of MUDRA come from priority sector shortfalls, capital provided by the parent SIDBI, and its own earnings, if any.
MUDRA’s multifaceted approach encompasses policy formulation, regulation, accreditation, technology promotion, credit guarantee, and ensuring last-mile credit delivery, with a focus on empowering the underprivileged sections of society and fostering economic development at the grassroots level.
FAQs
1. What is a Mudra Bank?
- A Mudra Bank, short for Micro Units Development and Refinance Agency Bank, is a financial institution in India established to provide financial assistance to small and micro enterprises.
2. Who can avail loans from Mudra Banks?
- Small businesses, startups, entrepreneurs, and individuals involved in non-farm income-generating activities such as manufacturing, trading, and service sectors are eligible to avail loans from Mudra Banks.
3. What types of loans are offered by Mudra Banks?
- Mudra Banks offer three types of loans: Shishu (up to Rs. 50,000), Kishor (from Rs. 50,001 to Rs. 5,00,000), and Tarun (from Rs. 5,00,001 to Rs. 10,00,000), catering to the different funding needs of micro and small enterprises.
4. How can one apply for a loan from Mudra Banks?
- Individuals can apply for loans from Mudra Banks through various participating financial institutions like public sector banks, regional rural banks, cooperative banks, microfinance institutions, and NBFCs (Non-Banking Financial Companies).
5. What are the benefits of borrowing from Mudra Banks?
- Borrowing from Mudra Banks often comes with lower interest rates, flexible repayment terms, and simplified application processes, making it more accessible for small and micro-enterprises to obtain the necessary funding for their businesses. Additionally, Mudra Loans often do not require collateral security for smaller loan amounts, easing the burden on borrowers.
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