Friday, March 13, 2015


According to Budget 2015-16, the union government will set up Micro Units Development and Refinance Agency (MUDRA) Bank with a capital of Rs. 20,000 crore to finance the micro-finance sector of India, under Pradhan Mantri Mudra Yojana.

Purpose of MUDRA Bank
The Bank will regulate and refinance all Micro-Finance Institutions (MFIs) in India, which lends to / finances the Micro, Small and Medium Enterprises (MSMEs) engaged in manufacturing, trading and services activities.

Finance Minister said, "The measures would not only help in increasing access of finance to the unbanked but also bring down the cost of finance from the last Mile Financers to the micro/small enterprises, most of which are in the informal sector".

Budgetary allocation
Rs. 20,000 crore corpus is allocated to set up the MUDRA bank. Another Rs. 3,000 crore would be provided to it, to create a Credit Guarantee corpus for guaranteeing loans to the micro finance sector.

Responsibility of MUDRA bank
  • Laying down policy guidelines for MSME financing business
  • Registration and regulation of MFI entities
  • Accreditation / rating of MFI entities
  • Formulating and running a credit guarantee scheme for providing guarantees to the loans which are being extended to micro-enterprises
  • Creating a good architecture of last mile credit delivery to micro business under the scheme of Pradhan Mantri Mudra Yojana, etc.

Priority Sector Lending
Finance Ministry also directed that MSME loans would be treated as Priority Sector Lending (PSL) and a separate sub-limit of 7.5 % in PSL is being created for the Micro Enterprises.

Some points on MUDRA Bank
  • It is to be set up as an apex refinancer, which will fund over 50 million entrepreneurswho generally do not have access to formal credit. These micro entrepreneurs also provide jobs to other people, thus creating an opportunity of inclusive growth.
  • It will fund micro units which are more efficient and adds more value to the economy than the corporates. According to the Economy Census 2014, the gross fixed assets of these (approx) 5.77 crore micro units is Rs. 11.5 lakh crore.62 % of these are owned by Scheduled Caste (SC), Scheduled Tribes (ST) and Other Backward Castes (OBCs).
  • The MUDRA architecture is indigenously designed to fund the Indian non-formal sector.

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