Shishu, Kishore and Tarun in Mudra Bank
Micro Units Development and Refinance Agency (MUDRA) Ltd. Bank was launched on 8 April, 2015 as a subsidiary of SIDBI. It has been registered as an NBFC with the Reserve Bank and within a year, the government intends to come out with a legislation to convert the NBFC into a bank.
The aim MUDRA is to finance the Non – Corporate Small Business Sector (NCSBS), thus encouraging entrepreneurs and small business units to expand their capabilities and operations, to reduce over indebtedness and to provide formal system of credit
This Bank would be responsible for regulating and refinancing all Micro-finance Institutions (MFI) which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities. The Bank would partner with state level/regional level coordinators to provide finance to Last Mile Financer of small/micro business enterprises.
A sum of Rs 20,000 crores would be allocated to the MUDRA Bank from the money available from shortfalls of Priority Sector Lending for creating a Refinance Fund to provide refinance to the Last Mile Financers. Another Rs 3,000 crore would be provided to the MUDRA Bank from the budget to create a Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises.
The MUDRA Bank would primarily be responsible for –
- Laying down policy guidelines for micro/small enterprise financing business
- Registration of MFI entities
- Regulation of MFI entities
- Accreditation /rating of MFI entities
- Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery
- Development of standardized set of covenants governing last mile lending to micro/small enterprises
- Promoting right technology solutions for the last mile
- 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 businesses under the scheme of Pradhan Mantri Mudra Yojana
Funding based on Stages of Growth of a Micro unit
MUDRA has classified the borrowers into three segments: the starters, the mid-stage finance seekers and the next level growth seekers. To address the three segments, it has launched three loan instruments:
- Under ‘Shishu’ Scheme, loans up to Rs 50,000 will be sanctioned. This is the first stage when the Under ‘Shishu’ Scheme, loans up to Rs 50,000 will be sanctioned. This is the first stage when the business is just starting up.
- Under ‘Kishor’ Scheme, loans above Rs 50,000 and up to Rs 5 Lakh will be provided.
- Under ‘Tarun’ category, loan of above Rs 5 Lakh and up to Rs 10 Lakh will be sanctioned.