MUDRA Bank launched with a Initial Corpus of Rs 20,000 Cr to help Micro Businesses

In order to uplift the micro entrepreneurs Prime Minister Narendra Modi launched the Micro Units Development & Refinance Agency Ltd (MUDRA) to cater to the financial needs of over fifty million self-employed people.

The initial corpus of the Mudra comprising of Rs. 20,000 crore will be filled through the short-fall of priority sector lending.

‘Mudra will build on the only capital that fifty million landless self-employed people have: trust’,  Modi said.

The Initial products launched under the Pradhan Mantri Mudra Youjna are in three categories: Shishu- covering loan size up to Rs. 50,000; Kishore loan sizes from Rs. 50,000 to Rs. 5 lac and Tarun for loan sizes from Rs. 5 lac to Rs. 10 lac. At least 60% of the loans has been earmarked for loans sizes up to  Rs. 50,000.

Stating that ‘Mudra will fund the unfunded’, Finance Minister explained that ‘Mudra will re-finance a range of financial intermediaries and  besides Finance Institutions (MFIs) would leverage presence of institutions such as Self-help groups, Banks, Regional Rural Banks (RRBs), Cooperative Banks among others who in turn would fund the micro entrepreneurs’.

To begin with Mudra is begin functioning like a subsidiary of SIDBI and will regulate and re-finance the MFIs.

Besides re-financing, Mudra is also tasked to develop and capacitate supporting institutions and products.

Prime Minister also said that merely ‘1 crore 25 lakh people find employment in large industries, whereas small enterprises employ 12 crore people in the country’.

‘While there are a number of facilities provided for the large industries in India, there is a need to focus on these 5 crore 75 lakh self-employed people who use funds of Rs 11 lakh crore, with an average per unit debt of merely Rs 17,000 to employ 12 crore Indians’, he said.

Also present during the occasion were the Union Minister of Finance, Arun Jaitley, the Union Minister of State for Finance, Jayant Sinha, and the Governor of Reserve Bank of India, Shri Raghuram Rajan.

Here are few highlights of MUDRA BANK and why it is created:

• MUDRA Bank is expected to benefit 5.75 crore small business enterprises
• Must encourage self-employment
• Small businesses benefit 12 crore people across India
• Mudra Bank aims to fund the unfunded small entrepreneurs
• Need to strengthen savings habit in the country
• Big industrial houses provide jobs to only 1.25 crore people, while small entrepreneurs employ 12 crore people
• A little bit of help will go a long way in this sector
• Average debt of units in this sector is Rs 17,000
• If lending is increased to Rs 1 lakh, the sector will benefit immensely
• Only 11 lakh crore is invested in 5.77 crore small business units
• Agriculture, self-employment will be the biggest target groups of Mudra
• In a few years, the bankers will come to these entrepreneurs
• India should adopt globally successfully models on micro-finance
• 12 crore people in these small units have the potential to employ 25 crore people
• Mudra Bank will help to in economic progress of the country