MUDRA stands for Micro Units Development and Refinance Agency Bank. This Bank is 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 partner with state level/regional level coordinators to provide finance to Last Mile Financer of small/micro business enterprises.
Pradhan Mantri Mudra Yojana (PMMY), has resulted in the generation of 1.68 crore incremental jobs in the first two years since its launch.
(i) It will regulate and refinance all MFI who lend to MSME engaged in small manufacturing, trade or services.
(ii) It will partner all state/regional level coordinators to provide easy finance
to even the remote investors.
(iii) MUDRA Bank has rightly classified the borrowers into three segments:
- The starters,
- the mid-stage finance seekers and
- the next level growth seekers.
(iv) To address the three segments, MUDRA Bank has launched three loan instruments:
Shishu: covers loans upto Rs 50,000/-
Kishor: covers loans above Rs 50,000/- and upto Rs. 5 lakh
Tarun: covers loans above Rs 5 lakh and upto Rs 10 lakh
(v) The bank has been allotted a Refinance Fund of Rs. 20,000 Crores from the shortfalls of Priority Sector Lending.
(vi) Collateral Security: Banks have been mandated not to insist for collateral security in the case of loans up to 10 Lakh extended to the units in the Micro Small Enterprises sector.
- The share of loans to micro and small enterprises has come down from 13.33% at the end of fiscal year 2014-15. The year-on-year growth in such loans too is slowing down.
- Relevance of the Mudra scheme is in the refinance support that the Mudra agency extends toward such disbursals. The progress here leaves much to be desired.
- Banks are wary of lending to small borrowers due to the bad loan rates in this segment.
- There are number of already existing refinancing agencies.
- There can be confusion due to variable interest rates.
- Minority sector is still lagging behind
- 6% of all loans disbursed by non-banking financial corporations (NBFC) under the MUDRA scheme has been in the Shishu category, with a ticket size of less than Rs 50,000, in financial year 2015-16, according to data from agency’s website.
- The government should measure the success or failure of its interventions including Mudra Yojana by the extent of reduction in informal employment, the rise in formal employment and the extent of mobility of firms to medium and large sizes.
- Objective criteria will help in making these decisions in an apolitical fashion. For that, one of the conditions of the loans must be that entrepreneurs start to maintain books of accounts on employment, output, revenues, expenses and taxes.
- Government should also bring in policy measures to create incentives for firms in India to increase their size. The aim of policy must be to make them grow out of their sizes at birth.
Because of dispatch of Pradhan Mantri Mudra Yojana (PMMY), monetary consideration has expanded towards positive heading. So it can be said that if it is implemented properly, it may work as a game changing financial inclusion initiative of India and may boost the Indian economy.