MUDRA BANK

Date: March 02, 2015

Mudra bank financial inclusion sc/st

Micro Units Development and Refinance Agency (MUDRA) Bank

The Finance Minister in Budget  has proposed to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crore, and credit guarantee corpus of Rs. 3,000 crore. MUDRA Bank will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana.In lending, priority will be given to SC/ST enterprises.

It 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 co-ordinators to provide finance to Last Mile Financer of small/micro business enterprises.

The MUDRA Bank would be responsible for –

1)    provide policy guidelines for micro/small enterprise financing business 

2)    Registration of MFI entities 

3)    Regulation of MFI entities

4)    Accreditation /rating of MFI entities 

5)    Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery

6)    Development of standardised set of covenants governing last mile lending to micro/small enterprises 

7)    Promoting right technology solutions for the last mile 

8)    Formulating and running  a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises

9)    Creating  a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana.

Need for this bank- 

According to the NSSO survey of 2013, there are 5.77 crore small business units, mostly individual proprietorships, which run small manufacturing, trading or services activities. Most of these ‘own account enterprises’ are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes. Only 4% of such units get institutional finance. Providing access to institutional finance to such micro/small business units would turn them into strong instrument of GDP growth and also employment. Therefore, the government in the Budget 2015-16 proposed to set up a Micro Units Development and Refinance Agency (MUDRA)  Bank  through a statutory  enactment.

 

Suggested question for mains-

What is MUDRA Bank? Why government announced to open them and how they promote financial inclusion?      (200 words)