Mudra is a lending credit line set up as a subsidiary of the Small Industries Development Bank of India (SIDBI).Whenever informal sector people like rickshaw pullers, household factories etc., looked for formal credit the condition of security was a major hurdle in getting the loan and half of them couldn’t be fulfilled as the borrowers did not own any property or have collateral. With the introduction of Mudra, there is no condition of collateral of up to loan of ₹10 Lakh and it aims to fund the unfunded.
India is a nation running on the legs of small household businesses while the larger businesses make up for the body. If the legs are going to be weak, the nation is going to come crashing down very easily. It was about time the government did something about the small and medium enterprises and their lending segment.
Money lenders have harassed Indian businessmen for years in the past where at times the businessmen have had to sell off their gold or land just to pay back the interest, not even the seed capital. But what other option did they have? Banks had not reached the remote areas of our country, nor were the people educated enough to know where to lend from. So while some small businesses have flourished and done well, some are still under the burden of paying back their loan, not giving them a chance to grow.
Many of these ‘own account enterprises’ are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes. However, only 4% of such units get institutional finance. Providing access to institutional finance to such micro/small business units would turn them into a strong instrument of GDP growth and also employment.
That is when the government introduced the Micro Units Development and Refinance Agency or MUDRA to help and sustain the small businesses of our nation.
The primary product of MUDRA will be refinancing for lending to micro businesses/units under the aegis of the PradhanMantri MUDRA Yojana.
MUDRA Bank has been established by a government with a Refinance corpus of ₹20,000 crore, and credit guarantee corpus of ₹3000 crore.
The products would be covered under three categories that are as follows:
1) Shishu: covering loans up to ₹50,000/-
2) Kishor: covering loans above ₹50,000/- and up to ₹5 Lakh
3) Tarun: covering loans above ₹5 Lakh and up to ₹10 Lakh
At least 60% of loans shall be disbursed under Shishu category and remaining for Kishor and Tarun categories.
Availability Of The Loan
Mudra loan under PradhanMantriMUDRA Yojana (PMMY) is available at all bank branches across the country. Mudra loan is also issued by NBFCs/MFIs who are engaged in financing for micro enterprises in small business activities.
Eligibility Criteria for the MUDRA Scheme
- Individuals
- Proprietary concern
- Partnership Firm
- Private Ltd. Company
- Public Company
- Any other legal forms
The applicant should not be a defaulter to any bank or financial institution and should have a satisfactory credit track record. The individual borrowers may be required to possess the necessary skills/experience/ knowledge to undertake the proposed activity. The need for educational qualification, if any, needs to be assessed based on the nature of the proposed activity, and its requirement.
The interest rates charged on the loans are decided as per the policy of the bank, keeping in mind the ultimate benefit for the borrower and not the lender. Hence usually the interest rates are reasonable. Scheduled Commercial Banks, RRBs, and Cooperative Banks wishing to avail of refinancing from MUDRA will have to peg their interest rates, as advised by MUDRA Ltd., from time to time.
What Is The Process?
Once the beneficiary identifies an idea and comes up with a business plan, he is supposed to select the business category under which he wishes to avail the loan (Shishu, Kishor or Tarun).
The beneficiary can contact the nearest Public/Private sector bank where they can apply for the business loan under PMMY. As on date, the following are partners in the MUDRA initiative.
| Sr No. | Partner Institution | Number |
| 1 | Public Sector Banks | 27 |
| 2 | Private Sector Banks | 18 |
| 3 | Regional Rural Banks | 31 |
| 4 | Co-operative Banks | 14 |
| 5 | MFI – NBFC | 47 |
| 6 | MFI | 26 |
| 7 | NBFC | 31 |
| Total | 94 |
MUDRA In Its Current Days
Finance minister Arun Jaitley in Union Budget 2018 allocated ₹3 lakh crore for Micro-Units Development & Refinance Agency Ltd (MUDRA), a nearly 20 percent rise from the last year. The Budget 2017 had allocated ₹2.44 lakh crore for Mudra.
Introduction of the MUDRA Card
After the loan has been sanctioned under MUDRA Yojana, the candidate will get a MUDRA Card, a card like the credit card which the candidate can use to buy business raw material, etc. Mudra Card will have a limit of 10% of the business loan (subject to ₹10000 maximum).
Women Enterprise Program
In order to encourage women entrepreneurs, the financing banks / MFIs may consider extending additional facilities, including interest reduction on their loan. At present, MUDRA extends a reduction of 25bps in its interest rates to MFIs / NBFCs, who are providing loans to women entrepreneurs.
Nirav Modi and the PNB Scam
The Central Bureau of Investigation (CBI) has registered a fresh case related to fraudulent loans issued under Micro Units Development and Refinance Agency (Mudra) scheme. The fraud was reported in Punjab National Bank, which is in the midst of another scam worth ₹114 billion. PNB Bank Officials in Rajasthan disbursed 26 Mudra loans” between September 2016 and March 2017, causing a loss of ₹6.2 million to the public sector bank.
All in all, the MUDRA is a great initiative by the government and focuses on helping the Small and Medium Enterprises. The execution still needs to be worked on and strict credit analysis for the borrowers needs to be done to have a positive success rate.