MUDRA Bank: Weighing the Possible Benefits
4/21/2015 04:27:00 AM
How Can MUDRA Bank Make a Difference to
the Economy?
Most
individuals, especially those living in rural and interior parts of India, have
been excluded from the benefits of formal banking system. Therefore, they never
had access to insurance, credit, loans and other financial instruments to help
them establish and grow their micro businesses. So, most individuals depend on
local money lenders for credit. The loan comes at high interest and often with
unbearable conditions, which make these poor unsuspecting people fall in a debt
trap for generations. When businesses fail, the borrowers become vulnerable to
the lender’s strong-arm tactics and other forms of humiliation.As per NSSO Survey of 2013, there are close to 5.77 crore
small-scale business units, mostly sole proprietorships, which undertake
trading, manufacturing, retail and other small-scale activities. Compare this
with the organised sector and larger companies that employ 1.25 crore
individuals. Clearly, the potential to harness and nurture these micro
businesses is vast and the government recognises this. Today, this segment is
unregulated and without financial support or cover from the organised financial
banking system
The principal objectives of the MUDRA Bank are:
1-Regulate the
lender and the borrower of microfinance and bring stability to the microfinance
system through regulation and inclusive participation.
2-Extend
finance and credit support to Microfinance Institutions (MFI) and agencies that
lend money to small businesses, retailers, self-help groups and individuals.
3-Register all
MFIs and introduce a system of performance rating and accreditation for the
first time. This will help last-mile borrowers of finance to evaluate and
approach the MFI that meets their requirement best and whose past record is
most satisfactory. This will also introduce an element of competitiveness among
the MFIs. The ultimate beneficiary will be the borrower.
4-Provide
structured guidelines for the borrowers to follow to avoid failure of business
or take corrective steps in time. MUDRA will help in laying down guidelines or
acceptable procedures to be followed by the lenders to recover money in cases
of default.
5-Develop the
standardised covenants that will form the backbone of the last-mile business in
future.
6-Offer a
Credit Guarantee scheme for providing guarantees to loans being offered to
micro businesses.
7-Introduce
appropriate technologies to assist in the process of efficient lending,
borrowing and monitoring of distributed capital.
8-Build a
suitable framework under the Pradhan Mantri MUDRA Yojana for developing an efficient
last-mile credit delivery system to small and micro businesses.
Major Product Offerings
MUDRA
Bank has rightly classified the borrowers into three segments: the starters,
the mid-stage finance seekers and the next level growth seekers.
To address the three segments, MUDRA Bank has launched three loan instruments:
1-Shishu: covers loans upto Rs 50,000
2-Kishor: covers loans above Rs 50,000/- and upto Rs 5 lakh
3-Tarun:
covers loans above Rs 5 lakh and upto Rs 10 lakh
Initially,
sector-specific schemes will be confined to “Land Transport, Community, Social
& Personal Services, Food Product and Textile Product sectors”. Over a
period of time, new schemes will be launched to encompass more sectors.
Some of the Offerings Planned
for the Future:
1-MUDRA Card
2-Portfolio
Credit Guarantee
3-Credit
Enhancement
Can MUDRA Really Be a
Game Changer for India?
Yes it can.
See the existing demographics. Majority of Indians are poor and live in rural
and interior parts of India. Most are excluded from getting facilities that
would be termed very basic, even by Indian standards.
Most
people do not have access to farmland and in the absence of jobs, are left to
their own creativity to feed themselves and survive. They figure out ways to do
odd jobs in exchange of money or barter their services. Most of these people
belong to scheduled castes, scheduled tribes and other backward classes. It is
to be noted that most of the micro enterprises, retail or trading activity, are
initiated and controlled by women, with no exposure to education, formal
training or access to any form of banking support.
Now
visualise this. If India could harness this free spirit of enterprise and offer
some guidance, support, training and financial assistance, the potential to get
an immediate jump in GDP is there for the asking. Narendra Modi recognises this
and was clear of the potential of this low-hanging fruit.
If
MUDRA can continue to retain focus on the underprivileged and extend its reach
to the interiors, it can well emerge as a bigger success story than what
Grameen Bank of Bangladesh ever was or will be.
There
is an old saying that goes like this: “Give a man a fish you feed him for a
day, teach him how to fish and he will never go hungry”. MUDRA Bank is a step
by the government that can be a game changer in giving birth to a new set of
entrepreneurs, some of whom may scale heights not imagined today. This is far
better than giving subsidy, which may seem welcoming at first, but does little
to help an individual strive for a better life. MUDRA is the way to go.
The
modalities of functioning of MUDRA Bank are in place and it has been decided
that the funding activity will be carried out by microfinance institutions.
However, the small businesses have to wait to get full information on Mudra
Bank and have a clarity on who all are eligible for loans and how to get the
benefits of this scheme.
More Points Added By Learner -
1. It comes under Pradhan Mantri Mudra Yojna
2. MUDRA: MICRO UNIT DEVELOPEMENT AND REFINANCE AGENCY
3. it is set in April with a corpus of 20,000 Cr and a credit guarantee corpus of 3000 cr.
More Points Added By Learner -
1. It comes under Pradhan Mantri Mudra Yojna
2. MUDRA: MICRO UNIT DEVELOPEMENT AND REFINANCE AGENCY
3. it is set in April with a corpus of 20,000 Cr and a credit guarantee corpus of 3000 cr.
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