Indian
Prime Minister Shri Narendra Modi started this bank on April 8, 2015. Mudra Bank or Micro Units Development and
Refinance Bank may be described as a public sector entity that deals in various
financial products and services. Primarily, it makes loans accessible to small
entrepreneurs, who otherwise find it hard to procure financial assistance of
any kind, and this is done in lieu of low rates of interest.
Objective of Mudra Bank
The main aim of the
Mudra Bank programme is regulate the lending and borrowing activities in the
microfinance setup of India and thus make it stable to a certain extent. It
also looks to make this sector see greater levels of inclusive participation.
The initiative aims to provide crediting services and financial support to
those microfinance entities that are functioning across the country. These organizations
primarily cater to small business units, self help groups, retailers and
individual entrepreneurs. The Mudra Bank initiative will also be employed to
register all the microfinance institutions and then start a system of rating
their performances and accrediting them.
Products and Offerings
The Mudra Bank will
provide three kinds of loans – Shishu, Tarun and Kishore. The maximum amount
that will be lent under Shishu loan is Rs. 50,000. For Kishore loan, the upper
limit is Rs. 5 lakhs and in case of Tarun loan, the maximum amount has been
fixed at Rs. 10 lakhs. Now, the bank will determine which loan applicant falls
under particular category and the loans will be provided in accordance to that.
Shishu loans are basically for the ones who are just starting out their
businesses, Kishore loans are for those who are in the middle stage of their
business endeavours and Tarun loans are for those who are looking to move on to
higher levels, such as doing business expansion.
Benefits and Demerits
The biggest potential
advantage of the Mudra Bank programme is that it can help a large number
of countless entrepreneurs across the country by providing financial support,
which is such an important component in their existence and eventual success.
With its focus on the underprivileged section of the Indian economic hierarchy,
Mudra Bank may one day replicate what Grameen Bank has done in Bangladesh.
On the other hand, some experts feel that with a bank working as a microfinance institution, there may be a question of conflict of interest coming up soon. They have also questioned about the need of having a new microfinance entity when there are already several institutions like such in place. They feel that it may also give rise to shadow banking programmes.
On the other hand, some experts feel that with a bank working as a microfinance institution, there may be a question of conflict of interest coming up soon. They have also questioned about the need of having a new microfinance entity when there are already several institutions like such in place. They feel that it may also give rise to shadow banking programmes.
Mudra Bank Scheme Highlights
Following are certain
special features of the Mudra Bank :-
- Mudra Bank is established via a statutory enactment.
- It will be a part of the Pradhan Mantri MUDRA Yojana.
- It will function in the service area that falls outside the purview of the conventional banks. For this purpose, it shall use last mile agents.
- The programme has used the NSSO Survey of 2013 to identify its prospective clients.
- Among its target clientele, only 4percent can access loans that are going to be provided by the banks.
- The bank will try and make sure that its clients never run up any debt; therefore, it will focus on responsible methods of lending.
- Mudra Bank will, at the start, have a corpus of Rs. 20,000 crore. It will also have a credit guarantee fund ranging between Rs. 2000 crore and Rs. 3000 crore.