New Delhi, April 8: Prime Minister Narendra Modi on Wednesday launched MUDRA Bank, which will provide credit of up to Rs 10 lakh to small entrepreneurs. It is being said that the bank will act as a regulator for 'Micro-Finance Institutions' (MFIs).
Read more: I feel ashamed: Modi on farmers' woes
Launching another ambitious project under Jan Dhan Yojna, Modi said, "We need to increase employment opportunities in the nation."
"Big industrial houses provide jobs to only 1.25 crore people, while small entrepreneurs employ 12 crore people," PM Modi said.
Showing deep concern for farmer's plight, he announced higher compensation for crop damage and eased criteria for them to avail government support.
The Prime Minister said that he has also asked banks to restructure loans of affected farmers and instructed insurance companies to pro-actively settle their claims. Speaking at the launch Bank, Modi said criteria of 50 per cent crop damage for providing compensation to affected farmers has been reduced to 33 per cent which will help more farmers to get compensation for their crop loss.
"Second important decision we have taken is to raise the parameters for helping him (farmers). The amount of compensation has been increased to 1.5 times. If earlier, he was getting Rs 100 as compensation, now he will get Rs 150, if it was Rs 1 lakh, he will get Rs 1.5 lakh... a 50 per cent increase," he said.
Farmers, the Prime Minister said, have suffered a lot on account of natural calamities. "Last year, it was due to less rainfall and this year due to unseasonal rainfall and hailstorm", Modi said, adding that he took a review of the crop damage with Ministers sent to undertake on the spot assessment.
How bank will help?
Earlier, in his Budget speech, Finance Minister Arun Jaitley had proposed the Micro Units Development Refinance Agency (MUDRA) with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore.
"The initial products and schemes under this umbrella have already been created and the interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth/development and funding needs of the beneficiary micro unit/entrepreneur," the Ministry said.
Shishu would cover loans up to Rs 50,000 while Kishor above Rs 50,000 and up to Rs 5 lakh. Tarun category will cover loans of above Rs 5 lakh and upto Rs 10 lakh.
The roles envisaged for MUDRA include laying down policy guidelines for micro enterprise financing business and registration of MFI entities as well as their accreditation and rating.
There are about 5.77 crore small business units.
It will also lay down "responsible financing practices" to ward off over indebtedness and ensure proper client protection principles and methods of recovery, besides development of standardised set of covenants governing last mile lending to micro enterprises.
"Providing access to institutional finance to such micro/small business units/enterprises will not only help in improving the quality of life of these entrepreneurs but also turn them into strong instruments of GDP growth and employment generation," the Finance Ministry said in a statement.
(with inputs from PTI)