Small entrepreneurs are 'backbone of India', says Narendra Modi: Know how MUDRA bank will help them

Prime Minister Narendra Modi on Wednesday launched MUDRA (Micro Units Development and Refinance Agency) bank under the Pradhan Mantri Jan Dhan Yojana and said that it will fund the unfunded small entrepreneurs. He said millions of common men and women, who run small businesses, have almost remained outside the net of formal institutional finance, in spite of their large contributions to the economy. Here's all you need to know about the MUDRA banks:

• MUDRA stands for Micro Units Development and Refinance Agency.
• To 'fund the unfunded' self- employed as well as small businesses, Prime Minister Narendra Modi today launched the MUDRA Yojana that will offer loans of up to Rs 10 lakh at low rate of interest.
• MUDRA will focus on the 5.75 crore self-employed who use funds of Rs 11 lakh crore and provide jobs to 12 crore people.
• The Pradhan Mantri MUDRA Yojana can lend between Rs 50,000-Rs 10 lakh to small entrepreneurs.
• It has been set up for development and refinancing activities relating to micro units.
• It will provide refinance to banks and other institutions at 7 per cent.
• Explaining the functioning of MUDRA, Financial Services Secretary Hasmukh Adhia said micro finance institutions (MFIs) and non-banking finance companies (NBFCs) can avail of loans from MUDRA for onlending to the borrowers.

Aim of MUDRA bank

• MUDRA scheme is aimed at funding the unfunded.
• The MUDRA Bill will seek to create a financial institution for providing funding to 5.77 crore micro and small business entities engaged in manufacturing, trading and services.
• The roles envisaged for MUDRA Bank include laying down policy guidelines for micro enterprise financing business as well as registration of micro finance institutions (MFIs), their accreditation and rating.
• Laying down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery.
• Support development & promotional activities in the sector.

MUDRA Bill to be in Parliament within 6-12 months

A legislation on MUDRA Bank is expected to be introduced in Parliament within a year and it will incorporate provisions of the Micro Finance Institutions Bill that was prepared by the previous government, the Finance Ministry said today.

Three products of MUDRA bank:

The Mudra Bank will launch three products initially:

• Shishu: covering loans upto Rs. 50,000/-
• Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
• Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh

What did PM Modi say:

Prime Minister Narendra Modi on Wednesday launched the MUDRA bank to extend credit of up to Rs 10 lakh to small businesses and regulate micro-finance institutions, to promote their growth, add to the country's output and create jobs.

"After 'banking the un-banked' with the Jan Dhan Yojana, it's time to 'fund the unfunded'," the Prime Minister said at an event to launch what is called Micro Units Development and Refinance Agency - Mudra.

"Mudra is our innovation of funding the unfunded," Narendra Modi said.

"Millions of common men and women in this country, who run small businesses, have almost remained outside the net of formal institutional finance, in spite of their large contributions to the economy," he said at the event.

"Providing access to institutional finance to such micro and small business units and enterprises will not only help in improving the quality of life of these entrepreneurs, but also turn them into strong instruments of growth and employment generation," the finance ministry had earlier said.

(With inputs from agencies)