Mudra Bank launched, sets ambitious goals to reach 5.77 crore small businesses

A motley group of small entrepreneurs got their first individual "MUDRA loan" cheques from Prime Minister Narendra Modi on Wednesday to expand their businesses.

Grocery seller Rajesh Jindal, furniture parts maker Samiruddin and barber Mahesh Chandra were part of the group that got the loans at the launch of the Mudra (Micro Units Development and Refinance Agency) Bank at Vigyan Bhavan in New Delhi.

Mudra Bank was announced in the Finance Minister Arun Jaitley in his Budget 2015/16 speech with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore.

Targeted at 5.77 crore small business units that would get access to institutional finance, Mudra Bank would be responsible for developing and refinancing through a Pradhan Mantri Mudra Yojana all microfinance institutions that lend to micro or small business entities engaged in manufacturing, trading and service activities.

According to the finance ministry, the roles envisaged for Mudra would include laying down policy guidelines for micro enterprise financing business, registration of MFI entities, accreditation of MFIs, laying down responsible financing practices to ward off over-indebtedness and ensure proper client protection principles and methods of recovery, and formulating a credit guarantee scheme for providing guarantees to the loans being extended to micro enterprises.

It is to be targeted towards small entrepreneurs and self-employed youth who are running small and micro enterprises and would include small manufacturing units, shopkeepers, fruits and vegetable vendors, truck and taxi operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, street vendors and many others.

Most of these 'own account enterprises' are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes.

According to a finance ministry release, product offerings by Mudra would include loan interventions named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth and funding needs of the beneficiary micro unit or entrepreneur. 'Shishu' covers loans up to Rs 50,000, 'Kishor' covers loans above Rs 50,000 and up to Rs 5 lakh and 'Tarun' covers loans above Rs 5 lakh and up to Rs 10 lakh.

MUDRA is starting out as a subsidiary of the Smal Industries Development Bank of India (SIDBI).