MUDRA SCHEME – GOVERNMENT SCHEME
News: Those
criticizing MUDRA scheme don’t understand power of microfinance: PM Modi
What's in the news?
● Prime
Minister Narendra Modi said that those who facilitated loans for big corporate
houses by calling up banks were making fun of MUDRA, the micro finance scheme
of the government.
Key takeaways:
● Mr.
Modi said ₹23 lakh crore worth of bank
guarantee-free loans have been disbursed under the scheme and more than 70
% beneficiaries are women.
● This
scheme has created 8 crore new
entrepreneurs. These are the people who have started their business for the
first time with the help of Mudra Yojana.
MUDRA Yojana:
● The
Pradhan Mantri MUDRA Yojana (PMMY) was launched in 2015 for providing loans up to 10 lakh to the
non-corporate, non-farm small and micro enterprises.
● MUDRA
stands for Micro Units Development and Refinance Agency.
Aim:
● To
refinance collateral-free loans
given by the lenders to small borrowers.
Objective:
● The
core objective of the bank is to fund the unfunded.
● It
will finance “Last Mile Financiers” of
small/micro businesses.
● The
lending priority will be given to SC/ST
enterprises.
MUDRA Bank:
● MUDRA
Bank was established as a statutory body to regulate and refinance all MFI who
lend to MSME engaged in small manufacturing, trade or services.
● It
will partner all state/regional level coordinators to provide easy finance.
Three categories of loans:
● Shishu:
Covering loans upto 50,000
● Kishore:
Covering loans above 50,000 and upto 5 Lakh
● Tarun:
Covering loans above 5 Lakh and upto 10 Lakh.
Operation:
● MUDRA
Bank operates through financing
institutions, which in turn connect with last mile lenders such as Micro
Finance Institutions (MFIs), Primary Credit Cooperative Societies, Self Help
Groups (SHGs), Non-Bank Financial Companies (NBFCs) (other than MFIs), and
other lending institutions.
● Microfinance
institutions (MFIs) can become Member Lending Institutions (MLIs) of MUDRA
(SIDBI) Bank for refinancing and National Credit Guarantee Trustee Company
(NCGTC) for credit guarantee.
● The
applicant should not be defaulter to any bank or financial institution and
should have a satisfactory credit track record.
Interest Rate:
● This
scheme has no fixed interest rate. According to the Government of India, banks
are currently charging interest rates ranging from Base Rate plus 1% to 7% per annum.
Benefits:
● No
need for collateral security.
● Easily
dispersible and simple procedure instead of complex procedures.
● Guarantee by government
- In case of defaulting the loan legally, due to unforeseen circumstances or
for losses due to natural causes, the government bears the responsibility to
repay the loan.
● Empowering Women
- Women entrepreneurs have added special concessional benefits to the loans
offered under the MUDRA scheme.
● Rural Empowerment
- The MUDRA Yojana loans are equally available to small-scale businesses in
both rural and urban areas. Besides, rural locales benefit more from such loans
due to greater accessibility.
● Flexible Repayments -
Although one can choose to repay the loan in a shorter period, the time frame
of loan repayment can also be extended for a period of up to 7 years.
● Multiple Credit
Possibilities - The MUDRA scheme offers multiple
opportunities to expand your micro-unit enterprise with facilities like cash
credit, equipment financing, etc.
● MUDRA Card
- One can apply for a MUDRA card that provides instant and seamless access to
funds and overdraft facilities.
● PM
Modi highlighted the power of micro-finance in energizing the economy at the grassroots level.
Significance:
1. Loans to disadvantaged sections of society:
● Under
the scheme, approximately 70% of loan recipients are women.
● MUDRA
prioritizes lending to enterprises established by underprivileged sections of
society, particularly those from scheduled caste/tribe groups, first generation
entrepreneurs, and existing small businesses.
● There
are an estimated 5.77 crore small business units in India, the majority of
which are sole proprietorships that operate small manufacturing, trading, or
service businesses. Sixty-two percent of these are owned by SC/ST/OBC.
2. Boost to AtmaNirbhar Bharat and Make in India:
● The
focus has also been on new entrepreneurs.
3. Employment Generation:
● As
per a survey conducted by the Ministry of Labour and Employment, PMMY helped in
generating 1.12 crore net additional employment from 2015 to 2018.
● Out
of the 1.12 crore of estimated increase in employment, women accounted for 69
lakh (62%).
Issues:
● The
rise in non-performing assets in the
case of Mudra loans has been a source of concern for both the government and
the RBI.