Prime Minister Narendra Modi on Wednesday launched MUDRA Bank which will provide credit of up to Rs. 10 lakh to small entrepreneurs and act as a regulator for ‘Micro-Finance Institutions’ (MFIs).
Speaking at the launch of Rs. 20,000-crore MUDRA Bank, Modi said Large business groups, which attract a lot of media attention, provide employment to only 1.25 crore people, adding that 5.75 crore small entrepreneurs, with an average loan size of Rs. 17,000, employ 12 crore people.
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.
Talking about the Micro Units Development Refinance Agency (MUDRA) Bank, PM Modi said it is aimed at providing financial assistance to the “unfunded” small entrepreneurs who provide employment to a large number of people.
Generating employment and promoting self-employment is the priority of the government, the PM said, adding, “providing loans to small entrepreneurs will provide a big push to the GDP.”
Small borrowers repay loans promptly, he said, stressing that “saving is a habit in India and there is a need to (give a) push to this traditional strength.”
Exuding confidence over the success of the MUDRA Bank initiative, Modi said, “Write down my words. After one year, bankers will queue in front of MUDRA Bank and ask it to give 50 lakh clients.”
Speaking at the same event, Finance Minister Arun Jaitley said MUDRA Bank is aimed at “funding the unfunded”.
The Finance Minister regretted that although 20 per cent of the country’s population in dependent on 5.7 crore micro and small entrepreneurs, they do not have access to institutional credit.
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.
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.