Friday, January 20, 2017

Banking Awareness 2017 - All About Pradhan Mantri MUDRA Yojana and MUDRA Bank


Hello and welcome to exampundit. Today we are sharing all about the MUDRA Bank and MUDRA Yojana launched by our Union Government. This article covers the purpose, features, functions and all the other important information on PM MUDRA Yojana and MUDRA Bank.

Pradhan Mantri MUDRA Yojana

The Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Union Government on April 8, 2015 for providing loans upto 10 lakh to the non-corporate, non-farm small/micro enterprises.

Under PMMY, all banks viz. Public Sector banks, Private Sector Banks, Regional Rural Banks (RRBs), State Co-operative Banks, Urban Co-operative Banks, Foreign Banks and Non-Banking Finance Companies (NBFCs)/Micro Finance Institutions (MFIs) - are required to lend to non-farm sector income generating activities below 10 lakh. 

These loans are classified as MUDRA loans under PMMY.

PMMY was announced through Union Budget 2015-16, which proposed to create MUDRA bank with a corpus of 20,000 crore made available from the shortfalls of priority sector lending, to refinance Micro-Finance Institutions through Pradhan Mantri Mudra Yojana.

Further, budget supported a credit guarantee corpus of 3,000 crore for guaranteeing loans being provided to the micro enterprises.

The purpose of PMMY is to provide funding to the non-corporate small business sector. Non- Corporate Small Business Segment (NCSBS) consists of millions of proprietorship/ partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits/ vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas.

One of the biggest hurdles to the growth of entrepreneurship in the Non-Corporate Small Business Sector (NCSBS) is lack of financial support to this sector and a vast majority belonging to this sector do not have access to formal sources of finance.



Loan offerings under PMMY

Under the aegis of PMMY, the MUDRA has already created its initial set of products/ schemes.  The interventions have been  named ‘Shishu’ (meaning infant), ‘Kishor’ (meaning child) and ‘Tarun’ (meaning adolescent) to signify the state of growth/development and funding needs of the beneficiary micro unit/entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to:
  1. Shishu: covering loans upto 50,000/- provided with no collateral, @1% rate of interest/month repayable over a period of 5 years
  2. Kishor: covering loans above 50,000/- and upto 5 lakh
  3. Tarun:   covering loans above 5 lakh to 10 lakh



Approach of PMMY

A minimum of 60% of support would flow to enterprises in the smallest segment. Partner intermediaries of MUDRA Bank have to endeavor to adhere to the following broad framework :

First time entrepreneurs, youth entrepreneurs (i.e. entrepreneurs aged up to 30 years) and women entrepreneurs shall be encouraged and special schemes shall be designed for such entrepreneurs,
Emphasis shall be on cash flow based lending and not security based lending. Collateral securities, etc. shall be avoided.

Repayment obligations shall be flexible and shall be framed keeping in view the business cash flows of the entrepreneur.


Micro Units Development Refinance Agency (MUDRA) Bank

Micro Units Development Refinance Agency (MUDRA) Bank is a refinance institution for micro-finance institutions. As on date, MUDRA is conceived not only as a refinance institution and but also as a regulator for the micro finance institutions (MFIs).

 Key Persons:
    • Kshatrapati Shivaji – Chairman of MUDRA Bank
    • Pankaj Jain - Government Nominee Director




The MUDRA Bank is primarily be responsible for –
  1. Laying down policy guidelines for micro/small enterprise financing business
  2. Registration of MFI entities
  3. Regulation of MFI entities
  4. Accreditation /rating of MFI entities
  5. Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery
  6. Development of standardized set of covenants governing last mile lending to micro/small enterprises
  7. Promoting right technology solutions for the last mile
  8. Formulating and running a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises
  9. Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana.



Government has decided to provide an additional fund of 1 trillion (US$15 billion) to the market and will be allocated as
  • 40% to shishu
  • 35% to kishor
  • 25% to Tarun



Those eligible to borrow from MUDRA bank are
  • small manufacturing units,
  • service sector units,
  • shopkeepers,
  • fruits/ vegetable vendors,
  • truck operators,
  • food-service units,
  • repair shops,
  • machine operators,
  • small industries,
  • artisans,
  • food processors



MUDRA Card is an innovative product which provides working capital facility as a cash credit arrangement. MUDRA Card is a debit card issued against the MUDRA loan account, for working capital portion of the loan. The borrower can make use of MUDRA Card in multiple withdrawal and credit, so as to manage the working capital limit in a most efficient manner and keep the interest burden minimum. MUDRA Card will also help in digitalization of MUDRA transactions and creating credit history for the borrower.












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Regards



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