MUDRA is the acronym for Micro Units Development and Refinance Agency. The expanded form of MUDRA itself enough to define what is MUDRA ie., MUDRA aims and functioning to develop and refinance Micro entrepreneur units in India. More precisely, beneficiaries of MUDRA are to be one of Manufacturing (Non-farm enterprises), Trading, and Services. This agency, MUDRA is heavily supported by India Govt., and its liberalized financial services routed through or implemented by various Commercial Banks, Regional Rural Banks (RRB), Small Finance Banks, Micro Finance Institutions (MFI) and Non Banking Financial Company (NBFC) functioning across the country.
Following are the different methods of Accessibility and Functioning of MUDRA Schemes:
- Micro Credit Scheme
- Micro Enterprises Loan Schemes
- Mahila Udyami Scheme
- Refinance Schemes for Commercial and RRB / Scheduled Co-operative Banks
- MUDRA Card
Micro Credit Scheme
MUDRA provides financial support to Micro Finance Institution (MFI) for on lending to Individuals / groups of Individuals / Joint Liability Group (JLG) / Self Help Group (SHG) for creation of qualifying assets as per RBI guidelines towards setting up or running micro enterprises as per MSMED Act and also carrying out non-farm income generating activities.
Micro Enterprise Loans
Financial support to financial Intermediaries for on lending to Individuals for setting up or running micro enterprises as per MSMED Act and carrying out non-farm income generating activities with beneficiary loan size ranging between Rs. 50,000.00 to Rs. 10.00 lakhs per enterprise or borrower.
Mahila Uddyami Scheme
Timely and adequate financial support to the MFI, for on lending to women or group of women JLG / SHG for creation of qualifying assets as per RBI guidelines towards setting up or running micro enterprises as per MSMED Act and non-farm Income generating activities. Interest concession is being provided.
Refinance Schemes for Commercial and RRB / Scheduled Co-oprative Banks
Enhancing liquidity of Commercial Banks or RRB / Scheduled Co-operative Banks by refinancing loan extended to micro finance or micro enterprises as per MSMED Act with beneficiary loan size upto Rs. 10.00 lakhs for manufacturing and service sector enterprises.
MUDRA Card is an innovative product designed for the purpose of providing flexibility and easy accessibility of credit. MUDRA card would be an overdraft limit which could be operated by a Rupay based debit card. The card could be issued directly by the banks or in association with MFI. The MUDRA card would be Co-branded card between MUDRA, the Banks, and the MFI. MUDRA would provide credit guarantee and credit enhancement support to the product.
Significance of MUDRA Loan In Indian Economy
Micro / Small entrepreneur units are the most important income generating segment of the Indian economy. These Micro / Small units provide jobs to millions of people living in urban, rural, and even tribal areas. Often, most of these units are forced to borrow funds from informal sources with very high interest rates leading them to be exploited by those lenders. If they would have formal and regulated funding system, these segments could be performed well in our economy and contributed in a vast manner. To resolve this gap, central Govt. introduced very flexible, easy to access loan scheme - PM MUDRA Loan Scheme. The significance of MUDRA loan is tremendous in both Indian economy as a whole and income generation to individuals / partnership setup and is capable to support their family. Through MUDRA scheme, you can start new ventures or expand existing setup to its advanced level.
Some of the Major Significance MUDRA Brings to Indian Economy are:
- Laying down policy guidelines for micro enterprise financing business.
- Registration of MFI entities.
- Supervision of MFI entities.
- Accreditation or rating of MFl entities.
- Laying down responsible financing practices to ward-off-over indebtedness and ensure proper client protection principles and methods of recovery.
- Development of standardised set of covenants governing last mile lending to micro / small enterprises.
- Promoting right technology solutions for financial delivery to the last mile.
- Formulating and running a Credit Guarantee scheme for providing guarantees to the loans / portfolios which are being extended to micro-enterprises by Banks, NBFC and MFl.
- Supporting development & promotional activities in the sector.
- Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of PM MUDRA Loan.