MUDRA Bank: Weighing the Possible Benefits

The Prime Minister Narendra Modi  launched the promised Micro Units Development and Refinance Agency Ltd (MUDRA) Bank on 8 April, 2015 with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The launch was the fulfillment of an announcement made earlier by the Finance Minister Arun Jaitley in his FY 15-16 Budget speech.

How Can MUDRA Bank Make a Difference to the Economy?

Most individuals, especially those living in rural and interior parts of India, have been excluded from the benefits of formal banking system. Therefore, they never had access to insurance, credit, loans and other financial instruments to help them establish and grow their micro businesses. So, most individuals depend on local money lenders for credit. The loan comes at high interest and often with unbearable conditions, which make these poor unsuspecting people fall in a debt-trap for generations. When businesses fail, the borrowers become vulnerable to the lender’s strong-arm tactics and other forms of humiliation.

As per NSSO Survey of 2013, there are close to 5.77 crore small-scale business units, mostly sole proprietorships, which undertake trading, manufacturing, retail and other small-scale activities. Compare this with the organised sector and larger companies that employ 1.25 crore individuals. Clearly, the potential to harness and nurture these micro businesses is vast and the government recognises this. Today, this segment is unregulated and without financial support or cover from the organised financial banking system.

The principal objectives of the MUDRA Bank are:

1. Regulate the lender and the borrower of microfinance and bring stability to the microfinance system through regulation and inclusive participation.
2. Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money to small businesses, retailers, self-help groups and individuals.
3. Register all MFIs and introduce a system of performance rating and accreditation for the first time. This will help last-mile borrowers of finance to evaluate and approach the MFI that meets their requirement best and whose past record is most satisfactory. This will also introduce an element of competitiveness among the MFIs. The ultimate beneficiary will be the borrower.
4. Provide structured guidelines for the borrowers to follow to avoid failure of business or take corrective steps in time. MUDRA will help in laying down guidelines or acceptable procedures to be followed by the lenders to recover money in cases of default.
5. Develop the standardised covenants that will form the backbone of the last-mile business in future.
6. Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
7. Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed capital.
8. Build a suitable framework under the Pradhan Mantri MUDRA Yojana for developing an efficient last-mile credit delivery system to small and micro businesses.

Major Product Offerings

MUDRA Bank has rightly classified the borrowers into three segments: the starters, the mid-stage finance seekers and the next level growth seekers.

To address the three segments, MUDRA Bank has launched three loan instruments:

1. Shishu: covers loans upto Rs 50,000/-
2. Kishor: covers loans above Rs 50,000/- and upto Rs 5 lakh
3. Tarun: covers loans above Rs 5 lakh and upto Rs 10 lakh

Initially, sector-specific schemes will be confined to “Land Transport, Community, Social & Personal Services, Food Product and Textile Product sectors”. Over a period of time, new schemes will be launched to encompass more sectors.

MUDRA operates as a refinancing institution through State/Regional level intermediaries. It refinances NBFCs/MFIs and also banks, primary lending institutions etc.

Some of the Offerings Planned for the Future:

1. MUDRA Card
2. Portfolio Credit Guarantee
3. Credit Enhancement

Mudra Loan Mela

The government is organising MUDRA loan melas in different parts of the country. These melas are organised for few days where loans for small business funding could be applied.  In the melas, loans are granted ranging from Rs. 50,000 to Rs. 10 lakh.

To know more about the process of loan you can contact the Nodal officer of your area. http://www.mudra.org.in/Nodal-Officers-MUDRA.pdf

Can MUDRA Really Be a Game Changer for India?

Yes it can. See the existing demographics. Majority of Indians are poor and live in rural and interior parts of India. Most are excluded from getting facilities that would be termed very basic, even by Indian standards.

Most people do not have access to farmland and in the absence of jobs, are left to their own creativity to feed themselves and survive. They figure out ways to do odd jobs in exchange of money or barter their services. Most of these people belong to scheduled castes, scheduled tribes and other backward classes. It is to be noted that most of the micro enterprises, retail or trading activity, are initiated and controlled by women, with no exposure to education, formal training or access to any form of banking support.

Now visualise this. If India could harness this free spirit of enterprise and offer some guidance, support, training and financial assistance, the potential to get an immediate jump in GDP is there for the asking. Narendra Modi recognises this and was clear of the potential of this low-hanging fruit.

If MUDRA can continue to retain focus on the underprivileged and extend its reach to the interiors, it can well emerge as a bigger success story than what Grameen Bank of Bangladesh ever was or will be.

There is an old saying that goes like this: “Give a man a fish you feed him for a day, teach him how to fish and he will never go hungry”. MUDRA Bank is a step by the government that can be a game changer in giving birth to a new set of entrepreneurs, some of whom may scale heights not imagined today. This is far better than giving subsidy, which may seem welcoming at first, but does little to help an individual strive for a better life. MUDRA is the way to go.

The modalities of functioning of MUDRA Bank are in place and it has been decided that the funding activity will be carried out by microfinance institutions. However, the small businesses have to wait to get full information on Mudra Bank and have a clarity on who all are eligible for loans and how to get the benefits of this scheme.

Contact Details:

Registered Office

Sidbi, ground floor, Videocon Tower,

Jhandewalan Extension,

E-1, Rani Jhansi Road,

New Delhi – 110055

Corporate Office

MSME Development Centre,

C-11, g-block, Bandra Kurla Complex,

Bandra East, Mumbai – 400 051

Contact list of MUDRA officers: 

http://www.mudra.org.in/contact-us.php

Eligibility Criteria / Documents required for MUDRA Loan

1. Proof of identity – Self certified copy of Voter’s ID card / Driving License / PAN Card / Aadhar Card/Passport.
2. Proof of residence – Recent telephone bill, electricity bill, property tax receipt (not older than 2 months), Voter’s ID card, Aadhar Card & Passport of Proprietor/Partners/Directors.
3. Proof of SC/ST/OBC/Minority.
4. Proof of Identity/Address of the Business Enterprise -Copies of relevant licenses/registration certificates/other documents pertaining to the ownership, identity and address of business unit.
5. Applicant should not be defaulter in any Bank/Financial institution.
6. Statement of accounts (for the last six months), from the existing banker, if any.
7. Last two years balance sheets of the units along with income tax/sales tax return etc. (Applicable for all cases from Rs.2 Lacs and above).
8. Projected balance sheets for one year in case of working capital limits and for the period of the loan in case of term loan (Applicable for all cases from Rs.2 Lacs and above).
9. Sales achieved during the current financial year up to the date of submission of application.
10. Project report (for the proposed project) containing details of technical & economic viability.
11. Memorandum and articles of association of the company/Partnership Deed of Partners etc.
12. In absence of third party guarantee, Asset & Liability statement from the borrower including Directors& Partners may be sought to know the net-worth.
13. Photographs (two copies) of Proprietor/ Partners/ Directors.

Recent Developments

• On 4 July, the Corporation Bank launched the first MUDRA card under the Pradhan Mantri Mudra Yojana (PMMY).
• On 1 July, IDBI aigned an agreement with MUDRA for refinancing of loans.
• Hasmukh Adhia, union financial service secretary said that Mudra Bank will be first set up as a subsidiary of the Small Industries Development Bank of India and later will be converted to a full-fledged bank through an Act of Parliament. Adhia made this announcement during a ‘roundtable on financing of innovations’ which was attended by chiefs of banks and financial institutions, and also the President of India. Although Adhia did not disclose the details about the set up of Mudra Bank, he said that the Prime Minister will launch it soon.
• MUDRA bank has join hands with 19 state and regional level coordinators so as to reach the small entrepreneurs who have limited branch presence and are cut off from the general banking system. The initiative taken by the government is expected to be helpful for the small and micro businesses. It is also expected that these businesses will generate 10 times more number of jobs which are normally generated by the big business firms/companies at present.

State wise Disbursement report of PMMY for the FY-2015/16 as on Oct 28, 2015.

[Amount Rs. in Crore] Sr No Bank Type Name Bank Name Shishu (Loans up to Rs. 50,000) Kishore (Loans from Rs. 50,001 to Rs. 5.00 Lakh) Tarun (Loans from Rs. 5.00 to Rs. 10.00 Lakh) Total No Of A/Cs Disbursement Amt No Of A/Cs Disbursement Amt No Of A/Cs Disbursement Amt No Of A/Cs Disbursement Amt 1 NBFC-Micro Finance Institutions 1.1 BSS Microfinance 99832 215.08 0 0.00 0 0.00 99832 215.08 Total 99832 215.08 0 0.00 0 0.00 99832 215.08 2 SBI and Associates 2.1 State Bank of India 430552 253.19 33878 890.80 13013 893.54 477443 2037.53 2.2 State Bank of Bikaner and Jaipur 19124 44.78 3541 93.33 1726 126.85 24391 264.96 2.3 State Bank of Hyderabad 46689 64.74 13141 289.55 3134 265.62 62964 619.91 2.4 State Bank of Mysore 15109 16.60 8719 199.71 2355 193.20 26183 409.51 2.5 State Bank of Patiala 12192 31.87 3479 103.52 1698 144.67 17369 280.06 2.6 State Bank of Travancore 2861 8.94 2289 56.97 945 74.41 6095 140.32 Total 526527 420.12 65047 1633.88 22871 1698.29 614445 3752.29 3 Public Sector Commercial Banks 3.1 Allahabad Bank 88138 109.76 20925 364.00 3226 209.32 112289 683.08 3.2 Andhra Bank 101281 154.13 16046 256.95 1608 121.19 118935 532.27 3.3 Bank of Baroda 129457 177.63 23771 439.83 3548 289.49 156776 906.95 3.4 Bank of India 258746 356.35 27847 511.18 4994 325.47 291587 1193.00 3.5 Bank of Maharashtra 18089 45.57 15260 272.28 4182 266.12 37531 583.97 3.6 Canara Bank 229427 504.85 123553 2501.84 19614 1520.29 372594 4526.98 3.7 Central Bank of India 116358 104.13 13393 250.34 2980 207.06 132731 561.53 3.8 Corporation Bank 86941 202.81 27959 341.48 2928 158.85 117828 703.14 3.9 Dena Bank 57179 30.52 5815 101.48 1015 67.02 64009 199.02 3.10 Indian Bank 181374 161.43 16982 352.20 2310 165.67 200666 679.30 3.11 Indian Overseas Bank 80691 112.09 21723 335.66 1782 113.31 104196 561.06 3.12 Oriental Bank of Commerce 56542 80.81 6112 156.68 2260 178.64 64914 416.13 3.13 Punjab National Bank 176734 212.69 28802 478.10 6220 338.93 211756 1029.72 3.14 Syndicate Bank 169330 155.34 46751 849.87 6289 391.81 222370 1397.02 3.15 Union Bank of India 87772 170.44 30530 441.12 2386 117.17 120688 728.73 3.16 United Bank of India 50687 55.62 14498 266.71 1861 138.44 67046 460.77 3.17 Punjab & Sind Bank 17892 54.33 3512 73.85 1457 93.32 22861 221.50 3.18 UCO Bank 454394 524.72 29979 466.94 2944 216.75 487317 1208.41 3.19 Vijaya Bank 45271 167.43 24590 447.38 5091 353.78 74952 968.59 3.20 IDBI Bank Limited 73841 143.40 10230 261.98 3580 271.81 87651 677.19 3.21 Bharatiya Mahila Bank 3690 10.88 181 3.76 47 3.43 3918 18.07 Total 2483834 3534.93 508459 9173.63 80322 5547.87 3072615 18256.43 4 Private Sector Commercial Banks 4.1 Catholic Syrian Bank 83 0.20 108 2.50 22 1.84 213 4.54 4.2 Federal Bank 215 0.62 741 13.18 298 20.02 1254 33.82 4.3 Jammu & Kashmir Bank 2906 7.52 8896 168.41 912 62.00 12714 237.93 4.4 Karnataka Bank 834 2.92 3534 68.08 1040 64.49 5408 135.49 4.5 Karur Vysya Bank 197 0.41 1683 50.83 1460 103.13 3340 154.37 4.6 City Union Bank 81 0.29 690 22.25 557 48.60 1328 71.14 4.7 Lakshmi Vilas Bank 363 1.30 950 15.78 265 15.32 1578 32.40 4.8 Ratnakar Bank 33314 66.58 725 24.35 307 26.29 34346 117.22 4.9 South Indian Bank 429 1.32 1398 37.67 880 69.79 2707 108.78 4.10 ICICI Bank 8428 14.92 19638 670.45 14746 1038.35 42812 1723.72 4.11 Axis Bank 182177 328.15 3325 95.77 493 42.29 185995 466.21 4.12 IndusInd Bank 467432 1107.27 37999 536.40 3526 215.77 508957 1859.44 4.13 Yes Bank 3543 7.85 6480 146.55 324 23.59 10347 177.99 4.14 HDFC Bank 511658 1057.12 56080 1423.07 15796 1074.44 583534 3554.63 4.15 DCB Bank 36 0.10 380 13.56 373 29.04 789 42.70 4.16 Kotak Mahindra Bank 0 0.00 434 16.04 677 53.60 1111 69.64 Total 1211696 2596.57 143061 3304.89 41676 2888.56 1396433 8790.02 5 Foreign Banks 5.1 Citibank 0 0.00 199 5.62 68 5.16 267 10.78 5.2 Standard Chartered Bank 0 0.00 0 0.00 8 0.72 8 0.72 Total 0 0.00 199 5.62 76 5.88 275 11.50 6 Regional Rural Banks 6.1 Andhra Pradesh Grameena Vikas Bank 15755 68.72 1457 17.82 30 2.59 17242 89.13 6.2 Chairman, Andhra Pragathi Grameena Bank 24353 48.02 5630 58.14 18 1.33 30001 107.49 6.3 Chaitanya Godavari Grameena Bank 8565 31.94 1676 17.36 4 0.25 10245 49.55 6.4 Chairman, Telangana Grameena Bank 6018 24.80 5238 100.85 108 7.72 11364 133.37 6.5 Chairman, Saptagiri Grameena Bank 4499 13.60 11354 436.23 90 7.87 15943 457.70 6.6 Assam Gramin Vikash Bank 11099 28.61 2828 53.34 81 6.36 14008 88.31 6.7 Langpi Dehangi Rural Bank 366 0.68 62 1.36 2 0.10 430 2.14 6.8 Arunachal Pradesh Rural Bank 199 1.00 123 4.36 53 4.31 375 9.67 6.9 Uttar Bihar Gramin Bank 86253 117.04 35267 541.66 359 26.77 121879 685.47 6.10 Madhya Bihar Gramin Bank 28982 128.21 5827 248.33 208 16.48 35017 393.02 6.11 Bihar Gramin Bank 1805 6.69 804 17.58 75 5.84 2684 30.11 6.12 Chattisgarh Rajya Gramin Bank 8305 22.46 2826 26.39 20 1.45 11151 50.30 6.13 Dena Gujarat Gramin Bank 8021 7.32 909 16.72 38 2.81 8968 26.85 6.14 Baroda Gujarat Gramin Bank 3055 6.76 820 10.73 15 1.28 3890 18.77 6.15 Saurashtra Gramin Bank 1669 3.54 833 11.35 70 5.73 2572 20.62 6.16 Sarva Haryana Gramin Bank 2223 7.20 937 10.90 55 3.31 3215 21.41 6.17 Himachal Pradesh Gramin Bank 1474 7.03 1095 28.47 74 6.16 2643 41.66 6.18 Jharkhand Gramin Bank 7952 16.44 822 14.69 42 2.70 8816 33.83 6.19 Vananchal Gramin Bank 8717 33.56 1832 30.93 98 9.16 10647 73.65 6.20 Jammu And Kashmir Grameen Bank 369 1.64 1668 37.96 133 10.03 2170 49.63 6.21 Ellaquai Dehati Bank 252 1.22 699 15.09 67 3.70 1018 20.01 6.22 Kaveri Grameena Bank 12844 17.53 2691 35.11 94 7.51 15629 60.15 6.23 Karnataka Vikas Grameena Bank 21687 84.84 27224 409.91 368 29.23 49279 523.98 6.24 Pragathi Krishna Gramin Bank 65356 271.48 8228 198.22 957 67.00 74541 536.70 6.25 Kerala Gramin Bank 31090 83.23 15855 282.37 351 31.81 47296 397.41 6.26 Maharashtra Gramin Bank 1268 4.83 2605 53.04 275 23.19 4148 81.06 6.27 Vidharbha Konkan Gramin Bank 6473 15.38 1115 18.54 61 4.44 7649 38.36 6.28 Narmada Jhabua Gramin Bank 17633 29.66 2081 36.19 142 9.73 19856 75.58 6.29 Central Madhya Pradesh Gramin Bank 5965 17.64 423 6.81 98 7.15 6486 31.60 6.30 Madhyanchal Gramin Bank 9579 19.42 1789 31.63 56 4.02 11424 55.07 6.31 Manipur Rural Bank 778 3.12 191 2.74 6 0.46 975 6.32 6.32 Meghalaya Rural Bank 1061 3.56 977 24.48 95 7.96 2133 36.00 6.33 Mizoram Rural Bank 1487 6.32 261 4.79 7 0.55 1755 11.66 6.34 Nagaland Rural Bank 115 0.30 36 1.12 4 0.31 155 1.73 6.35 Odisha Gramya Bank 4229 16.91 1470 14.27 123 5.03 5822 36.21 6.36 Utkal Grameen Bank 648 2.42 249 5.65 29 1.95 926 10.02 6.37 Punjab Gramin Bank 6255 19.60 202 3.64 15 1.18 6472 24.42 6.38 Malwa Gramin Bank 866 1.08 21 0.39 1 0.09 888 1.56 6.39 Sutlej Gramin Bank 289 0.73 13 0.22 3 0.26 305 1.21 6.40 Puduvai Bharathiar Grama Bank 2034 4.01 126 1.92 4 0.30 2164 6.23 6.41 Baroda Rajasthan Ksethriya Gramin Bank 31614 21.15 1354 19.62 86 7.71 33054 48.48 6.42 Marudhara Rajasthan Gramin Bank 19127 39.09 89 1.19 6 0.27 19222 40.55 6.43 Pandyan Grama Bank 3533 10.99 1093 10.09 22 1.68 4648 22.76 6.44 Pallavan Grama Bank 22000 18.43 2305 49.36 83 6.03 24388 73.82 6.45 Tripura Gramin Bank 9040 24.02 981 18.14 94 7.78 10115 49.94 6.46 Allahabad UP Gramin Bank 22065 7.81 547 8.76 39 2.39 22651 18.96 6.47 Baroda UP Gramin Bank 34144 26.15 978 19.23 145 7.60 35267 52.98 6.48 Gramin Bank Of Aryavrat 17102 39.79 1968 29.95 122 7.41 19192 77.15 6.49 Kashi Gomti Samyut Gramin Bank 9858 37.28 407 9.50 70 5.48 10335 52.26 6.50 Prathama Bank 7746 24.07 3221 61.81 390 32.82 11357 118.70 6.51 Purvanchal Bank 5707 19.02 579 18.77 209 8.67 6495 46.46 6.52 Sarva UP Gramin Bank 5308 19.38 214 2.66 3 0.15 5525 22.19 6.53 Uttarakhand Gramin Bank 627 2.55 1717 45.05 209 15.13 2553 62.73 6.54 Bangiya Gramin Vikash Bank 6828 22.20 5479 92.45 214 14.92 12521 129.57 6.55 Paschim Banga Gramin Bank 11023 39.62 6352 133.36 356 25.02 17731 198.00 6.56 Uttarbanga Kshetriya Gramin Bank 2373 6.32 3932 36.69 1067 26.63 7372 69.64 Total 627683 1536.41 179480 3387.93 7444 497.81 814607 5422.15 Grand Total 4949572 8303.11 896246 17505.95 152389 10638.41 5998207 36447.47

For further information on Mudra Bank, please log onto: http://www.mudra.org.in

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