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What is Mudra Bank?

What is Mudra Bank?
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What is Mudra Bank? In the Union Budget 2015/16, Finance Minister Arun Jaitely has proposed to set up a Micro Units Development and Refinance Agency...

In the Union Budget 2015/16, Finance Minister Arun Jaitely has proposed to set up a Micro Units Development and Refinance Agency (MUDRA) Bank to encourage entrepreneurship among SC/STs and OBCs. The Mudra Bank will refinance institutions through a Pradhan Mantri Mudra Yojana.

This bank would be responsible for regulating and refinancing all Micro-finance Institutions (MFI) which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities. It would partner with state level/regional level coordinators to provide finance to Last Mile Financer of small/micro business enterprises.

The Mudra Bank will set up with the capital of Rs 20,000 crores and would be responsible of regulating and refinancing all Micro - finance Institutions (MFI). A sum of Rs 3,000 crores would also be provided to Mudra Bank, to create Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises. The objective of micro finance is to give low income and poor people an opportunity to become self - sufficient by providing financial services, saving money, borrowing money and insurance.


The Mudra Bank will lay out policy guidelines for micro/small business enterprise financing business, registration and regulation of micro finance Institutions, accreditation/rating of MFI entities, formulating responsible financial practices, development of standardized set of covenants governing last mile lending, promoting right technology solution, formulating and running a Credit Guarantee Scheme etc.

Trade leaders said that apart from enhancing business prospects, this step will also bring informal business into formal sector. As per NSSO there are 5.77 crore business enterprises in un-organized sector which are contributing 45% to national GDP and providing employment to nearly 46 crore people. Only 4% of this sector could able to avail finance from core banking sector and rest of 96% depends upon private moneylenders, relatives and friends. Mudra Bank will certainly change the business ecosystem of non corporate sector in the Country.

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