MUDRA is now a Bank

Govt approves its conversion to cater to small businesses
It offers three products under the PM MUDRA Yojana including Shishu, Kishor and Tarun, signifying the stage of growth and funding needs of the beneficiary micro unit or entrepreneur
New Delhi : The Cabinet on Wednesday approved conversion of MUDRA Ltd, an NBFC, into MUDRA Bank and also setting up of a Credit Guarantee Fund for loans disbursed under the Pradhan Mantri Micro Units Development Refinance Agency (MUDRA) Yojana.

Prime Minister Narendra Modi cleared creation of a Credit Guarantee Fund for MUDRA loans and to convert MUDRA Ltd into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI, an official statement said.

"The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management; data analysis etc apart from any other activity entrusted or advised by Government of India," it said.

The Credit Guarantee Fund is expected to guarantee more than Rs 1 lakh crore worth of loans to micro and small units in the first instance, it said, adding it will help in reducing risk taken by banks and financial institutions in case of default under the scheme.

A Credit Guarantee Fund for MUDRA Units (CGFMU) for guaranteeing loans -- sanctioned under the scheme with effect from April 8, 2015 -- will be set up.

The National Credit Guarantee Trustee Company Ltd (NCGTC Ltd), a wholly-owned company of Government of India, constituted under the Companies Act to manage and operate various credits guarantee funds, shall be the Trustee of the Fund, it said.

The guarantee would be provided based on a portfolio basis to a maximum extent of 50 per cent of amount in default in the portfolio. Three products available under the PM MUDRA Yojana are Shishu, Kishor and Tarun to signify the stage of growth and funding needs of the beneficiary micro unit or entrepreneur.

Shishu covers loans up to Rs 50,000 while Kishor covers above Rs 50,000 and up to Rs 5 lakh. Tarun category provides loans of above Rs 5 lakh and up to Rs 10 lakh.

MUDRA Bank and a Credit Guarantee Fund was proposed to be set up with a refinance corpus of Rs 20,000 crore and a corpus of Rs 3,000 crore respectively in the Budget 2015-16.

As a precursor to the launch of the Pradhan Mantri MUDRA Yojana (PMMY) in April 2015, MUDRA Ltd was set up as a corporate subsidiary of SIDBI in March 2015. The RBI has allocated Rs 20,000 crore and the first tranche of Rs 5,000 crore has been received by MUDRA as refinance.

‘Stand Up India plan’ for SC, ST and women entrepreneurs

Targeting some 250,000 women and scheduled castes and tribes people, the government on Wednesday approved the "Stand Up India" scheme to foster entrepreneurship among them with a corpus of Rs 10,000 crore, and extend loans of up to Rs 1 crore for new projects.

The scheme, announced by Prime Minister Narendra Modi in his Independence Day 2015 address, was given the go ahead by a meeting of the union cabinet chaired by him here, with a mandate to the department of financial services to anchor it.

"The scheme is intended to facilitate at least two such projects per bank branch -- on an average one for each category of entrepreneur. It is expected to benefit atleast 2.5 lakh borrowers," an official statement said.

The expected date of reaching the target of at least 2.5 lakh approvals is 36 months from the launch of the scheme, it added. Borrowers will be provided handholding support both at the pre-loan stage and during operations.

This would include increasing their familiarity with factoring services, registration with the online platforms and e-market places, along with sessions on best practices and problem-solving, the finance ministry said.