Modi’s MUDRA Bank
In a bid to help the Indian farmers and small entrepreneurs and also for promoting ‘Make in India’ concept, Prime Minister Narendra Modi took a step towards “funding the unfunded”, as said by Union Finance Minister Arun Jaitley. After enabling farmers for input subsidy if 33 percent of their crops are damaged, as compared to the earlier 50 percent, Modi launched the MUDRA Bank, which will refinance the MFIs. The bank was launched with a collection of Rs. 20,000 crores and credit guarantee of Rs. 3,000 crores.
He stated that helping the Micro Finance Institutions or MFIs in their functioning with schemes such as this is vital for creating more jobs. Tackling the problem of unemployment is one of the biggest issues for Modi, and he believes that small entrepreneurs have been much more affluent in providing employment to people. Compared to the employment of 1.25 crore people by big industrial houses, such entrepreneurs have done the same for close to 12 crore people. Thus, with MUDRA, Narendra Modi aims to develop and refinance MFIs that lend to business entities engaged in activities like trading and service, manufacturing.
In order to provide capital to investors of small and micro business enterprises, the bank will partner with the state and regional level coordinators, laying down guidelines for financing, registration, accreditation and rating of MFI entities. The rules will primarily look to prevent over-indebtedness, ensuring client protection principles and methods of recovery.
“A vast part of the non-corporate sector operates as unregistered enterprises and formal or institutional architecture has not been able to reach out to meet its financial requirements. Providing access to institutional finance to such micro, small business units, enterprises will not only help in improving the quality of life of these entrepreneurs, but also turn them into strong instruments of GDP growth and employment generation,” the release said.