FinMin reviews launch preparation of MUDRA Bank on April 8

The Finance Ministry today reviewed preparations for the launch of Rs 20,000 crore MUDRA Bank, which would primarily be responsible for regulating micro and small enterprise financing business, and supporting them.
The Micro Units Development and Refinance Agency (MUDRA) bank, to be launched by Prime Minister Narendra Modi on April 8, would get additional Rs 3,000 crore from the budget to create a credit guarantee corpus for guaranteeing loans being provided to the micro enterprises.
Financial Services Secretary Hasmukh Adhia, who reviewed the preparations, said the Prime Minister would also launch the 'Pradhan Mantri Mudra Yojana' on the occasion.
The Secretary said that MUDRA bank, based on the theme of 'funding the unfunded', would be responsible for regulating and refinancing all micro-finance institutions which are in the business of lending to micro and small business entities engaged in manufacturing, trading and services activities among others.

It would be set-up through a statutory enactment and would be partner with state level/regional level coordinators to provide finance to 'Last Mile Financier' of small and micro business enterprises, a Finance Ministry statement said.
The Bank, it said, would primarily be responsible for laying down policy guidelines for micro/small enterprise financing business; registration, regulation and accreditation/rating of MFI entities; laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery

It would also be responsible for the development of standardised set of covenants governing last mile lending to micro/small enterprises; promoting right technology solutions for the last mile; formulating and running a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises and creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana.

A sum of Rs 20,000 crore would be allocated to the MUDRA Bank from the money available from shortfalls of priority sector lending for creating a refinance fund to provide refinance to the Last Mile Financiers, it said.
Another Rs 3,000 crore would be provided to the Bank from the budget to create a Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises, it added.
These steps, it said will bring down the cost of finance from last Mile Financiers to the micro and small enterprises, most of which are in the informal sector.