Stakeholders' meet to discuss setting up Mudra Bank on Mar 25

Micro Units Development and Refinance Agency Bank was proposed in Budget by Finance Minister Arun Jaitley

Finance

Ministry has called the first meeting of all stakeholders, including MSME and microfinance institutions, on March 25 for discussing formalisation of structure of the Rs 20,000-crore Mudra Bank.

Micro Units Development and Refinance Agency (Mudra) Bank as proposed in the Budget by to micro or small business units and act as a regulator for microfinance institutions (MFIs).

Based on the feedback received in the meeting on March 25, the government will incorporate those suggestions in the draft Bill for setting up of Mudra Bank, sources said.

The government proposes to set up Mudra Bank through a statutory enactment. This bank would be responsible for regulating and refinancing all MFIs which are in the business of lending to micro or small business entities engaged in manufacturing, trading and services activities.

The bank would partner with state level/regional level coordinators to provide finance to last mile financier of small/micro business enterprises.

Mudra Bank would primarily be responsible for laying down policy guidelines for micro/small enterprise financing

business, registration of MFI entities, regulation of MFI entities, 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 responsible for 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.

Another Rs 3,000 crore would be provided to the Mudra Bank from the budget to create a Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises.