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MUDRA to start out as SIDBI unit

It will later be converted to a full fledged bank through an act of Parliament

BS Reporters  |  New Delhi 

Financial Services Secretary, said on Friday that the proposed Micro Units Development Refinance Agency (MUDRA) will be set up soon, first as a subsidiary of Small Industries Development of India (SIDBI), and then as a through an act of Parliament.

will start off as a subsidiary of It will later be converted to a full fledged bank through an act of Parliament,” Adhia said at the Roundtable on Financing of Innovations, chaired by President Pranab Mukherjee, and attended by chiefs of and financial institutions.

Adhia added that Prime Minister, Narendra will launch soon, but did not give details.

In his 2015-16 budget speech, Minister, Arun had announced the creation of with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore, with with the aim of providing loans to the smallest of businesses.

“These bottom-of-the-pyramid, hard-working entrepreneurs find it difficult, if not impossible, to access formal systems of credit,” had said. He also promised lending priority to enterprises owned by scheduled castes and scheduled tribes. A survey of the National Sample Survey Organisation has revealed that of 5.77 crore such micro enterprises, 65 per cent are owned by SC/ST and OBC members.

Speaking at the event on Friday, Adhia also said that existing commercial have not been adequate for financing needs to these micro enterprises as the owners have not been able to provide mortgage. “Of the 5.77 crore small enterprises in India, which employee around 12 crore people, the availability of capital is about Rs 11 lakh crore. Of this amount, only about 4 per cent comes from institutional sources,” he said.

Later, at the same event, President Mukherjee said that innovations in the country were "languishing" for want of financial support and asked to open dedicated counters across India to meet the capital requirements for entrepreneurs.

"Innovations in different segments, at different levels and for different sections will aid this process (of India’s growth) in no small measure", he said, adding that the role of the banking system is paramount in the entire innovation value-chain since financing of innovation is a critical step.I would like to draw your attention to the financial needs of our ingenious youth, both in rural and urban areas that are yet to be adequately met by the banking sector,“ the President said, adding that there were many instances of innovations that are languishing for want of financial support.

Mukherjee said the banking system, in collaboration with the National Innovation Foundation, can help create a pool of mentors in every district to assess and meet the financial needs of innovators.

"Bankers have to take the initiative to reach out to innovators, mentor them, and wherever possible, connect them with their other clients who may help them in expanding their market. This role of creating linkages between creative people and successful clients could be a game-changing institutional innovation," he said.

First Published: Fri, March 13 2015. 17:30 IST