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Micro, Small and Medium Enterprises (MSMEs) sector is a backbone to the Indian Economy. It generates employment for more than 100 million people.
According to the annual report of the Ministry of MSMEs, the sector contributes around 8% in India’s GDP. To fulfill ‘Make in India’ vision of Prime Minister Narendra Modi, MSMEs growth is must. But this sector has a problem of weak financial support.

To provide finance to micro and small businesses, The Prime Minister Narendra Modi launched the promised Micro Units Development and Refinance Agency Ltd (MUDRA) Bank on 8 April, 2015 with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The launch was the fulfillment of an announcement made earlier by the Finance Minister Arun Jaitley in Budget speech. The launch of MUDRA is the biggest policy initiative for this non-corporate small business sector of the country.

Principal Objectives of the MUDRA
  1. Bring stability to the microfinance system through regulation and inclusive participation.
  2. Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money to small businesses, retailers, self-help groups and individuals.
  3. Register all MFIs and introduce a system of performance rating and accreditation for the first time. This will help last-mile borrowers of finance to evaluate and approach the MFI that meets their requirement best and whose past record is most satisfactory.
  4. Provide structured guidelines for the borrowers to follow to avoid failure of business or take corrective steps in time.
  5. MUDRA will help in laying down guidelines or acceptable procedures to be followed by the lenders to recover money in cases of default.
  6. Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
  7. Introduce appropriate technologies to assist in the process of efficient lending, borrowing of capital.

Major Offerings
MUDRA Bank has classified the borrowers into three segments: the starters, the mid-stage finance seekers and the growth seekers. To address all segments, it has launched three loan instruments:
Shishu: covers loans up to Rs. 50,000/-
Kishor: covers loans above Rs. 50,000/- and up to Rs. 5 lakh
Tarun: covers loans above Rs. 5 lakh and up to Rs. 10 lakh

Offerings Planned for the Future:
Portfolio Credit Guarantee
Credit Enhancement
Published date : 02 Jun 2015 11:54AM

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