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MUDRA AS REGULATOR AND REFINANCING BANK

The MUDRA or the Micro Units Development and Refinance Agency has been launched a week ago. This is under the ‘Pradhan Mantri Mudra Yojana’ which intends to lend to small and very small enterprises, particularly those owned by vulnerable sections of society who are usually not preferred as borrower by conventional lenders like banks. Banks usually have preference for established enterprises and have much elaborate appraisal system for loan sanctions.  Most small or micro enterprises usually are unable to meet the required as a borrower of banks.

The role of Mudra is two-fold.  The first is as a refinancing agency for financial institutions which lend to eligible borrowers – here the function of MUDRA is similar to NABARD or SIDBI.  The second function is that of a regulator of MFI or Micro-Finance Institutions which are registered as NBFC-MF.  This function was so far with RBI. Now Mudra is the dedicated agency for regulating thousands of MFIs operating in India.

Capital base of MUDRA is to be Rs. 20,0 billion.  Maximum loan amount to one enterprise will be Rs. 1 million.  

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