Micro Units Development Refinance Agency Ltd. (MUDRA)

Micro Units Development and Refinance Agency Limited (MUDRA) has been set up for ‘funding the unfunded’ micro enterprises in the country.  MUDRA will refinance all banks, Micro-finance Institutions (MFIs) and other lending institutions, which are in the business of lending to micro / small business entities, engaged in manufacturing, trading and services activities. Thus, MUDRA will strengthen the Last Mile Financial Institutions by extending refinance and other development support to expand their outreach.  This will in turn help micro businesses across the length and breadth of the country. MUDRA’s mandate also includes developing the micro enterprise sector into a viable economic sector, for which various developmental interventions including financial/ business literacy programmes are planned.

Pradhan Mantri Mudra Yojana (PMMY), a scheme to finance income generating small business enterprises was launched on 08 April 2015 by the Hon’ble Prime Minister, whereby all banks are required to finance micro entrepreneurs upto ` 10 lakh. MUDRA loans are available in three categories. For small business, loans upto `.50000/- is available under the ‘Shishu’ category; beyond ` 50,000 and up to ` 5 lakh under the ‘Kishor’ category and beyond ` 5 lakh and up to ` 10 lakh under “Tarun” category.

PMMY loans will be extended by all Banks such as PSU banks, Regional Rural Banks (RRBs), Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions and Non- Banking Finance Companies.

Any Indian Citizen who has a business plan for income generating micro/small business activity in manufacturing, processing, trading or service sector, and whose credit need is less than 10 lakh can approach a Bank/ MFI for availing of MUDRA loans under PMMY, or can apply online through website of standup India (https://www.standupmitra.in/).

Micro Credit Scheme is offered mainly through Micro Finance Institutions (MFIs), which deliver the credit upto Rs.1 lakh, for various micro enterprise activities. Although, the mode of delivery may be through groups like SHGs/JLGs, the loans are given to the individuals for specific income generating micro enterprise activity. The MFIs for availing financial support need to enroll with MUDRA by complying to some of the requirements as notified by MUDRA, from time to time.
Different banks like Commercial Banks, Regional Rural Banks and Scheduled Cooperative Banks are eligible to avail of refinance support from MUDRA for financing micro enterprise activities. The refinance is available for term loan and working capital loans, upto an amount of 10 lakh per unit. The eligible banks, who have enrolled with MUDRA by complying to the requirements as notified, can avail of refinance from MUDRA for the loan issued under Shishu, Kishor and Tarun categories.
In order to encourage women entrepreneurs the financing banks / MFIs may consider extending additional facilities, including interest reduction on their loan. At present, MUDRA extends a reduction of 25bps in its interest rates to MFIs / NBFCs, who are providing loans to women entrepreneurs.
MUDRA also supports Banks / NBFCs / MFIs for raising funds for financing micro enterprises by participating in securitization of their loan assets against micro enterprise portfolio, by providing second loss default guarantee, for credit enhancement and also participating in investment of Pass Through Certificate (PTCs) either as Senior or Junior investor.
Mudra loan is extended for a variety of purposes which provide income generation and employment creation. The loans are extended mainly for :
  • Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities
  • Working capital loan through MUDRA Cards
  • Equipment Finance for Micro Units
  • Transport Vehicle loans

  • MUDRA Card is an innovative product which provides working capital facility as a cash credit arrangement. MUDRA Card is a debit card issued against the MUDRA loan account, for working capital portion of the loan. The borrower can make use of MUDRA Card in multiple withdrawal and credit, so as to manage the working capital limit in a most efficient manner and keep the interest burden minimum. MUDRA Card will also help in digitalization of MUDRA transactions and creating credit history for the borrower.
    Traditional financing in Indian context adopts an Asset Based lending approach with emphasis on collaterals. Micro units, most of the times, are unable to provide the comfort of collaterals. Hence MUDRA loans i.e. loans upto 10 lakh, have been made collateral free, as per the RBI norms in this regard.
    The corpus proposed for the Credit Guarantee Scheme would be regularly augmented with a charge on the outstanding loans under refinance. The same would be utilized for providing first loss guarantee / credit enhancement for securitized portfolio loans, as discussed below4. 4 Credit enhancement : Facilities offered to cover probable losses from a pool of securitized assets in the form of credit risk cover through a letter of credit, guarantee or other assurance from the originator / co-originator or a third party to enhance investment grade in any securitization process. First loss facility is the first level of credit enhancement offered as part of the process in bringing the securities to investment grade. Second loss facility provides the second / subsequent tier of protection against potential losses.

    for more information visit Mudra Bank Website