MUDRA bank Current Affairs

Union Cabinet approves creation of a Credit Guarantee Fund for MUDRA loans

The Union Cabinet has approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans.

The CGF is expected to guarantee more than 1,00,000 crore rupees worth of loans to micro and small units in the first instance.

Features of scheme

  • Credit Guarantee Fund for MUDRA Units (CGFMU) will guarantee loans sanctioned under Pradhan Mantri Mudra Yojana (PMMY) to reduce the credit risk to Banks and other financial intermediaries who are Member Lending Institutions (MLIs).
  • National Credit Guarantee Trustee Company NCGTC Ltd  will manage  and  operate  various  credit  guarantee  funds and shall  be  the  Trustee  of  the
  • NCFTC will be a wholly-owned  company  of  Union Government  and shall be constituted  under  the  Companies  Act,  1956 (2013).
  • Under this scheme the guarantee  would  be  provided  on  portfolio  basis  to  a  maximum  extent of  50 per cent  of  Amount  in  Default  in  the

MUDRA (SIDBI) Bank

  • Cabinet also gave its nod for converting MUDRA Ltd. into MUDRA Small Industries Development Bank of India (SIDBI) Bank, a wholly owned subsidiary of SIDBI.
  • The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management and also data analysis etc.

Background

In the Union Budget  speech for 2015-16, Union Finance Minister Arun Jaitley had proposed to set up MUDRA Bank and CGF with  a refinance corpus of 20,000 crore rupees and a corpus of 3,000 crore  rupees respectively. MUDRA Ltd. was set up as a corporate subsidiary of SIDBI in March 2015 prior to the launch of the Pradhan Mantri MUDRA Yojana (PMMY) in April 2015.

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PM Narendra Modi launches MUDRA Bank to provide credit to small entrepreneurs

Prime Minister Narendra Modi on 8 April 2015 launched Micro Units Development Re-finance Agency (MUDRA) Bank in New Delhi.

MUDRA Bank will act as a regulator for ‘Micro-Finance Institutions’ (MFIs) involved in manufacturing, trading and service activities to promote their growth.

The Pradhan Mantri MUDRA Yojana will be the main support system for the bank and will be the part of Small Industries Development Bank of India (SIDBI).

The MUDRA bank was proposed in Budget 2015-16 by Union Government with an initial corpus of 20,000 crore rupees. Apart from this, 3,000 crore rupees also has been earmarked as credit guarantee corpus.

The envisaged roles for MUDRA Bank include

  • Formulate policy guidelines for micro-enterprise financing business and registration of MFI entities.
  • Undertake rating and accreditation of MFI entities.
  • Develope standardized set of guidelines in order to govern last-mile lending to micro enterprises.
  • Promote appropriate technology solutions for the last mile.
  • Formulate and operate a credit guarantee schemes in order to provide guarantees to loans and portfolios that are extended to micro enterprises.
  • Support promotional and development activities in the sector and create a good architecture for last-mile credit delivery.

MUDRA Bank will provide financing on 3 stages- Shishu, Kishore and Tarun.

  • Shishu is first stage in which loan cover upto Rs 50,000 will be given to a business entity at start of business.
  • Kishore is second stage in which loan cover ranging from Rs 50,000 to Rs 5 lakh will be given.
  • Tarun is the third stage in which loan cover up to Rs. 10 lakh will be given.

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