DMPQ: What is MUDRA? Discuss its significance

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India is largely a informal economy where various MSME units are there. But these units find hard to access to the formal systems of credit. Before the inception of MUDRA, this sector gets only 4% of its credit needs from banks. The sector used to borrows unspurious rates of interest of 120% and beyond.

MUDRA stands for Micro Units Development and Rehabilitative agency. It launched on 8th October 2015. The aim of MUDRA is to refinance microfinance institutions engaged in lending to MSME’s engaged in manufacturing, trading and service activities.

MUDRA is a part of SIDBI. It started with an initial corpus of Rs. 20000 crore. There are  3 financing stages of MUDRA:

  1. Shishu- loan upto 50000
  2. Kishore- btw. 50k and 5 lakh
  3. Tarun – max loan upto 10 lakh

 

Significance:

  • Will boost the labor intensive sectors. Some 5.77 crore small business units are covered under it. It is an indigenous and innovative solution for the
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most job-intensive.
  • Act as a catalyst for financial inclusion and hence the inclusive growth. 62% of the small business units are owned by SC/ST/OBC.
  • It will lay down policy guidelines for micro finance institutes. Registration, accreditation for MFI’s.
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