The MUDRA bank along with the Small Banks are going to create the history, by accelerating the pace of growth of micro and small enterprises, unprecedented hitherto in Bharat or anywhere else. The target for this financial year is of extending advances of Rs 1.2 lakh crores to 1.25 crore borrowers.
The new-found “Micro Units Development and Refinance Agency (MUDRA) Bank”, in combination with the nascently approved small banks, is going to change the nation’s economic landscape by extending new life-infusing credit line for the 6 crore-plus micro and small enterprises of the country, employing above 11 crore persons in the country. Access to affordable credit to small businesses would give spurt to the growth in the number of micro and small units, whereby a vast number of job-seeking youth would get motivated to turn into job-providers, from job seekers with a sustained growth in the number of start-ups in the micro and small scale sector. As per the statement of the Finance Minister Arun Jaitely, the MUDRA Bank has after its launch on April 8 this year itself, had advanced over Rs 24,000 crore to around 37 lakh micro-enterprises. He has further expected such advances through the MUDRA Bank to micro and small enterprises to cross above Rs. 1.2 Lakh crores by March 31, 2016, potentially benefitting more than 1.25 crore borrowers. This would eclipse, outshine and outcast all endeavors of economic development and financial inclusion, made by Bharat’s public financial institutions ever since our Independence. It would even dwarf all the erstwhile tall claims of country’s financial sector, having been made, ever since the bank nationalisation in 1969 or even before. Indeed, it would be such a giant leap for a praise worthy record, to well match with the legendary pace at which the bank accounts were opened under the Prime Minister’s Jan Dhan Yojna in the country, that would transform the country’s job scenario to fulfill the dream target of “jobs for every hand” as envisioned by Pt. Deendayal Ji in the Integral Humanism.
Since the MUDRA Bank has a mandate to use the entire range of financial service providers of the country, currently servicing the micro segment, including the banks, non-banking financial companies (NBFCs) and micro finance institutions (MFIs), it would enhance the ultimate outreach to enable access to all categories of small borrowers to institutional finance. Moreover, since the MFIs are the most active players in the field of providing much needed finance to the micro-enterprises, these would get the most needed and crucial access to more and more resources for landing onward to their target segment. So, the MUDRA bank would give them (the MFI’s) access to the much needed funds to lend.
The MUDRA Bank would also play a crucial role in infusing financial resources, critical for the viability and success of the newly licensed small banks as well, which are mandated to lend the bulk of their funds to priority sector borrowers alone, ranging from Rs. 50,000-10 Lakh. So, the MUDRA Bank, a unique NDA Government innovation, along with the Small Banks, as crafted by the Reserve Bank of India are going to fill the most vital gap of funding the tiny business units, hitherto never in focus to bridge this gap, ever since the Independence. The micro finance was hitherto available only to the borrowers, borrowing upto a total of Rs 1 lac only.
On the other hand, banks and NBFCs typically do not lend in the range of Rs 1-10 lakh range. So, it is also worth mentioning here that since, 8 out of 10 entities, which granted approval for running a small bank are the MFIs, and moreover the MUDRA Bank also aims to re-finance loans given by them, to micro enterprises under 3 categories, viz., the Shishu (upto Rs. 50,000), Kishore (Rs. 50,000-5 Lakh) and the Tarun (Rs. 5-10 Lakh), it would prove to be a truly life infusing nectar for small entrepreneurs in the country, largely dependent till date, upon private lenders, charging exorbitant interest.
Therefore, it would be a most needed bounty to the micro and small enterprises, which hitherto had to borrow from the unorganised money lenders at rates as high as 30 per cent, which was almost nightmarish to service and a major impediment against their survival and growth. Once, the loan rate would soften with the advent of MUDRA and small banks to around 10 per cent, these tiny units or firms would flourish and grow at such an accelerating pace, which can restore our ancient glory of a vibrant economy, powered by infinite micro-units widely embedded across the country to power growth, through decentralised economic activities, and help to overcome the country from the post-reforms ailment of jobless growth, within a short span of time.
Bhagwati Prakash Sharma (The Writer is Vice-Chancellor of Pacific University, Udaipur, Rajasthan)