small business is big business - mudra bank may rekindle growth
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Small Business is BIG Business - Micro Units Development and Refinance Agency (MUDRA) BanK may rekindle growth for Micro and Small Business Segment - Small Business and MSME sector.The new bank announced in the annual Budget last week could boost loans and cut borrowing costs for cash-starved small businesses.It is expected that funds to be made available through MUDRA will increase liquidity and so lower their borrowing costs and in turn the burden on borrowers This initiative could give a major boost to help micro and small businesses as also make the mainstream banks and financial institutions innovate products to address the needs of this segment.TRANSCRIPT
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Manoj Rawat | [email protected]
Small Business is BIG Business | Manoj Rawat Micro Units Development and Refinance Agency (MUDRA) Bank
May rekindle growth for Micro and Small Business Segment
The Micro Units
Development and
Refinance Agency
(MUDRA) Bank will be
set up through a
statutory enactment and
will be responsible for
regulating & refinancing
all micro-finance Institutions which are in business of lending to micro/small
business entities engaged in manufacturing, trading and service activities. The bank
will be setup with a corpus of Rs 20,000 crore and credit guarantee corpus of Rs
3,000 crore will be created.
The new bank announced in the annual Budget last week could boost loans and cut
borrowing costs for cash-starved small businesses artisans, tailors, mechanics,
small trade & restaurant owners, tea and fruit vendors and phone booth operators
who account for around a fifth of the economy. MUDRA Bank may be step forward to
rekindle growth in Rural India.
The Bank would partner with state/regional level coordinators to provide finance to
last mile financier of
small/micro business
enterprises. In
lending, priority will
be given to small
businesses owned by
scheduled class and
scheduled tribes.
-
Manoj Rawat | [email protected]
MUDRA to strengthen, promote and regulate MFI sector
The MUDRA Bank would primarily be responsible for
1) Laying down policy guidelines for micro/small enterprise financing business
2) Registration of MFI entities
3) Regulation of MFI entities
4) Accreditation /rating of MFI entities
5) Laying down responsible financing practices to ward off indebtedness and
ensure proper client protection principles and methods of recovery
6) Development of standardised set of covenants governing last mile lending to micro/small enterprises
7) Promoting right technology solutions for the last mile
8) Formulating and running a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises
9) Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana
This step is aimed to bring informal business into formal sector.
India's small businesses employ more than 106 million workers, according to
government statistics, in a country that brings a million new workers into the
workforce every month.
As per NSSO there are 5.77 crore business enterprises in un-organized sector which
are contributing 45% to national GDP and providing employment to nearly 46 crore
people. Only 4% of this sector could able to avail finance from core banking sector
and rest of 96% depends upon private moneylenders, relatives and friends.
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Manoj Rawat | [email protected]
It is estimated estimates that microfinance lenders have loan assets totalling Rs.
35000 cr. But they have had a limited impact on small businesses as they primarily
target lending to individuals or groups of individuals among the poor where they can
lend to a single borrower at Rs 50,000, making it many a times unviable option for
many businesses.
It is expected that funds to be made available through MUDRA will increase liquidity
and so lower their borrowing costs and in turn the burden on borrowers
This initiative could give a major boost to help micro and small businesses as also
make the mainstream banks and financial institutions innovate products to address
the needs of this segment.
Its important to see how the policy and regulatory framework emerges under
MUDRA bank, which now seems to become an over-arching Financial Institution for
growth, development and regulation of Micro & Small Business Sector.
Manoj Rawat | India
EVP & Head, Agribusiness Group | RBL Bank ---------------------------------------------------- [email protected]
Linkedin : https://in.linkedin.com/in/mkrawat Twitter :TheManojRawat
----------------------------------------------------- The views expressed are purely personal.