Prime Minister Narendra Modi has launched Micro Unit Development and Refinance Agency, or MUDRA to fund and promote microfinance institutions (MFIs), which would in turn provide loans to small and vulnerable sections of businesses. Modi said these businesses would provide almost 10 times the jobs to that were being generated by big companies. MUDRA will have an initial corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The initial corpus would be provided by banks from their priority sector lending shortfall. To be a Non-banking financial company (NBFC) and a part of Sidbi, MUDRA will later take the form of a bank through a Bill, which the government will present in Parliament within the next year, according to financial services secretary Hasmukh Adhia. With this, the long-awaited Bill on MFIs would not come and some of its provisions would be incorporated in the Bill on MUDRA, Adhia added. “It will also put in place an entire mechanism as to how much interest rate can be charged for the micro sector,” he said.

The issue had become quite contentious after the MFI sector faced a tough time, particularly in Andhra Pradesh when the state government tightened the noose on MFIs for recovery of loans in the wake of the over-indebtedness of the loanees. On whether MUDRA would regulate the NBFC (MFI), Adhia said, “That decision would be taken when the Bill will be framed.” He added the government was yet to take a call on whether MUDRA would be transformed into a universal bank. The Modi government is working on creating self-employment opportunities rather than conventional employment opportunities in the country.

—Prashant Tewari, Editor-in-Chief

Prime Minister Narendra Modi has launched Micro Unit Development and Refinance Agency, or MUDRA to fund and promote microfinance institutions (MFIs), which would in turn provide loans to small and vulnerable sections of businesses. Modi said these businesses would provide almost 10 times the jobs to that were being generated by big companies. MUDRA will have an initial corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore. The initial corpus would be provided by banks from their priority sector lending shortfall. To be a Non-banking financial company (NBFC) and a part of Sidbi, MUDRA will later take the form of a bank through a Bill, which the government will present in Parliament within the next year, according to financial services secretary Hasmukh Adhia. With this, the long-awaited Bill on MFIs would not come and some of its provisions would be incorporated in the Bill on MUDRA, Adhia added. “It will also put in place an entire mechanism as to how much interest rate can be charged for the micro sector,” he said.

The issue had become quite contentious after the MFI sector faced a tough time, particularly in Andhra Pradesh when the state government tightened the noose on MFIs for recovery of loans in the wake of the over-indebtedness of the loanees. On whether MUDRA would regulate the NBFC (MFI), Adhia said, “That decision would be taken when the Bill will be framed.” He added the government was yet to take a call on whether MUDRA would be transformed into a universal bank. The Modi government is working on creating self-employment opportunities rather than conventional employment opportunities in the country.

—Prashant Tewari, Editor-in-Chief