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Rs 8K cr credit guarantee funds for MUDRA, Stand Up India

Loans worth Rs 72,000 cr disbursed under MUDRA to 1.73 cr beneficiaries, says Arun Jaitley.

By: ENS Economic Bureau | New Delhi | Published: January 7, 2016 1:57 am

The Union Cabinet on Wednesday approved the setting up of two credit guarantee funds to facilitate loans to micro and small entrepreneurs through MUDRA (Micro Units Development Refinance Agency) and the Stand Up India scheme. The corpus of credit guarantee fund for MUDRA will be Rs 3,000 crore and for Stand Up India Rs 5,000 crore. Finance minister Arun Jaitley said these schemes will improve funding to micro and small entrepreneurs and help boost economic activity.

Under MUDRA, the agency refinances loans up to Rs 10 lakh to micro and small units, and has so far disbursed loans worth Rs 72,000 crore to 1.73 crore beneficiaries. MUDRA was launched in April last year.

The Stand Up India scheme seeks to provide refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount of Rs 10,000 crore.

The Stand Up India scheme is distinct as its objective is to help entrepreneurs from scheduled castes, scheduled tribes and women entrepreneurs.

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Each branch of all banks, including private banks, will fund at least two entrepreneurs in the SC/ST category and one in women category, Jaitley said. The government aims to refinance loans of 2.5 lakh borrowers in 36 months under Stand Up India. The credit guarantee fee under both the funds will be paid by the banks and not passed on to the borrowers, banking secretary Anjuly Chib Duggal said.

She said the National Credit Guarantee Trustee Company Ltd (NCGTC) would be the trustee for both the credit guarantee funds of MUDRA as well as Stand Up India.

The Stand Up India scheme will handhold borrowers both at the pre-loan stage and during operations. “This would include increasing their familiarity with factoring services, registration with online platforms and e-market places as well as sessions on best practices and problem solving,” the government said in a statement. Under the scheme, the margin money would be up to 25 per cent, while remaining would be funded by the bank.

The credit guarantee fund for MUDRA is expected to guarantee more than Rs 1 lakh crore worth of loans to micro and small units in the first instance, the government said. It will help in reducing risk taken by banks and financial institutions in case of default under the scheme. The government will provide guarantee on portfolio basis to maximum extent of 50 per cent of the amount in default in portfolio.

The Cabinet also approved conversion of MUDRA Ltd, currently a non banking finance company, into a bank called MUDRA-SIDBI Bank, a wholly owned subsidiary of SIDBI.

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  1. K
    kamath Ramesh
    Jan 7, 2016 at 9:08 am
    It is indisble fact that the funding is the base for any business and extending this to needy is utmost important and govt is doing good by providing the same. However it should not turn up another loan NPA mela. Banks must monitor the loans closely to ensure the funds are utilized properly or else borrower may use this for his personal enjoyment. These fresher or small time businesspersons do not have experience and when the loan comes there is every possibility of mismanaged.
    1. P
      Jan 7, 2016 at 11:29 pm
      PMJDY, MUDRA, and, DBT (implemented for Gas and being implemented for Kerosene and other areas), is the most significant achievement of this govt. These will have far reaching impact on the country in immediate future. MUDRA scheme will fundamentally alter rural areas and hinterland of the country. No wonder the psuedo seculars (sikulars) and psuedo well wishers of SC/ ST and backward cles are worried. They have exploited these people for last so many decades as vote banks without doing anything for them.
      1. R
        Jan 7, 2016 at 12:00 am
        Modiji/Jaitleyji: Time is of the essence. Goal is "jobs, jobs, jobs". Take bold steps like this one - some will fail, but some will succeed. Just listen to economists / technocrats. If you create many jobs, that will be good for India, and you will be reelected. It is a win-win formula. Avoid divisive topics (like religion). Once all Indians are gainfully emplo (and hence families well-fed), people will agree to reasonable solutions. When people are hungry and angry, the w society behaves unreasonably.