Of Rs 71,000-crore in Mudra loans, Government credit Rs 2,000 crore

The scheme’s intent is to refinance collateral-free loans of up to Rs 10 lakh given by lending institutions to non-corporate small borrowers, for income-generating activities in the non-farm segment.

Written by Sunny Verma | New Delhi | Updated: January 12, 2016 11:10 am
MUDRA, PM modi, MUDRA loan, narendra modi, mudra yojna, mudra scheme, mudra bank, PMMY, pmmy scheme, pmmy yojana, Modi mudra bank, Modi pmmy scheme, pradhanmantri mudra yojna, mudra loan, mudra yojna, PM mudra yojna, Micro Units Development Refinance Agency, Stand Up India scheme, indian express PM Modi at the launch of the Pradhan Mantri MUDRA Yojana in New Delhi Wednesday. (Express Photo by: Prem Nath Pandey)

On January 7, the Government announced: “MUDRA (Micro Units Development Refinance Agency) loans amounting to Rs 71,312 crore have been disbursed to 1.73 crore borrowers as on 1st January, 2016.” A closer look at these numbers reveals the government refinanced loans of only Rs 2,000 crore under the MUDRA Scheme — the rest Rs 69,312 crore are loans disbursed by microfinance institutions (MFI) and banks which have now been renamed as MUDRA loans.

The scheme’s intent is to refinance collateral-free loans of up to Rs 10 lakh given by lending institutions to non-corporate small borrowers, for income-generating activities in the non-farm segment. The results, though, look magnified by merely rebranding microfinance loans and micro credit from banks as the MUDRA loans.

MUDRA Ltd admits this on its website: “All loans sanctioned on or after April 08, 2015 (when the Scheme was launched) upto a loan size of Rs 10 lakh for non farm income generating activities will be branded as PMMY (Pradhan Mantri MUDRA Yojana) loans”. Prime Minister Narendra Modi launched the MUDRA Scheme on April 8, 2015.

In an interview to The Indian Express, Department of Financial Services Secretary Anjuly Chib Duggal confirmed the numbers: “The total disbursement of (roughly) Rs 72,000 crore under the MUDRA scheme is done largely by micro finance institutions and banks. Of this, about Rs 2,000 crore has been refinanced by the government under the MUDRA scheme.”

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Loans under the scheme have been bracketed in three categories: Shishu loans are up to Rs 50,000; Kishor loans are between Rs 50,001 and Rs 5 lakh; and Tarun loans of Rs 5-10 lakh. Shishu accounts for the majority (40 per cent) of the loans disbursed. Kishor and Tarun account for 37 per cent and 23 per cent of the total disbursed amount, respectively.

Since MFIs are leading players in these loan segments, the government has so far refinanced loans mainly of micro finance institutions.

The top six institutions that received refinance under the MUDRA Scheme are: Hyderabad-based SKS Microfinace Ltd (that got refinance of Rs 100 crore); Bangalore-based Ujjivan Financial Services P. Ltd (Rs 100 crore); Chennai-based Equitas Microfinance Pvt Ltd (Rs 75 crore); Delhi-based Satin Credicare Network Ltd (Rs 35 crore); Chennai-based Madura Microfinance Ltd (Rs 35 crore) and Guwahati-based RGVN (NE) Microfinance Ltd (Rs 30 crore).

Banks and MFIs can draw refinance under the scheme after becoming member-lending institutions (MLIs) of MUDRA, Secretary Duggal said. “This gives them an additional resource to draw upon,” she said. The government has laid down stiff criteria for becoming an MLI.

In the financial year 2014-15, the aggregate gross loan portfolio of MFIs grew 61% over the previous year to Rs 40,138 crore, as per data from industry body Microfinance Institutions Network (MFIN). Separate data on micro credit provided by banks was not readily available.

Duggal said the idea of the MUDRA Scheme is to fund the unfunded at reasonable rate and to bring them under the main banking channel. Another objective is weaning away small business borrowers from the traditional high-cost money lenders, Duggal said.

While all states are beneficiaries of the Scheme, states getting biggest chunk of loans include Karnataka (with MUDRA loan disbursement of Rs 8114 crore), Maharashtra (Rs 6988 crore), Uttar Pradesh (Rs 6547 crore), Tamil Nadu (Rs 6484 crore), Bihar (Rs 4423 crore) and West Bengal (Rs 4086 crore).

The state-wise disbursement roughly follows lending pattern of MFIs. Andhra Pradesh, which had been a hub of microfinance activities, received disbursement of Rs 3758 crore under the MUDRA scheme, while the new state Telangana got Rs 2284 crore.

Other states to get significant amount of MUDRA loans include Madhya Pradesh (Rs 3671 crore), Gujarat (Rs 3386 crore), Odisha (Rs 2946 crore), Rajasthan (Rs 2648 crore), Punjab (Rs 2126 crore) and Kerala (Rs 2817 crore).

The total corpus of MUDRA Ltd is Rs 20,000 crore to be spread over four years, and the agency has received first tranche of Rs 5,000 crore from the Reserve Bank of India. Finance Minister Arun Jaitley said last Wednesday that the government expects MUDRA loans disbursement to touch Rs 1.22 lakh crore by March 2016.

In a report released last week, rating agency ICRA said the overall size of microfinance sector was Rs 1.1 lakh crore as on September 30, 2015. Much of these would qualify to be called MUDRA loans as well. The MUDRA Scheme does not provide any interest subsidy or waiver, but still turns out to be cheaper for the non-corporate small business borrowers.

“MUDRA borrowers can withdraw money daily as per their needs through RuPay debit cards. Interest is charged on reducing balance basis. So for borrowers, the interest rate turns out to be much cheaper than that on loan taken from money lenders,” Duggal said.

Shishu loans support small businesses like a vegetable vendor, a beauty parlour, a hair salon, or a rickshaw puller.

Kishor and Tarun loan help slightly bigger businesses such as toilet soap manufacturing unit, banana fiber extraction and weaving, production of paper cups or paper napkins, dairy products, pickle units, pappad manufacturing and so on.

Banks provide a composite loan for both working capital and term loan requirement under the MUDRA Scheme.

To make the MUDRA scheme more attractive, the government last week announced setting up of a Rs 3000-crore Credit Guarantee Fund for these loans. This will provide insurance against default on MUDRA loans to the maximum extent of 50%.

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First Published on: January 12, 2016 3:44 am
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      sitaram
      Feb 11, 2017 at 2:25 pm
      sir i stereted small business pelse give me lones thax
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        Ansari farzana
        Sep 23, 2016 at 8:17 am
        Farzana ansari mujhe lone chaye busniss kelye
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          amit
          Jan 12, 2016 at 9:15 am
          Finally they have distributed the loan form what account has gone it is immaterial. Finally intentions are bonfires so why your tone is critical. I don't see any suggestions you can't praise because they are not paying you and you can't sit idle.
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            Anand Prakash
            Jan 12, 2016 at 8:23 am
            Modi's government excels in repackaging and then excessive drum beating - no worthwhile achievement to boast about.
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              Anand Prakash
              Jan 12, 2016 at 8:21 am
              The language you use, amply confirms your pedigree. After all you khaki chadhiwallas can counter comments only with abusive language, not arguments.
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                  Bijan Mohanty
                  Jan 12, 2016 at 2:20 pm
                  Modiji's policy of Mudra loans has ended in failure in absence of a proper selection procedure of choosing borrowers.
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                    Karunakaran
                    Jan 12, 2016 at 2:56 am
                    It is fairly evident the PDP has seen the terrible consequences as a result of partnership with BJP. The Central Government is entirely run by the PMO, and not by the parliament. The Parliament, where all matters should be discussed, hardly knows what is happening. Because, the crouching, dokhla-eating Gujjubhai, cannot speak. The crouching, dokhla-eating Gujjubhai, only knows how to do the drama-queen acting for the invited cheering supporters (mostly Gujjus), but he cannot speak. So the Central Government is run by the PMO, not by the Parliament. PDP has seen the result of Delhi elections, the result of Bihar elections, the result of Gujarat elections, and the result of even Madhya Pradesh elections. Most voters have deserted the BJP and the drama-queen, crouching, dokhla-eating Gujjubhai. So PDP's future can only be with the Congress party. Congress party is sincere. No false promises like those of the crouching, dokhla-eating Gujjubhai.
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                        ASHOK KUMAR
                        Jan 12, 2016 at 10:23 am
                        A crooked politician called Modi is expert in jhumlas only. The IandB Ministry is compiling jhumlas of Modi given during 2014 Lok Sabha elections.
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                          Factual
                          Jan 12, 2016 at 11:08 am
                          All these congressi slaves barking about repackaging forget that Congress did the same in 1991 and 2004. At least the BJP is open about repackaging and not fooling the people unlike what ManMohan singh and congress did.
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                            Mukesh Goswami
                            Jan 12, 2016 at 10:14 am
                            Day is not far when every loan and funding by any insution/bank/company will be shown as a part of some Modi scheme.. he along with Jaitley will go tom tomming about all this.. reality, no jobs, food prices up, advantage of oil prices drop in the pockets of Adani/Ambani, rupee depreciating, exports gone for a toss.. but still Jaitley will say we are a great story with a bright future.. Jaago Bharat Jaago..
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                                Jan 12, 2016 at 10:19 am
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