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The amount of refinance provided by the government under the MUDRA scheme grew by 5.62 per cent to Rs 3525.94 crore in 2016-17 from Rs 3337.20 crore in the previous year, according to data sourced from SIDBI. There was a sharp fall in the refinance provided to the public sector banks — as the amount dropped by 28.90 per cent to Rs 1,886.73 crore in 2016-17 from Rs 2,432 crore in the previous financial year. The refinance to microfinance institutions and non-banking finance companies increased during 2016-17.
In the current fiscal till July 25, Rs 550.68 crore of refinance amount was provided to public banks, small finance banks, among others. Micro Units Development and Refinance Agency (MUDRA) Ltd has also provided refinance in the form of investment in pass through certificates (PTCs) of NBFCs and MFIs. Small finance banks got a total of Rs 100 crore of refinance funding till July 25 in the current fiscal.
Public sector banks received refinance of Rs 390.05 crore till July 25. The scheme provides another avenue for banks or other lending agencies to raise resources through refinance on amount that is already lent. While Mudra loans are extended by banks, regional rural banks and micro-finance institutions, MUDRA Ltd or is a firm that provides refinance for such loans.
MUDRA scheme’s intent is to refinance for 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. These include loans such as taxi loan, auto loan, loans for small and medium enterprises. All such loans — sanctioned on or after April 8, 2015, when Prime Minister Narendra Modi launched the scheme — are being branded as PMMY (or Pradhan Mantri MUDRA Yojana) loans.
A total of Rs 1.75 lakh crore worth of Mudra loans were disbursed in 2016-17, as compared to Rs 1.33 lakh crore in 2015-16, according to the data available on Mudra website. Interest rate on these loans ranges from 9-12 per cent. Around 1.5 per cent of the total disbursement of Mudra loans or Rs 2,955.51 crore have turned into NPAs as on December 30, 2016, according to data from the finance ministry.
The scheme does not provide any interest subsidy or waiver, but turns out to be cheaper for the non-corporate small business borrowers when compared with the loans they take from money lenders at high rates of interest. Banks provide a composite loan for both working capital and term loan requirement under the scheme.
Loans under the MUDRA scheme are of three types: 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. Banks, NBFCs and MFIs among others can draw refinance under the scheme after becoming member-lending institutions of MUDRA.