Prime Minister Narendra Modi on Wednesday launched the Mudra bank which will provide loans of up to Rs 10 lakh to small entrepreneurs including shopkeepers and beauty parlour owners, hoping that it will promote growth and create jobs.
Short for Micro Units Development and Refinance Agency Bank, the financial institution will act as a regulator for micro-finance institutions (MFIs).
Mudra Bank will have a corpus of Rs 20,000 crore, Modi said at the launch of the bank, first proposed in his budget by finance minister Arun Jaitley, who was also present at the event.
“After banking the un-banked with the Jan Dhan Yojana, it’s time to fund the unfunded,” the Prime Minister said at the event.
He said millions of common men and women, who run small businesses, have almost remained outside the net of formal institutional finance, in spite of their large contributions to the economy.
The move is aimed at benefiting some 58 million small businesses in the country, who account for a mere 4% of institutional funding, despite employing over 120 million people, many from unprivileged strata of society, officials said.
Officials said the bank will benefit small manufacturing units, fruit and vegetable sellers, truck operators, hawkers and artisans in both rural and urban areas.
The Prime Minister said that agriculture and self-employment will be the “biggest target groups of the new bank adding that small businesses benefit around 12 crore people of the country.
The initiative will also lay down the norms for responsible financing practices for micro-finance institutions so that the small businesses do not face hardship over indebtedness, while getting a fair environment for repayment.
In his budget speech delivered on February 28, the finance minister had said that while there were 5.77 crore small businesses in India, mostly individual proprietorships, these bottom-of-the-pyramid entrepreneurs found it difficult, if not impossible, to access formal systems of credit.
Modi also said that government has asked banks to restructure loans of farmers hit by recent unseasonal rains and insurers to pro-actively settle their claims.
The eligibility for getting compensation for crop damage has been lowered from 50% of crop area to 33%, Modi said adding that the quantum of compensation to affected farmers has also been increased by 50%.