E-Paper
Rs 1,500 cr interest subvention for Mudra-Shishu loans: Here’s what you need to know
Finance minister Nirmala Sitharaman’s announcement of 2% interest rate subvention under the MUDRA Shishu scheme was part of the second instalment of the Rs 20 lakh crore Atmanirbhar Bharat economic relief package and focused on farmers, migrant labourers and street vendors.
Union finance minister Nirmala Sitharaman on Thursday said the government will offer 2% interest rate subvention for a period of 12 months to prompt loan payees under the MUDRA Shishu scheme.
It was part of the second instalment of the Rs 20 lakh crore Atmanirbhar Bharat economic relief package and focused on farmers, migrant labourers and street vendors.
Apart from free food grain to migrant workers to credit facility for street vendors to concessional credit for farmers, the finance minister revealed new measures and highlighted the steps taken by the NDA government in the last two months to assist the vulnerable class hit by the economic slump triggered by the coronavirus pandemic.
Here is what you need to know:
What is the MUDRA scheme all about?
In 2015-16, the National Democratic Alliance government had announced the Pradhan Mantri Mudra Yojana (PMMY) to ensure better access to credit for small firms, boost entrepreneurship and promote financial inclusion.
Micro Units Development and Refinance Agency (MUDRA) was started to refinance loans of up to Rs 10 lakh given by banks and other lending institutions to small borrowers.
Under the scheme, collateral-free loan of up to Rs 10 lakh falls under three categories—Shishu, Kishore and Tarun. Loans from Rs 50,001 toRs 5 lakh are disbursed under Kishore. The third category is for loans of Rs 5-10 lakh.
According to the MUDRA website, 58.36 million loans worth Rs 3.16 trillion have been disbursed during 2019-20 data updated on March 27 showed.
What’s the need?
The announcement is a part of the second tranche of nine measures aimed at migrants, street vendors, small traders and farmers as part of the Rs 20 trillion package to revive the economy.
The decision is expected to bring much-needed relief to small borrowers under the MUDRA Shishu loans up to Rs 50,000.
Small businesses have been severely hit with the imposition of nearly a two-month-long nationwide lockdown aimed at curbing the spread of Covid-19. This has also impacted the ability of these borrowers to repay their loans.
What Nirmala Sitharaman said?
“After availing the three-month loan moratorium (approved by the Reserve Bank of India), when they come back to pay interest/EMI, they will have a problem. (That’s why) we want to support them with an interest subvention. The incentive will be to pay in time to get the 2% interest subvention,” Sitharaman said.
“This support will entail total relief of Rs 1,500 crore, which is for all Shishu loan holders,” she said, adding that the scheme will benefit more than 30 million credit takers.
“If outstanding Shishu loan is Rs 1.62 lakh crore, and on the assumption that everyone has taken loan up to Rs 50,000—the maximum limit—the 2% interest subvention will benefit more than 3 crore borrowers,” she said.
