Prime Minister Narendra Modi along Finance Minister Arun Jaitley on Wednesday launched MUDRA Bank i.e.Micro Units Development Refinance Agency.The bank will provide credit of up to Rs 10 lakh to small scale enterprises entrepreneurs and act as a regulator for the micro financial institutions.
But does India really need more banks to finance micro, small and medium enterprises, while the global trend is discourage shadow banking and use the main-line banking system to meet the financing needs of all segments. Precisely for this reason, the Reserve Bank of India wants to set up small finance banks and, given a choice, most existing MFIs will migrate to small banking.
The new bank will provide credit of up to Rs 10 lakh to small scale enterprises entrepreneurs and act as a regulator for the micro financial institutions.MUDRA will lay down policy guidelines for micro enterprises and register MFI entities. It will also be helpful in their accreditation and rating procedures.
On a closer look it doesn’t make sense to create yet another refinance agency and positioning it as a regulator leads to conflict of interest, with the same entity lending and overseeing regulations. Over 50 million unfunded small entrepreneurs need funds at a reasonable cost and the best way to meet their need is to give permits to probably 50 small banks and not create yet another refinance agency
MUDRA Bank will have a corpus of Rs 20,000 crore and credit guarantee corpus of Rs 3,000 crore
Through MUDRA bank we want to fund the unfunded: PM @narendramodi
— PMO India (@PMOIndia) April 8, 2015
But does India really need more banks to finance micro, small and medium enterprises, while the global trend is discourage shadow banking and use the main-line banking system to meet the financing needs of all segments. Precisely for this reason, the Reserve Bank of India wants to set up small finance banks and, given a choice, most existing MFIs will migrate to small banking.
The new bank will provide credit of up to Rs 10 lakh to small scale enterprises entrepreneurs and act as a regulator for the micro financial institutions.MUDRA will lay down policy guidelines for micro enterprises and register MFI entities. It will also be helpful in their accreditation and rating procedures.
On a closer look it doesn’t make sense to create yet another refinance agency and positioning it as a regulator leads to conflict of interest, with the same entity lending and overseeing regulations. Over 50 million unfunded small entrepreneurs need funds at a reasonable cost and the best way to meet their need is to give permits to probably 50 small banks and not create yet another refinance agency
MUDRA Bank will have a corpus of Rs 20,000 crore and credit guarantee corpus of Rs 3,000 crore
