To promote very small businesses, the Centre aims to facilitate credit up to ₹1 lakh crore under the MUDRA scheme in the current fiscal.

According to a senior government official, the credit facility issue was discussed at a meeting between the Finance Minister and bankers recently.

It was proposed that for the current fiscal, the target under ‘Shishu’ category would be ₹40,000 crore, for ‘Kishor’ ₹35,000 crore, and ‘Tarun’ ₹25,000 crore.

The Centre has already made it clear that it would facilitate more credit to the first category at it promotes not only self entrepreneurship but also more employment opportunities.

“The whole concept is promoting entrepreneurship at micro level through funding the un-funded,” a senior government official told BusinessLine. MUDRA (Micro Units Development and Refinance Agency Ltd), which was proposed in the Budget, was launched by the Prime Minister on April 8.

Under the new scheme, there are three categories of loans — ‘Shishu’ (loan up to ₹50,000) ‘Kishor’ (loan above ₹50,000 up to ₹5 lakh) and ‘Tarun’ (above ₹5 lakh up to ₹10 lakh) — that will be disbursed by the banks. The amount will be refinanced through the new scheme which is being implemented by a subsidiary of SIDBI.

NSSO study

The MUDRA concept is based on National Sample Survey Organisation’s (NSSO) 2013 study which talked about 5.77 crore informal enterprises.

They are unincorporated, single person or two person enterprises. They get just 4 per cent of their credit requirements from the institutional mechanism, while 96 per cent comes from informal sources even while they give employment to about 12 crore people.

To help these entrepreneurs, the Government has offered 27 public sector banks, 17 private sector banks, 27 regional rural banks, 25 micro financial institutions (MFIs), and 21 non-banking financial institutions (NBFCs) to be enrolled as partner institution.

Apart from credit facilities by these institutions, an overdraft facility of up to ₹5,000 under Pradhan Mantri Jan Dhan Yojana will also be covered under the scheme.

Credit guarantee

Under the scheme, refinance/credit guarantee will be provided. Keeping this in mind, the process to get Expenditure Finance Committee (EFC) nod for ₹3,000-crore credit guarantee fund has been initiated and approval is expected soon. The corpus can guarantee up to ₹40-45,000 crore loans. This will enable various small-small banks, NBFCs and MFIs to give loans to people at cheaper rates. Because once the guarantee is given, the risk margin will come down.

MUDRA cards, similar to debit cards, are also being proposed. It will work on RuPay platform and can be used in ATMs and merchant establishments.

The plan is to provide 20-30 per cent of the loan requirement through this card.

In the next stage, the Centre aims to set up MUDRA Bank with a corpus of ₹20,000 crore. A Bill will be introduced soon in Parliament to set up a refinance mechanism on the lines on SIDBI.