Increasing access of finance to the unbanked but also bring down the cost of finance from the last Mile Financers to the micro/small enterprises, most of which are in the informal sector.

Intended beneficiary

Any Indian Citizen who has a business plan for a non-farm sector income generating activity such as manufacturing, processing, trading or service sector and whose credit need is less than Rs 10 lakh.

Salient features

  • For implementing the Scheme, government has set up an NBFC named, Micro Units Development & Refinance Agency Ltd MUDRA).
  • MUDRA loans are extended by banks, NBFCs, MFIs and other eligible financial intermediaries as notified by MUDRA Ltd.
  • The funding support from MUDRA are of two types:
  • Micro Credit Scheme (MCS) for loans up to 1 lakh finance through MFIs.
  • Refinance Scheme for Commercial Banks / Regional Rural Banks(RRBs) / Small Finance Banks / Non-Banking Financial Companies (NBFCs).
  • The present authorised capital of MUDRA is at Rs. 5000 crore with a paid up capital of Rs.1675.93 crore. RBI has allocated an amount of Rs 20,000 crore from Priority Sector shortfall of Commercial Banks for creating a Refinance Corpus Fund.
  • 3 types of loans to be allotted by micro units’ development and refinance agency bank are;
  • Shishu: covering loans upto Rs. 50,000
  • Kishor: covering loans above Rs. 50,000 and upto 5 lakhs
  • Tarun: covering loans above Rs. 5 lakh and upto 10 lakhs
  • There is no subsidy for the loan given under PMMY. However, at present, MUDRA extends a reduction of 25bps in its interest rates to MFIs / NBFCs, who are providing loans to women entrepreneurs.
  • Banks have been mandated by RBI not to insist for collateral security in the case of loans upto 10 lakh extended to the units in the Micro Small Enterprises sector.
  • To mitigate the issue of collateral and to provide comfort to the lending institutions, a Credit Guarantee Product is extended by creation of a Fund called “Credit Guarantee Fund for Micro Units” (CGFMU).
  • The Scheme is being managed by National Credit Guarantee Trustee Company Ltd. (NCGTC), an agency promoted by the GOI.
  • MUDRA Card is a debit card issued against the MUDRA loan account. The borrower can make use of MUDRA Card in multiple drawals and credits, so as to manage the working capital limit in cost-efficient manner and keep the interest burden minimum.

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