Giving a major boost to the micro-finance sector prime minister Narendra Modi will launch MUDRA (Micro Units Development and Refinance Agency) Bank on April 8. Finance minister Arun Jaitley in his budget 2015 speech had announced the formation of MUDRA Bank. He said, “Our government firmly believes that development has to generate inclusive growth.”

Talking about the need for the new institution he said, “While large corporate and business entities have a role to play, this has to be complemented by informal sector enterprises which generate maximum employment.”

Adding further Jaitley said, “There are some 5.77 crore small business units, mostly individual proprietorship, which run small manufacturing, trading or service businesses. 62% of these are owned by SC/ST/OBC. These bottoms of the pyramid, hard-working entrepreneurs find it difficult, if not impossible, to access formal systems of credit. I, therefore, propose to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore.”

MUDRA Bank will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana. In lending, priority will be given to SC/ST enterprises. “These measures will greatly increase the confidence of young, educated or skilled workers who would now be able to aspire to become first generation entrepreneurs; existing small businesses, too, will be able to expand their activities. Just as we are banking the un-banked, we are also funding the un-funded,” said the finance minister.

In order to decide the modalities of functioning of MUDRA Bank, a meeting of stake holders consultation was held in New Delhi on March 25 under the chairmanship Hasmukh Adhia, secretary, department of financial services, in which all stakeholders, including cross section of micro finance institutions, NBFCs, Banks, NABARD, SIDBI and RBI representatives were present.

“Based on the consultation which took place today as well as the consultation which will happen in the days to come, the exact modalities of functioning of MUDRA Bank and its activities would be framed before the formal launch of MUDRA Bank on April 8”, said a finance ministry press release dated March 25.