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All about MUDRA Bank

MUDRA Bank stands for Micro Units Development Refinance Agency (MUDRA). When so many banks are around, where is the need to set up one more bank? I think the problem is not about the banks, the problem is about the lengthy and cumbersome procedure of lending by the banks. Agree? When you want it, you won’t get it. When you don’t want, the banker will knock your door. Yes or No?


But the government is not thinking this way. Instead of another bank, I wish they helped the society by making the lending process simpler and by offering innovative products than what exists today. Anyway, they have started something; lets’ understand what it offers.


National Sample Survey Organization (NSSO) in its 2013 survey said that there are 5.77 Crore small business units, mostly individual proprietorships, which run small manufacturing, trading or services activities. Only 4% of such units get institutional finance. Providing access to institutional finance to such micro/small business units would turn them into strong instruments of GDP growth and also employment.



This Bank would be responsible for regulating and refinancing all Micro-finance Institutions (MFI) which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities. The players in the Micro Finance sector are the Self Help Group (SHG) Bank linkage model started by NABARD, the Non-Banking Finance Companies (NBFC) and the others including Trusts, Societies etc. So, MUDRA Bank is a single regulator for all types of entities in the micro finance space in India.


The Bank would partner with state level/regional level coordinators to provide finance to Last Mile Financer of small/micro business enterprises.



  • Laying down policy guidelines for micro/small enterprise financing business
  • Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery
  • Promoting right technology solutions for the last mile


Corpus of the bank

The Bank will be set up with a corpus of Rs 20,000 crore and a credit guarantee fund of Rs 2,000 crore.



  • The low cost funds of MUDRA may translate into a lower rate of lending to the end customers.
  • MUDRA as a regulator will bring uniformity in regulations for all mirco finance lending programs
  • Increased liquidity in micro finance may help the cash crunched market.


Hope this move of the government will help to accelerate the growth of Indian economy.


Thought for the day

Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the actions of human beings. 



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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]