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MUDRA Bank Bill likely in Winter session

MUDRA launch by Narendra Modi

New Delhi: A legislation to operationalise the Micro Units Development and Refinance Agency (MUDRA Bank) is likely to be introduced in the Winter session of Parliament, a top official said here today.

“A couple of discussion rounds have taken place, but it is still at the drafting stage. We expect that maybe, by the Winter session, it (the Bill) could be tabled in Parliament,” MUDRA Bank chief executive Jiji Mammen told reporters on the sidelines of an Assocham event here.

“The policy has been finalised. Eligibility criteria for partners have also been finalised. We have already enrolled about 122 partners, which include some 73 banks, 25 microfinance institutions (MFIs) and 23-24 non-banking finance companies (NBFCs),” Mammen added.

The MUDRA Bill will seek to create a financial institution to meet funding requirements of 5.77 crore micro and small enterprises (MSMEs) engaged in manufacturing, trading and services.

MUDRA Bank, with a seed capital of Rs 250 crore, plans to finance MSMEs to the tune of Rs 20,000 crore through banks by March.

The bank, the CEO said, has already received first tranche of Rs 5,000 crore and is ready to start lending.

“RBI has been very, very prompt in sanctioning the corpus. They have allocated Rs 20,000 crore. We have also received the first tranche of Rs 5,000 crore from different banks… We are all ready to start the lending process,” he said.

Asked about first loan disbursement, Mammen said: “That should happen in a week because 15 banks have already signed refinance agreement. So, any moment, they can now approach us for refinancing.”

He added: “The first loan sanctioned is of around Rs 30 crore. Till now, no loan disbursement has taken place, but one proposal has been sanctioned.”

Mammen spoke of challenges faced by MUDRA as an NBFC, and has asked for RBI support.

“We are trying to sort out the issues regarding the exposure limit, the CRAR requirement of capital. We are working as an NBFC now, therefore facing some challenges on the exposure norms front. These things need to be considered and RBI needs to consider some kind of an exemption for us,” he said.

Capital to risk-weighted assets ratio (CRAR) is the measure of a bank’s financial strength expressed by the ratio of its capital (net worth and subordinated debt) to its risk-weighted credit exposure (loans).

“… it will be difficult for MUDRA Bank in the present form to progress as it is an NBFC today,” he said.

Mammen hoped that MUDRA Bank becomes a full-fledged bank through the statutory enactment shortly.

The mandate for MUDRA Bank includes laying down policy guidelines for micro enterprise financing business as well as registration of MFIs, their accreditation and rating.

MUDRA Bank was launched by Prime Minister Narendra Modi on April 8.

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