In the 2015-16 budget, the government had allocated Rs 20,000 crore for Mudra refinance. So far, Mudra has sanctioned about Rs 3,000 crore under refinance and total disbursement has been close to Rs 2,200 crore, said Jiji Mammen, Chief Executive officer.
“This year, we are expecting total refinancing to be close to Rs 4,000 crore,” according to Mammen.
The stringent conditions attached are a reason. While banks get loans from Mudra at 6.72 per cent, they are required to lend it at their base rate.
However, in general, loans to small and medium enterprises are given at one to two per cent higher than a bank’s BR. Second, Micro Finance Institutions (MFIs) cannot earn spreads over 10 per cent under Mudra refinance, whereas the Reserve Bank allows MFIs to have 10-12 per cent, depending on size.
“Taking refinance from Mudra is totally under the discretion of banks and depends on their liquidity and cost of fund. Moreover, there are certain conditions attached, which banks find restrictive,” said Mammen.
To make Mudra a viable business model, recently the Cabinet approved its conversion into a bank.
Mudra loans encompass three categories– ‘Shishu’, ‘Kishor’ and Tarun’. These signify the stage of growth and development, and funding needs of the beneficiary micro unit entrepreneur. Shishu covers loans up to Rs 50,000, Kishor above this and up to Rs 5 lakh, and Tarun covers loans above Rs 5 lakh and up to Rs 10 lakh. Thus, almost all the loans by MFIs, which are up to Rs 50,000, are re-categorised as Mudra loans, though there has been no refinance from the NBFC arm of Mudra.
The government has partnered with 36 MFIs, 17 public sector banks and 25 NBFCs, among other entities which have reclassified their loans as Mudra loans.
Source: Business Standard