Small industrial Development Bank of India (SIDBI) & Mudra Bank

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 SIDBI

  • Small industrial Development Bank of India (SIDBI) is a development financial institution in India, headquartered at Lucknow and having its offices all over the country.
  • Its purpose is to provide refinance facilities and short term lending to industries, and serves as the principal financial institution in the Micro, Small and Medium Enterprises (MSME) sector.
  • SIDBI also coordinates the functions of institutions engaged in similar activities.
Finance Facilities Offered by SIDBI
Small Industries Development Bank of India, offers the following facilities to its customers:
  1. Direct Finance
    • SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan, Support against Receivables, equity support, Energy Saving scheme for the MSME sector, etc.
  2. Indirect Finance
    • SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions), comprising of banks, State Level Financial Institutions, etc. with an extensive branch network across the country. The key objective of the refinancing scheme is to raise the resource position of Primary Lending Institutions that would ultimately enable the flow of credit to the MSME sector.
  3. Micro Finance
    • Small Industries Development Bank of India offers microfinance to small businessmen and entrepreneurs for establishing their business.
Mudra Bank
  • 'Micro Units Development and Refinance Agency Bank (or 'MUDRA Bank) is a public sector financial institution in India.
  • It provides loans at low rates to micro-finance institutions and non-banking financial institutions which then provide credit to MSMEs. It was launched on 8 April 2015
  • The MUDRA banks were set up under the Pradhan Mantri MUDRA Yojana scheme. It will provide its services to small entrepreneurs outside the service area of regular banks, by using last mile agents.
  • About 5.77 crore (57.6 million) small business have been identified as target clients using the NSSO survey of 2013.
  • Only 4% of these businesses get finance from regular banks. The bank will also ensure that its clients do not fall into indebtedness and will lend responsibly.
  • The bank will initially function as a non-banking financial company and a subsidiary of the Small Industries Development Bank of India (SIDBI).
  • Later, it will be made into a separate company.
  • The bank will classify its clients into three categories and the maximum allowed loan sums will be based on the category:
    • Shishu: Allowed loans up to ₹50,000
    • Kishore: Allowed loans up to ₹5 lakh
    • Tarun: Allowed loans up to ₹10 lakh
  • 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 can approach either a Bank, MFI, or NBFC for availing of Micro Units Development & Refinance Agency Ltd. (MUDRA) loans under Pradhan Mantri Mudra Yojana (PMMY).
  • Under the Mudra scheme about 60 per cent of the loans are expected to be disbursed to Shishu entrepreneurs by all the commercial public and private banks
The Union Cabinet has approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans.
  • Features of Credit Guarantee Scheme
  • Fund for MUDRA Units (CGFMU) will guarantee loans sanctioned under Pradhan Mantri Mudra Yojana (PMMY) to reduce the credit risk to Banks and other financial intermediaries who are Member Lending Institutions (MLIs).
  • National Credit Guarantee Trustee Company NCGTC Ltd will manage and operate various credit guarantee funds and shall be the Trustee of the NCFTC will be a wholly-owned company of Union Government and shall be constituted under the Companies Act, 1956 (2013).
  • Under this scheme the guarantee would be provided on portfolio basis to a maximum extent of 50 per cent of Amount in Default
Problems
  • Seeking collateral security from the beneficiaries is not mandatory under Mudra Yojana which would be good politics but bad economics.
  • The average of sanctioned loans under Mudra Yojana comes at Rs 46,530 This amount could not be considered enough to launch a startup that could provide jobs to others.
  • This amount is also much lower than the average per capita income of Indians - Rs 1.11 lakh for 2017-18, according to advance estimates of the Central Statistics Organisation (CSO).
  • The number of large-sized loans or disbursements from the banks exceeding Rs 5 lakh - that can generate employment - are mere 1.3 per cent under Mudra Yojana.
  • Total value of Mudra loans stood at Rs 5.57 lakh crore. Total number of employment generated from this amount stood at 1.12 crore. This means every single employment cost the government around Rs 5 lakh under Mudra Yojana. 

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