empowering micro, small & medium enterprises mudra – the road ahead….. jiji mammen, ceo,...

Empowering Micro, Small & Medium EnterprisesEmpowering Micro, Small & Medium Enterprises

MUDRA – The Road Ahead…..

JIJI MAMMEN, CEO, MUDRA

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Genesis of MUDRA

Budget for 2015-16, proposed to create a Micro Units Development & Refinance Agency (MUDRA) Bank for regulating and refinancing micro finance institutions.

To bridge the gap in last mile financing in partnership with scheduled banks / Regional Rural Banks (RRBs) / cooperative banks, Non-Bank Finance Companies (NBFCs) / MFIs etc.

“Funding the un funded” is the objective of MUDRA

To serve to lay down policy guidelines governing financing of target businesses and development of standardized set of covenants governing last mile lending



Need for MUDRA As per National Sample Survey Office (NSSO) survey (2013),

there are 57.7 million small/ micro units in the country, employing around 120 million people.

Mostly individual proprietorship / ‘Own Account Enterprises’ Over 60% of units owned by persons belonging to vulnerable

sections like Scheduled Castes (SCs), Scheduled Tribes (STs) or Other Backward Classes (OBCs)

Majority of these units are outside the formal banking system – borrow from informal sources, use own funds

By creating a good architecture of Last Mile Credit Delivery to micro businesses, MUDRA will aim to increase the confidence of the aspiring young persons to become first generation entrepreneurs as also of existing small businesses to expand their activities


Empowering Micro, Small & Medium EnterprisesEmpowering Micro, Small & Medium Enterprises4

Objective of MUDRA• Defining policy guidelines for micro enterprise financing

business • Registration of MFI entities • Accreditation /rating of MFI entities • Laying down responsible financing practices • Development of standardised set of covenants

governing last mile lending to micro enterprises • Promoting last mile technology solutions • Formulating and running a Credit Guarantee Scheme for

micro lending • Support development & promotional activities in the

sector • Creating a good architecture of Last Mile Credit Delivery

to micro businesses under the scheme of Pradhan Mantri MUDRA Yojana

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MUDRA Architecture


MUDRAMUDRA

Regional Aggregators

Regional Aggregators BANKS

PSBS

Pvt CBs

RRBs

Coop

BANKSPSBS

Pvt CBs

RRBs

Coop

Micro Enterprises (loans upto Rs. 1 million)Micro Enterprises (loans upto Rs. 1 million)

SBFCs / small NBFCs /Micro Finance Institutions ( MFIs)SBFCs / small NBFCs /Micro Finance Institutions ( MFIs)

How MUDRA can work with Banks – The new financial architectureHow MUDRA can work with Banks – The new financial architecture

SBFCs /small NBFCs / Micro Finance Institutions

SBFCs /small NBFCs / Micro Finance Institutions




MUDRA Ltd at a glance

MUDRA Ltd launched as a NBFI, pending enactment of Parliament, by Hon’ble Prime Minister, on 08 April 2015 and commenced its opérations

Allocation of Rs.20,000 crore as corpus fund for refinance made by RBI in May 2015; Rs 5000 cr received

Eligibility norms for partner institutions firmed up140 partner institutions- 79 banks 36 MFIs (including

5 non NBFC mFIS), and 25 NBFCs shortlisted as partners

Rs 825 cr sanctioned to 14 mFIs/ NBFC and 4 banks; Rs 340 cr disbursed to 7 MFIs/ NBFCs + 4 banks



MUDRA Card A hassle free credit to small borrowers; Loan

withdrawal on demand with flexibility in operation. A co-branded card with MUDRA and the issuing

bank, issued directly or in association with MFI. Mudra Card- Debit card on RuPay platform;

operable on ATMs and POS machines. Most of the PSBs, and 3 RRBs have launched the

product MUDRA to provide refinance / credit guarantee

against loans granted under MUDRA Card. About 1.49 lakh cards issued for Rs 380 crore Saija + IDBI bank issued cards in Bihar



MUDRA Card (contd..)

MUDRA to provide refinance / credit guarantee against loans granted under MUDRA Card.

Layout / design for MUDRA card, approved by NPCI, circulated to all Banks; revise design suggested by DFS also circualted

RBI approved MUDRA card subject to non participation of risk by NBFCs/ MUDRA



New Mudra card design



Pradhan Mantri Mudra Yojana(PMMY)

All loans issued by banks to micro enterprises with credit needs below Rs. 10 lakh.

A target of Rs.122118 crore set under PMMY for FY 2015-16 with 20% for Shishu, 50% for Kishore and 30% Tarun.

Mudra loans to be governed by MUDRA Charter. Refinance / credit guarantee to be provided from MUDRA. Special module to capture daily progress in credit camp target Special campaign on Shishu laons from 1 Sept to 02 October

2015 achieved sanction of 22.50 lakh Shishu laons with Rs 4150 cr

As on 09 October 2015, Rs 37285 crore for 60 lakh borrowers disbursed Shishu – Rs 8878 cr ( 50.12 lakh a/c) Kishore - Rs 17492 cr ( 8.50 lakh a/c) Tarun - Rs 10915 cr ( 1.44 lakh a/c



MUDRA – Road Ahead

MUDRA as Refinancer Providing refinance support to MFIs Providing support for double intermediation Market maker; securitization/ assignment/ bond

issue

MUDRA as regulator MUDRA charter Legislation of Mudra Bank Act Accreditation/ registration/ regulation?? Functional Regulation through MUDRA charter Off site surveillance of mFIs?



MUDRA – Road Ahead

MUDRA as ecosystem facilitator Mudra Guarantee Fund

Capacity building through training, IT enablers

New products- Mudra card

shift from cash based to digital; virtual cards

Enabling reduction in ultimate interest rates

IT platform – supporting entire ecosystem

Providing feed back micro finance ecosystem



Way forward• The credit outstanding from Scheduled Commercial Banks to

MSMEs- Rs 10.35 lakh Cr (March 2014), expected to grow to 30 lakh crore in next 5 years.

• 5.77 crore small business units estimated to face a financing short fall of Rs. 357,000 crore.

• Boosting flow of credit to the sector through the triple mechanisms of establishment of PMMY targets for the lenders, incentive of refinance through MUDRA and credit guarantee mechanism proposed to be set up are volume centric tools

• MUDRA Card at base rate, which is expected to create a south-ward trend in interest rates.

• The trinity of PMJDY, Aadhar linkage and DBT expected to replace group lending / peer pressure, using cash and brick and mortar models, with expected lowering of cost



Way forward….contd.

• Mobile driven transaction systems to provide the basis for building of tools to develop path breaking financial products which ride on ratings derived from analytics of such transactions.

• MUDRA’s is endeavouring to build an IT platform in partnership with NPCI, IDRBT, banks, credit-bureaus and other players (which could possibly also include e-commerce majors as well as telcos).

• MUDRA to provide an advanced micro-loan assessment and accounting solution for last mile financiers

• All these disruptive measures together with the government’s other efforts at financial inclusion, Skill development, Digital India, Make in India expected to give a boost to the economic activity at the lowest level and help achieve the eradication of poverty at a much quicker pace.



Thank you!

www.mudra.org.in



Progress in Business front

Intrest rates


S No. Institution Interest rate by MUDRA

Ceiling on interest rate to be charged by lending institutions to the ultimate borrowers

1 Commercial Banks

6.72% Not more than base rate of refinanced banks

2 RRBs/Co-operative Banks

6.72% Shall not be more than 3.5% above MUDRA’s lending rate

3 NBFCs Upto SIDBI’s PLR by adopting differential rate of interest based on ratingUpto SIDBI’s PLR

Shall not be more than 6% above MUDRA’s lending rate

4 NBFC-MFIs Shall be governed by the norms of priority sector lending by banks to MFIs


Eligibility criteriaCommercial Banks• Continuous profit track record for 3 years• Net Non Performing Assets (NPAs) not exceeding 3%• CRAR < 9%• Net worth < Rs 100 cr

Regional Rural Banks Having profitable operations Not carrying any accumulated losses Net NPA less than 3% ( can be extended to 5% on case by case basis) Capital to Risk Assets (CRAR) < 9%



Eligibility criteria (contd..)NBFCs Minimum external rating of BB- for small NBFCs having total portfolio below Rs. 5 billion and BBB+ for NBFCs having portfolio of Rs. 5 billion or more. Meeting the minimum CRAR and other norms stipulated by RBI and comply with all the prevailing RBI guidelines. For all categories of NBFCs, registration with RBI will be mandatory. Net NPA should be < 3% and recovery should be > 90%

State Cooperative BanksCategory ANet NPA up to 5% as on last audited statement.Should have earned net profit during the last 2 years.Should not carry any accumulated losses in their books of accounts.Category BNet NPA above 5% and up to 10% as on last audited statement.Should have earned net profit during the last 2 years.Should not carry any accumulated losses in their books of accounts.



Eligibility criteria (contd..)Urban Cooperative Banks

Should be an Urban Co-operative Bank (UCBs) listed in RBI’s second schedule. should have been in operation for minimum 3 years should have earned net profits for the last two years sizeable outstanding portfolio in respect of micro/small business entities engaged in manufacturing, trading and service activities,Should have Strong financialsi) net worth not less than Rs. 500 million ii) CRAR not less than 9% iii) level of net NPA not exceeding 3% and iv) should not carry any accumulated loss in their books of accounts.



Eligibility criteria (contd..)NBFC-MFIsShould have been lending to micro units meeting the loan size criteria of MUDRA for at least 3 years or the promoters / management should have an experience of at least 10 years.Having minimum out reach of 3000 existing borrowers. Minimum rating of Mfr5 by CRISIL or its equivalentMeeting the minimum CRAR and other norms stipulated by RBI.Three years profitable track record, Recovery performance not less than 90%, Portfolio At Risk at 90 days below 5% and operational self sufficiency > 100%.Should be a member of credit bureau.Desirable to have undergone Code of Conduct Assessment (COCA) with a minimum score of 60 or equivalent.


empowering micro, small & medium enterprises mudra – the road ahead….. jiji mammen, ceo,...

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