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MUDRA bank

Micro Units Development and Refinance Agency (MUDRA) Bank.


To regulate and refinance all Micro-finance Institutions (MFI) which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities under the scheme of Pradhan Mantri Mudra Yojana.

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


A sum of Rs 20,000 crores would be allocated to the MUDRA Bank from the money available from shortfalls of Priority Sector Lending for creating a Refinance Fund to provide refinance to the Last Mile Financers.

Another Rs 3,000 crore would be provided to the MUDRA Bank from the budget to create a Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises.


Small business units, mostly individual proprietorships, which run small manufacturing, trading or services activities.


The MUDRA Bank would primarily be responsible for

  1. Laying down policy guidelines for micro/small enterprise financing business.
  2. Registration of MFI entities.
  3. Regulation of MFI entities.
  4. Accreditation/rating of MFI entities.
  5. Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery.
  6. Development of standardised set of covenants governing last mile lending to micro/small enterprises.
  7. Promoting right technology solutions for the last mile.
  8. Formulating and running  a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises.
  9. Creating  a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana.


Only 4% of small scale business units get institutional finance, especially most of them are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes.


What is Micro finance?

Micro Finance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counseling etc.

It consists of three main groups

  1. SHG-Bank linkage model started by NABARD
  1. Non-Banking Finance companies(NBFC's) and
  2. Others including Trusts, Societies etc…


What is priority sector lending?

Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture or small scale industries. This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector.


What is meant by Priority Sector?

Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation. Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.


What are the different categories under priority sector?

Priority Sector includes the following categories:

  1. Agriculture
  2. Micro and Small Enterprises
  3. Education
  4. Housing
  5. Export Credit etc…

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