Mudra Bank Decoded explanation

Mudra Bank Decoded

The Prime Minister Narendra Modi launched the promised Micro Units Development and Refinance Agency Ltd (MUDRA) Bank on 8 April 2015 with a corpus of Rs 20,000 crore and a credit guarantee corpus of Rs 3,000 crore.

HQ – New Delhi

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 MSME’s. It was launched by Prime Minister Narendra Modi on 8 April 2015.

– Wikipedia 


most individuals those living in rural and interior parts of India and never had access to insurance, credit, loans and other financial instruments, those depend on local moneylenders for credit. For those, The loan comes at high interest and often with unbearable conditions which make them more poorer and poorer.

Eligible to borrow from MUDRA bank:

  • Small manufacturing unit
  • Shopkeepers
  • Fruits / Vegetable vendors
  • Artisans

There are close to 5.77 crore  Small-scale business units, mostly sole proprietorships, which undertake trading, manufacturing, retail and other small-scale activities. Compare this with the organised sector and larger companies that employ 1.25 crore individuals. Clearly, the potential to harness and nurture these micro businesses is vast and the government recognises this. Today, this segment is unregulated and without financial support or cover from the organised financial banking system.

-NSSO Survey (2013)


# Regulate the lender and the borrower of microfinance and bring stability to the microfinance system through regulation and inclusive participation.

# Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money to small businesses, retailers, self-help groups and individuals.

# Register all MFIs and introduce a system of performance rating and accreditation for the first time. This will help last-mile borrowers of finance to evaluate and approach the MFI that meets their requirement best and whose past record is most satisfactory. This will also introduce an element of competitiveness among the MFIs. The ultimate beneficiary will be the borrower.

# Provide structured guidelines for the borrowers to follow to avoid failure of business or take corrective steps in time. MUDRA will help in laying down guidelines or acceptable procedures to be followed by the lenders to recover money in cases of default.

# Develop the standardised covenants that will form the backbone of the last-mile business in future.

# Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.

# Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed capital.

# Build a suitable framework under the Pradhan Mantri MUDRA Yojana for developing an efficient last-mile credit delivery system for small and micro businesses.


# Providing Low-cost funding for MFI (micro finance institutes). Priority for SC/STs in Lending.

# It will increase liquidity and Access for funds for Small scale business.

# By combining their integrity with capital (MUDRA), it would become the key to their success – पूंजी सफलता की कुंजी.

# Uniformity in regulations and best practices for the SHG Bank linkage programme, NBFC-MFIs, and trusts/societies/not for profit NBFCs/Section 25 companies engaging in MFI activities as MUDRA Bank would be the sole regulator for all players in the MFI sector.


MUDRA Bank has rightly classified the borrowers into three segments:

  • The starters,
  • The mid-stage finance seekers and
  • The next level growth seekers.

 To address the three segments, MUDRA Bank has launched three loan instruments:

  • Shishu: covers loans upto Rs 50,000/-
  • Kishor: covers loans above Rs 50,000/- and upto Rs 5 lakh
  • Tarun: covers loans above Rs 5 lakh and upto Rs 10 lakh.

Recently Govt. Has decided to provide an additional fund of ₹1 trillion (US$15 billion) to the market and will be allocated as

  • 40% to shishu
  • 35% to kishor
  • 25% to tarun

After You prepare your business plan and you select your business categories (as mentioned above), you have to contact your nearest Public or Private bank where you can apply for a Business loan under PRADHAN MANTRI MUDRA YOJANA.

Note: As some users got confused, mudra bank is not a separate bank (like SBI or BOB) it is the government’s finance scheme to provide a business loan to a new small business in India. To get a business loan under Mudra Yojana, you have to contact your nearest public/private bank.

Initially, sector-specific schemes will be confined to “Land Transport, Community, Social & Personal Services, Food Product and Textile Product sectors”. Over a period of time, new schemes will be launched to encompass more sectors.

MUDRA operates as a refinancing institution through State/Regional level intermediaries. It refinances NBFCs/MFIs and also banks, primary lending institutions etc.


# MUDRA Card: After your loan has been sanctioned from Mudra Yojana, you will get MUDRA CARD, a card like a credit card which you can use to buy your business raw material etc. Mudra Card’s Limit will be 10% of your business loan (subject to Rs.10000 maximum).
# Portfolio Credit Guarantee
# Credit Enhancement


The government is organising MUDRA loan meals in different parts of the country. This melas are organised for a few days where loans for small business funding could be applied.  In the melas, loans are granted ranging from Rs. 50,000 to Rs. 10 lakh.

 Can MUDRA Really Be a Game Changer for India? 

Yes, it can. See the existing demographics. Majority of Indians are poor and live in rural and interior parts of India. Most are excluded from getting facilities that would be termed very basic, even by Indian standards.

Most people do not have access to farmland and in the absence of jobs, are left to their own creativity to feed themselves and survive. They figure out ways to do odd jobs in exchange for money.

Most of these people belong to scheduled castes, scheduled tribes and other backward classes. It is to be noted that most of the micro enterprises, retail or trading activity, are initiated and controlled by women, with no exposure to education, formal training or access to any form of banking support.

Now visualise this. If India could harness this free spirit of enterprise and offer some guidance, support, training and financial assistance, the potential to get an immediate jump in GDP is there for the asking. Narendra Modi recognises this and was clear of the potential of this low-hanging fruit.

If MUDRA can continue to retain focus on the underprivileged and extend its reach to the interiors, it can well emerge as a bigger success story than what Grameen Bank of Bangladesh ever was or will be.

There is an old saying that goes like this: “Give a man a fish you feed him for a day, teach him how to fish and he will never go hungry”. MUDRA Bank is a step by the government that can be a game changer in giving birth to a new set of entrepreneurs, some of whom may scale heights not imagined today. This is far better than giving subsidy, which may seem welcoming at first, but does little to help an individual strive for a better life. MUDRA is the way to go.

 Documents required for MUDRA Loan 

1. Proof of identity – a Self-certified copy of Voter’s ID card / Driving License / PAN Card / Aadhar Card/Passport.

2. Proof of residence – Recent telephone bill, electricity bill, property tax receipt (not older than 2 months), Voter’s ID card, Aadhar Card & Passport of Proprietor/Partners/Directors.

3. Proof of SC/ST/OBC/Minority.

4. Proof of Identity/Address of the Business Enterprise -Copies of relevant licenses/registration certificates/other documents pertaining to the ownership, identity and address of the business unit.

5. Applicant should not be a defaulter in any Bank/Financial institution.

6. Statement of accounts (for the last six months), from the existing banker, if any.

7. Last two years balance sheets of the units along with income tax/sales tax return etc. (Applicable for all cases from Rs.2 Lacs and above).

8. Projected balance sheets for one year in case of working capital limits and for the period of the loan in case of term loan (Applicable for all cases from Rs.2 Lacs and above).

9. Sales achieved during the current financial year up to the date of submission of application.

10. Project report (for the proposed project) containing details of technical & economic viability.

11. Memorandum and articles of association of the company/Partnership Deed of Partners etc.

12. In absence of the third-party guarantee, Asset & Liability statement from the borrower including Directors& Partners may be sought to know the net-worth.

13. Photographs (two copies) of Proprietor/ Partners/ Directors.



The Hindu

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