India is a country which has diversified population. India is diversified in terms of culture, geographical location, and occupation. Occupational diversity is one of the major factors that affects the socio-economic growth of the country.
According to 59th round of NSS0 survey, it was reported that 51.4 % of farmer households are financially excluded from both formal/informal sources of credit. Also, only 27% accessed formal credit and 73% have no access to formal sources of credit.
Pradhan Mantri Jan Dhan Yojana – The Genesis of MUDRA
In the year 2013, Crisil reported that only 40 % of India’s population had access to formal banking services. To address this issue, PM Narendra Modi launched the “Pradhan Mantri Jan-Dhan Yojana (PMJDY)”. The objective of PMJDY is to ensure various financial services like availability of basic savings bank account, access to need to be based credit, remittances facility, insurance, and pension to the excluded sections i.e. weaker sections and low-income groups.
MUDRA – Next Stage of Financial Inclusion
The opening of accounts under PMJDY is first important step. The next step is to enable the account holders to enjoy financial services, irrespective of their economic backgrounds. MUDRA (Micro Units Development & Refinance Agency) Ltd. was set up by the Government of India as a wholly owned subsidiary of Small Industries Development bank of India (SIDBI). The collateral free feature of MUDRA scheme has enabled millions of borrowers to avail loans from the banks and other financial institutions.
Features of the Scheme
All loans under MUDRA are disbursed on a collateral free basis. This implies that the borrowers who could not apply for a loan due to an absence of a collateral can now avail financial services with the help of Pradhan Mantri MUDRA Yojana.
There are 3 types of loan offered under the MUDRA scheme. The lending amount depends on the requirement of the borrower.
- SHISHU Loan – Offering financial support of up to INR 50,000
- KISHOR Loan – Offering financial support of amount ranging between INR 50,000 and INR 5,00,000
- TARUN Loan – Offering financial support of amount ranging between INR 5,00,000 and INR 10,00,000
An essentially great feature of the MUDRA loan is that the loan amount is provided through the MUDRA Card (Rupay Card). The card is provided by the bank through which the loan is being sanctioned. The card can be utilized for different purposes like–
- Online payments
- Used as a Debit Card, and
- ATM card
This would provide ease of payment and purchasing, and also encourage transparency in the business process. Moreover, the borrower needs to pay interest only on the amount of money that the borrower has used.