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01-11, ISSN: 2456-4516

MUDRA Yojana: An Evolutionary Impact on SSIs


Ms. Neelam Singh
Assistant. Professor,
Bora Institute of Management Sciences.

Ms. Richa Martolia


Assistant. Professor,
Bora Institute of Management Sciences.

Abstract
India is a developing country & its speedy growth taking to its in the queue of developed country. The
main sources of the growth are industrialization, youth population, agriculture, service sectors &
SSIs. SSIs play a tremendous role to provide employment & contribution in GDP. After knowing the
importance of SSI in employment and self- employment, the GoI introduce new institutional set up
named MUDRA Yojana under the scheme of PMMY to create new entrepreneurship & provide
financial assistance to NCSBS. It also helps in refinancing facility to MFIs (Micro-Finance
Institution). The main focus of this paper is on the various financial assistance, creation of
entrepreneurship & impact of MUDRA Yojana on SSIs.
Keywords : MFIs, SSIs, refinance, NCSBS.
Objectives:
1. To know the various financial assistance provided by MUDRA Yojana.
2. To know the creational activity for entrepreneurship development.
3. Impact of MUDRA Yojana on SSIs.
Research Methodology: The study is based on the secondary data. All the information & data
gathered from journals, magazines, newspaper & website of MUDRA Yojana etc.
1. INTRODUCTION
MUDRA (Micro Units Development and Refinance Agency Ltd.)
MUDRA was registered as a Company in March 2015 under the Companies Act 2013 and as a Non
Banking Finance Institution with the RBI on 7th April 2015. On 8th April 2015 Hon’ble Prime
Minister Mr. Narendra Modi launched it in the Vigyan Bhavan, New Delhi. The main motive of
MUDRA Yojana is to “ Funded to Unfunded” which includes set up new enterprises & expand
existing units.. Mudra Yojana is the helping hand of MFIs ( Micro Finance Institutions), SHGs ( Self
Help Groups) & Small entrepreneurs.
During the year, MUDRA sanctioned `3,783.21 crore and disbursed `3,337.21 crore. The sanctions
include undisbursed sanction of `250 crore in respect of non banking financial
companies (NBFCs).
Intial corpus : Rs. 20,000 crore
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Credit guarantee corpus : Rs 3000 Crore


NCSBS
The Non Corporate Small Business Sector (NCSBS) share a large share in Indian market. The
NCSBS includes truck & taxi operators, machine operators, small manufacturing units, food-service
units, small industries artisans, shopkeepers, repair shops ,Street vendors ,fruits/vegetables, food
processors and many others. They provide employment & many other facilities like suppliers,
manufacturers, contractors, retailers, vendors, distributers & service providers. The country’s GDP
annually increases 6.28 lakh gross value additions by this sector.
Most of the participation in Indian economy came from this sector. One of a speech of Mr. Narendra
Modi, he, addressed that “we have perception that big enterprises of companies employed more
people but the truth is that that only 1 crore 25 lakh people find employment in large industries,
whereas small enterprises employ 12 crore people in the country”.
According to NSSO survey (2013), there are 5.77 crore small business units, mostly individual
proprietorship. Most of these “Own Account Enterprises (OAE) are owned by people belonging to
SC, ST or OBC.
They get finance from mostly self financed, personal networks & money lenders. Banking facilities
are far away from them due to non registration and unorganized, scattered pattern of business, rural
areas and high interest rates. It creates a hurdle in the growth of economy. To reducing this problem
MUDRA scheme was launched. The main aim of this scheme is to encourage & enhance the skills of
small entrepreneurs.
OBJECTIVES
 To ensure equitable distribution of funds.
 Provide employment.
 Increase the no. of small business units.
 Accelerate the economic growth.
 Increase the standard of living.
 Enhance the skills of entrepreneurs.

FUNCTION & RESPONSIBILITIES


 To registration & regulation of all MFIs ( Micro-Finance Institutions).
 Accreditation of MFIs entities.
 Prescribe policies & guidelines for MSMEs.
 It coordinates at State & Regional level for granting financial assistance.
 It acts as last mile financiers of SMEs.
 Reduce the cost of finance.
 Commercial Banks, Regional Rural Banks, MFIs & NBFCs are getting refinance facilities
through this scheme only when they provide loans on their base rate.
 To provide assistance small entrepreneurs to develop their business.
 Give priority to SC/ST/OBC and women entrepreneurs.
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 Monitoring of PMMY.
 To ensuring client protection principles and methods of recovery.
 Creating structures for micro enterprises to access loan under the Prime Minister’s MUDRA
scheme.
 It provides responsibility to prevent over indebtedness.
 SBUs are getting financial aids through this.
 To provide the financial facility up to 10 lakh rupees.
 It also provides the technological assistance.
 Small Business Units are also covered in this scheme for financial aids.
PARTNERS OF MUDRA
 21 PSBs ( Public Sector Banks)
 SBI & Associates
 18 PSBs (Private Sector Banks).
 56 RRBs ( Regional Rural Banks)
 4 CBs ( Cooperative Banks)
 39 MFIs
 2 Foreign Banks
 25 NBFCs ( Non-Banking Financial Institutions)
MUDRA OFFERINGS
 Under the scheme of PMMY, MUDRA offers mainly three types of loans:
S.No. Schemes/ Loans Used ( Mostly loans taken Loan Disbursement
Category for)
1. SHISHU Up to Rs. 50,000 For start up new business or At least 60% of loans
small business shall be disbursed
2. KISHORE From Rs. 50,000 After establishment of
to 5 Lakh business or Increase the
efficiency & capacity of Remaining loans shall be
business disbursed
3. TARUN From Rs. 5 Lakh To expand the business
to 10 Lakh

Rate of Interest:

Limits Micro Enterprises Small Enterprises


Up to Rs. 50,000 Base Rate Base Rate + 0.50%
Above Rs. 50,000 to Rs. 2 Base Rate + 0.50% Base Rate + 1.00%

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Lakh
Above Rs. 2 Lakh to 10 Lakh Base Rate + 1.00% Base Rate + 1.25%

Processing Fee : Nil

MUDR
A
Offering
s

Refinance Business Equipme


Sector/ Micro Scheme for Mahila loans for nt
Activity Credit RRBs/Coop Uddyami traders Finance
Focused Scheme erative Scheme & Scheme
Scheme banks/MFIs shopkee for
pers Micro
Units

Community,
Social & Food
Land Transport Products Textile
Personal Products
Sector/Activity Sector
Service Sector/Activity
Activities

 Sector Activity Focused Scheme


It gives higher consideration to specific sector & tailored its products to meet their
requirements so that the coverage area of beneficiaries increased.
a. Land Transport Sector/Activity:
It provides financial support to purchase transport vehicle for goods & transports viz. e-
rickshaw, Taxies, 3 wheelers etc.
b. Community, Social & Personal Service Activities:
These services includes beauty parlours, medical stores, saloons, DTP & photocopying
facility, dry cleaning shop, motorcycle repair shop etc.
c. Food Production Sector:
It includes food products like biscuit making, bread & bun making, Achar & papad making,
cold storage, agricultural products preservation in rural areas.
d. Textile Products Sector/Activity:
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It includes hadloom, chikan kari work, powerloom, zari work, cotton cloths designing work
(traditional embroidery work), stitching, jute bags, handbags, artificial & paper jewellery
work etc.
Micro Credit Scheme:
It provide financial assistance to micro financial institutions for lending any individual, Self
Help Groups, Joint Liability Groups or individual groups for setting or running any micro
enterprise as per MSMED Act up to 1 lakh. It helps in creating new assets through providing
loan to small entrepreneurs. For availing these facilities the MFIs should be registered with
MUDRA.
 Refinance Scheme for RRBs/Cooperative Banks
To provide loans to RRBS/Cooperative banks & others by refinancing due to the extending
limit of manufacturing & service sector enterprises up to 10 lakh.
 Mahila Uddyami Scheme:
Provide financial support to women entrepreneur individual/ group of women/SHGs.
 Business loans for traders & shopkeepers:
To provide timely & adequate lending facility to shopkeepers & traders for smooth running of
business
 Equipment Finance Scheme for Micro Units:
To provide financial support to NCSBS to purchasing of equipment like machinery with loan
size up to 10 lakh.
 MUDRA CARD:
It is a new innovative step to provide loan in an easy way. It has pre-approved credit line like
any credit card. It provide the facilities of :
 Cash Credit facility.
 To purchase raw materials.
 To purchase equipments.
 It can be link with Jan Dhan Saving Account of the individual.
SMALL SCALE INDUSTIRIES (SSIs)
A small Scale industries comprises with small group of people & a small budget. Less power, labour
incentive & a single place of production & production of goods for less people are the identity of
small scale industries in past but with the help of new industrial policy of India it converted into big
industries, produces lots of goods, provided employment to large no. of people, using new
machineries but still labour incentive.
These industries are set up for fulfillment of the rural areas regular needs which includes daily routine
products & services like Saolon, Parlor, Laundry etc.
These enterprises need not required huge amount of capital. These can be open with small capital &
the working area of these businesses is limited. These business are requires cheap labour which is

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easily available in rural sectors& their target market. The income generated through this business is
not so high so they exempt from tax.
The categorization of any industry is depending upon the production of the company & employee’s
strength. Which industry generates low production & with a small number of employees stated as
“Small Scale industries” & visa versa.
Any country can be developing if there is balanced growth & it can be done by both urban & rural
development. So the main focus of the government policies is rural areas development because urban
areas already developed. But in India, there is unbalanced economic growth. SSIs plays a significant
role in balancing economy. SSIs are helps in removing poverty, increase standard of living &
generating employment. Due to labour intensiveness & dynamic condition SSIs attract the attention of
the economic planners, administrators, sociologist & politicians
The Small Scale Industries Board in 1955 defined, "Small-scale industry as a unit employing less than
50 employees if using power and less than 100 employees if not using power and with a capital asset
not exceeding Rs. 5 lakhs".

Initial Capital Investment


Year
Small Scale Units Ancillary Units
1975 10 Lakh 15 Lakh
1980 15 Lkah 20 Lakh
1985 35 Lakh 45 Lakh
1991 60 Lakh 75 Lakh
1997 3 Crore
Government of India took an initiative for the new policy framing in 1999-2000. By that initiative the
industry which indulges in manufacturing, processing, repairing & preservation of goods, Investment
in plant & machinery & the cost limit is not exceeding Rs. 100 Lakh.
CHARACTERISTICS OF SSIs
(i) Ownership: It can be in the form of Individual, Sole-proprietorship or Partnership with
few individuals.
(ii) Management and control: If it is in the form of Sole-proprietorship or individual then
all the rights of decision & controlling indulge in a single person who is the owner. But if
it is the in the form of Partnership then only active member of that partners will manage
& control the whole industry. All other partners play the role of sleeping partners.
(iii) Area of operation: The area of SSIs is small & local. The local resources & employees
are deployed in the activities of production or manufacturing. The demand of the product
is mainly generated by the local users. So he target customers are local. That why the area
is confined to limited.
(iv) Gestation period: Gestation period means that development period of the industry when
it starts generate revenue & profit. Small Scale industries gestation period is less than
large scale industries period because it requires less capital, cheap labour & local
resources.

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(v) Flexibility: SSIs are more flexible & dynamic than Large Scale units respective to
changes in production method, arrival of new product, changes in the socio-economic
environment etc .
(vi) Resources: These industries are uses local resources & cheap labour. So it can be open
or start anywhere in the country.
(vii) Scattering of units:
Local resources are optimally utilizes in a better way by these SSIs units. They can spread
it across the boundary of rural area. They create employment & avoid the immigration of
rural sector people to cities.
OBJECTIVES OF SSIs
 To create employment in rural areas.
 Increase the standard of living.
 Support other facilities development like Education, Health etc.
 To avoid the immigration of rural sector people to cities.
 Helps in balancing growth.
 Promote the local resources in national & international levels. Like – Kite industry of
Gujarat.
 To attain self-reliance.
 Helps in development of other industries.
 It fulfills the requirement of raw material for large scale industries.
IMPACT OF MUDRA YOJANA ON SSIs
 Increase the no. of small business in India.
 Create the favourable environment for the growth of small industries.
 Encourage the start ups new industries which soon will be converted in big industries.
 Through start up of new small business the problem of raw material deficiency will be
reduced.
 Provide loan on reasonable interest rate.
 Reduce the cost of finance.
 Increase the profit & investment.
CREATIONAL ACTIVITY FOR ENTREPRENEURIAL DEVELOPMENT
NBSBS and small entrepreneurs have capital requirement for setting up new enterprises. They have
less money & money lenders provided money on high rate of interest. This will increase the burden
on them. Profit & loss is the two side of any business & starting there is no guarantee that it will be
successful. If it then high interest charges reduced from their income, will leads reduction in saving &
investment, growth of business is not increased. In india there is numerous creative minds but lack of
financial support it will not participating in the growth of country’s economy.
After knowing all these facts MUDRA Yojana launched with the aim of “Funded to unfunded”.
These activities include:
 Loan is categorized in the context of business progress
 Mostly 60% loans provided by MUDRA scheme for new Entreprenurs.
 Less interest charges.
 Encourage women entrepreneurs.
 No collateral security is needed for taking loan.
 Get rid from money lenders problems.
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 Include in the mainstream of the country.


 Increase the profit ratio.
 Encourage & enhance the small entrepreneurs for new ideas, innovation.
 Based on the economic life of the assets created and also the cash flow generated.
Refinance facility by MUDRA will be provided for 36 months or as per RBI
allotment decision taken by time to time.
 Provide the bucket of loans with minimum charges.
PERFORMANCE OF MUDRA (YEAR 2015-16)
In 2015-16 the target of disbursement was set by the government was 1,22,188 crore. But it increase
by 109% by the total sanctions & disbursement 1,37,449 crore & 1,32,954.73 crore respectively by
Banks & MFIs. Above 3.48 crore micro borrowers was benefit by this scheme in year 2015-16. These
are shown in Table 1.
This table shows that that this scheme fulfill the requirement of the micro borrowers & entrepreneurs
who are not getting the financial assistance form the bank or any other sources.

Table 1: Category of MUDRA Loans & Beneficiaries 2015—16

Category No. of accounts ( in crore) Amount disbursed ( Rs. in


crore)
Shishu 324.02 62,028
Kishore 20.69 41,073
Tarun 4.10 29,854
Total 348.81 1,32,955
Out of the above
New Entrepreneurs 124.75 58,908
(36%)
Women Entrepreneurs 276.28 63,190
(79%)
Share of SC/ST/OBC 184.00 49,196.33
(53%)
*Parenthesis indicates their share in total
* Source: Mudra website

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SHISHU KISHORE TARUN

• No. of accounts • No. of accounts • No. of accounts


: 324.02 : 20.69 : 4.10
• Amount • Amount • Amount
disbursed disbursed: disbursed :
41,073 29,854

Table 2: Sanctioned & disbursed amount ( F.Y. 2015-16)

S.No. LENDING AGENCIES AMOUNT SANCTIONED AMOUNT DISBURSED


1. Banks 2,432 2,432
2. MFIs 812 606
3. NBFCs 250 0
4 RRBs 239 239

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3,000

2,500

2,000

1,500 Amount Sanctioned


Amount disbursed
1,000

500

0
Banks MFIs NBFCs RRBs

Figure 1: Amount sanctioned & disbursed in 2015-16 (Rs. crore)


Table 3

Lending agencies New Entrepreneurs ( No. of Women Entrepreneurs ( No.


accounts) of accounts)
Public sector banks 38,22,226 14,75,907
Private sector banks & 17,77,400 21,53,790
foreign banks
Regional rural banks 7,20,430 2,92,127
NBFC-MFI 60,49,094 2,29,62,461
Non NBFC-MFI 1,05,518 7,43,980

ADVANTAGES OF MUDRA
1. Provide employment to rural areas.
2. Registered NCSBS & MFIs.
3. Increase the GDP
4. Emergence of start ups.
5. Giving special preference to backward classes of nation.
6. More liquidity & access of funds for small scale business.
DOWNFALLS FACED BY MUDRA YOJANA IN INDIA
 There is inequitable distribution of funds.
 There are many agencies which works on to providing financing & refinancing facility like
SIDBI (Small Scale industries Development Bank of India), NHB ( National Housing Bank),

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NABARD ( National Bank for Agriculture & Rural Development) etc. So instead of creating
new agency there should be restructuring & broadening the scope of existing agencies.
 Conflict may arise in future due to indulge several refinancing agencies in this field.
 MUDRA bank seems to promote shadow banking which may be creating financial crises.
(Shadow banking means which is not working under the administration & regulation of RBI).
 AT present MFIs regulated by more than 2 agencies. So it will create problems in future.
 It provides loans to high risk nature business. So there is chance of bad debts which leads
NPA, losses.

2. CONCLUSION
The new launching scheme under PMMY will surely benefits to small scale industries. It help to
increase the start ups of small business, make them self-depend, more innovative and support the
programme of “ Make In India”. The primary aim of MUDRA scheme is to provide fund to unfunded
and it works on that platform well being & show the positive impact on the economy, increase the
participants. Some conflicts may be arise in future will be resolved by the help of all MFIs,
NBFCs,Banks, GoI & RBI

References

1. https://www.mudra.org.in/
2. https://www.mudra.org.in/Annual report of MUDRA 2015-16
3. Seema (2015). “MUDRA: Micro Units Development & Refinance Agency”, International
Journal in Commerce, IT & Social Sciences, Vol.2, Issue 10, pp. 23-27.
4. http://pib.nic.in/index.aspx

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