Despite high target, Mudra refinance to remain low
Even as the government has set a lofty target of Rs 1,80,000 crore worth loan sanction under Mudra Yojna, the actual refinance by Mudra, the non-banking finance arm of Small Industries Development Bank of India (SIDBI), will be not more than Rs 4,000 crore this year.
In the 2015-16 budget, the government had allocated Rs 20,000 crore for Mudra refinance.
So far, Mudra has sanctioned about Rs 3,000 crore under refinance, while the total disbursement has been close to Rs 2200 crore, said Jiji Mammen, chief executive officer, Mudra.
"This year, we are expecting total refinancing to be close to Rs 4000 crore," according to Mammen.
Notably, the stringent conditions attached with Mudra refinance has hindered it popularity. While banks get loans from Mudra at 6.72%, they are required to lend it at base rate.
However, in general, loans to small and medium enterprises are given at 1-2% higher than base rate by banks. Secondly, MFIs cannot earn spreads over 10% respectively under Mudra refinance scheme, whereas RBI allows MFIs to have spread between 10-12%, depending on its size.
"Taking refinance from Mudra is totally under the discretion of banks, and it depends on their liquidity condition and cost of fund. Moreover, there are certain conditions attached with Mudra refinance, which banks find restrictive,' said Mammen. In order to make Mudra a viable business model, recently the Cabinet approved conversion of MUDRA into a bank.
Mudra loans encompass three categories -- 'Shishu', 'Kishor' and Tarun' to signify the stage of growth and development and funding needs of the beneficiary micro unit entrepreneur. Shishu covers loans upto Rs 50,000, Kishor covers loans above Rs 50,000 and up to Rs 5 lakh and Tarun covers loans above Rs 5 lakh and up to Rs 10 lakh.
Thus, almost all the loans by MFIs, which are of the value of up to Rs 50000, are re-categorized as Mudra loans, even though there has been no refinance from the NBFC arm of Mudra. The government has partnered with about 36 MFIs, 17 public sector banks and 25 NBFCs, among other entities who have reclassified their loans as Mudra loans.
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