Definition
MUDRA stands for Micro Units Development and Refinance Agency. It is a financial institution in India established for the development and refinancing of micro units enterprises. It was launched by the Indian Government in 2015.
Key Takeaways
- The full form of MUDRA is Micro Units Development and Refinance Agency. This is an organization developed by the Indian government to offer unsecured loans to micro enterprises throughout the country.
- MUDRA promotes micro, small and medium enterprises by supporting the growth of micro units and providing them refinance support. This agency primarily focuses on small businesses that lack access to traditional bank loans and other mainstream financial services.
- MUDRA has three categories of loans under the ‘Pradhan Mantri MUDRA Yojana’ (PMMY) scheme named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stages of growth or development and financing needs of the borrower. These loans range from 50,000 INR under Shishu to 5,00,000 INR under Tarun, assuring extensive coverage of the Indian micro enterprise spectrum.
Importance
MUDRA, which stands for Micro Units Development and Refinance Agency, is an important financial term and institution in India designed to promote entrepreneurship and small scale industries by providing much needed funding and refinancing support.
It helps to strengthen the country’s economic base by encouraging small businesses which often face difficulties in accessing credit from traditional lending institutions.
MUDRA offers financial aid to non-corporate, non-farm sector income generating activities of micro and small entities, provided the credit need is below ten lakh rupees.
Therefore, its significance lies in its contribution to economic development and job creation, while also promoting financial inclusion.
Explanation
MUDRA, an acronym for Micro Units Development & Refinance Agency Ltd, is essentially a financial initiative in India that assists small and micro-units in getting financial support and acknowledgement.
Established by the Indian government in 2015, its core purpose is to provide funding to the non-corporate, non-farm sector income generating activities of micro and small enterprises whose credit needs are below 10 Lakh (∼14,000 USD).MUDRA primarily serves to extend the institutional finance system to such sectors of the society, which have previously been underserved by traditional banking services.
In doing so, MUDRA helps these enterprises grow and ultimately contribute to the overall development of the Indian economy.
The agency does this by developing and offering innovative financial products and services that cater to the unique requirements of these enterprises.
It is also responsible for developing the micro-enterprise sector by partnering with a network of financial intermediaries, such as microfinance institutions, non-banking financial companies, and commercial banks.
Examples of Full Form of MUDRA
MUDRA stands for Micro Units Development and Refinance Agency. It’s an initiative by the government of India to support and promote small enterprises, particularly in non-farm sectors of the Indian economy. The loans endorsed by MUDRA are typically known as MUDRA loans. Here are three real-world examples:
Street Vendor Loan: Under the MUDRA scheme, an individual who operates as a street vendor can apply for a loan to buy more goods to sell or upgrade their cart. If the loan is approved, the borrower has the opportunity to grow their small business and increase profits.
Beauty Salon Loan: An owner of a small beauty salon in a tier-2 city in India requires funds to expand services and renovate the salon. By applying for a MUDRA loan, the owner can upgrade the salon and attract more customers, thereby expanding their income.
Agriculture Equipment Purchase: A small farmer needs to buy better agricultural equipment to increase productivity. He can apply for a loan under MUDRA, and if approved, he can buy the equipment needed to increase yield, which in turn would grow his earnings.
Frequently Asked Questions About MUDRA
What does MUDRA stand for?
MUDRA stands for Micro Units Development and Refinance Agency. It’s an initiative by the government of India to provide non-corporate, non-farm sector income generating activities of micro and small enterprises whose credit needs are below ₹10 Lakh.
What is the role of MUDRA in India?
The role of MUDRA is to develop and refinance all micro-enterprises sector by providing loans through its partner institutions to small manufacturing units, shopkeepers, fruits and vegetable vendors, truck operators, food-service units, repair shops, small industries, artisans and service sector units, among others in rural and urban areas.
What are MUDRA loans?
MUDRA loans are offered to non-corporate, non-farm micro/small enterprises. These loans come under the scheme of ‘Pradhan Mantri MUDRA Yojana’. There are three types of MUDRA loans: Shishu, Kishore, and Tarun that signify the stage of growth and funding needs of the beneficial enterprise.
How does MUDRA benefit the common man?
MUDRA benefits the common man by providing access to loans for setting up micro and small enterprises, which in turn creates more employment opportunities. Since these loans are backed by government of India, obtaining them is relatively easier with less stringent requirements compared to regular bank loans.
How to apply for a MUDRA loan?
To apply for a MUDRA loan, you need to approach a bank/MFI/NBFC with your business plan and loan requirement. The lending institution will appraise your business and loan proposal. If it fits into the norms of the institution and MUDRA’s guidelines, the loan will be sanctioned. You can also apply online through the MUDRA portal.
Related Entrepreneurship Terms
- Micro Units Development and Refinance Agency
- Pradhan Mantri MUDRA Yojana (PMMY)
- Shishu, Kishore and Tarun Loans
- Non-Corporate Small Business Sector (NCSBS)
- Refinancing
Sources for More Information
- MUDRA Official Website: This is the official website of MUDRA (Micro Units Development and Refinance Agency) where you can find complete information about the organization and its offered schemes.
- Reserve Bank of India (RBI): The RBI website often provides valuable insights about various Indian financial institutions, including MUDRA.
- State Bank of India (SBI): SBI provides loans under the MUDRA scheme. You can find specific details about the program on this bank’s website.
- India Government’s Official Website: Being a government-run program, you can find reliable information about MUDRA on the official website of the Indian government.
