Empowering Micro, Small & Medium Enterprises MUDRA – The Road Ahead….. JIJI MAMMEN, CEO, MUDRA पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Genesis of MUDRA  Budget for , proposed to create a Micro Units Development & Refinance Agency (MUDRA) Bank for regulating and refinancing micro finance institutions.  To bridge the gap in last mile financing in partnership with scheduled banks / Regional Rural Banks (RRBs) / cooperative banks, Non-Bank Finance Companies (NBFCs) / MFIs etc.  “Funding the un funded” is the objective of MUDRA  To serve to lay down policy guidelines governing financing of target businesses and development of standardized set of covenants governing last mile lending पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Need for MUDRA  As per National Sample Survey Office (NSSO) survey (2013), there are 57.7 million small/ micro units in the country, employing around 120 million people.  Mostly individual proprietorship / ‘Own Account Enterprises’  Over 60% of units owned by persons belonging to vulnerable sections like Scheduled Castes (SCs), Scheduled Tribes (STs) or Other Backward Classes (OBCs)  Majority of these units are outside the formal banking system – borrow from informal sources, use own funds  By creating a good architecture of Last Mile Credit Delivery to micro businesses, MUDRA will aim to increase the confidence of the aspiring young persons to become first generation entrepreneurs as also of existing small businesses to expand their activities पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises 4 Objective of MUDRA Defining policy guidelines for micro enterprise financing business Registration of MFI entities Accreditation /rating of MFI entities Laying down responsible financing practices Development of standardised set of covenants governing last mile lending to micro enterprises Promoting last mile technology solutions Formulating and running a Credit Guarantee Scheme for micro lending Support development & promotional activities in the sector Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri MUDRA Yojana 4 पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises MUDRA Architecture पूंजी सफलता की कुंजी MUDRA Regional Aggregators BANKS PSBS Pvt CBs RRBs Coop BANKS PSBS Pvt CBs RRBs Coop Micro Enterprises (loans upto Rs. 1 million) SBFCs / small NBFCs /Micro Finance Institutions ( MFIs) How MUDRA can work with Banks – The new financial architecture SBFCs /small NBFCs / Micro Finance Institutions Regional Aggregators

Empowering Micro, Small & Medium Enterprises MUDRA Ltd at a glance  MUDRA Ltd launched as a NBFI, pending enactment of Parliament, by Hon’ble Prime Minister, on 08 April 2015 and commenced its opérations  Allocation of Rs.20,000 crore as corpus fund for refinance made by RBI in May 2015; Rs 5000 cr received  Eligibility norms for partner institutions firmed up  140 partner institutions- 79 banks 36 MFIs ( including 5 non NBFC mFIS ), and 25 NBFCs shortlisted as partners  Rs 825 cr sanctioned to 14 mFIs/ NBFC and 4 banks; Rs 340 cr disbursed to 7 MFIs/ NBFCs + 4 banks पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises MUDRA Card  A hassle free credit to small borrowers; Loan withdrawal on demand with flexibility in operation.  A co-branded card with MUDRA and the issuing bank, issued directly or in association with MFI.  Mudra Card- Debit card on RuPay platform; operable on ATMs and POS machines.  Most of the PSBs, and 3 RRBs have launched the product  MUDRA to provide refinance / credit guarantee against loans granted under MUDRA Card.  About 1.49 lakh cards issued for Rs 380 crore  Saija + IDBI bank issued cards in Bihar पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises MUDRA Card (contd..)  MUDRA to provide refinance / credit guarantee against loans granted under MUDRA Card.  Layout / design for MUDRA card, approved by NPCI, circulated to all Banks; revise design suggested by DFS also circualted  RBI approved MUDRA card subject to non participation of risk by NBFCs/ MUDRA पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises 9 New Mudra card design 9 पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Pradhan Mantri Mudra Yojana(PMMY)  All loans issued by banks to micro enterprises with credit needs below Rs. 10 lakh.  A target of Rs crore set under PMMY for FY with 20% for Shishu, 50% for Kishore and 30% Tarun.  Mudra loans to be governed by MUDRA Charter.  Refinance / credit guarantee to be provided from MUDRA.  Special module to capture daily progress in credit camp target  Special campaign on Shishu laons from 1 Sept to 02 October 2015 achieved sanction of lakh Shishu laons with Rs 4150 cr  As on 09 October 2015, Rs crore for 60 lakh borrowers disbursed  Shishu – Rs 8878 cr ( lakh a/c)  Kishore- Rs cr ( 8.50 lakh a/c)  Tarun- Rs cr ( 1.44 lakh a/c पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises MUDRA – Road Ahead  MUDRA as Refinancer  Providing refinance support to MFIs  Providing support for double intermediation  Market maker; securitization/ assignment/ bond issue  MUDRA as regulator  MUDRA charter  Legislation of Mudra Bank Act  Accreditation/ registration/ regulation??  Functional Regulation through MUDRA charter  Off site surveillance of mFIs? पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises 12 MUDRA – Road Ahead  MUDRA as ecosystem facilitator  Mudra Guarantee Fund  Capacity building through training, IT enablers  New products- Mudra card  shift from cash based to digital; virtual cards  Enabling reduction in ultimate interest rates  IT platform – supporting entire ecosystem  Providing feed back micro finance ecosystem 12 पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises 13 Way forward The credit outstanding from Scheduled Commercial Banks to MSMEs- Rs lakh Cr (March 2014), expected to grow to 30 lakh crore in next 5 years crore small business units estimated to face a financing short fall of Rs. 357,000 crore. Boosting flow of credit to the sector through the triple mechanisms of establishment of PMMY targets for the lenders, incentive of refinance through MUDRA and credit guarantee mechanism proposed to be set up are volume centric tools MUDRA Card at base rate, which is expected to create a south-ward trend in interest rates. The trinity of PMJDY, Aadhar linkage and DBT expected to replace group lending / peer pressure, using cash and brick and mortar models, with expected lowering of cost पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises 14 Way forward….contd. Mobile driven transaction systems to provide the basis for building of tools to develop path breaking financial products which ride on ratings derived from analytics of such transactions. MUDRA’s is endeavouring to build an IT platform in partnership with NPCI, IDRBT, banks, credit-bureaus and other players (which could possibly also include e-commerce majors as well as telcos). MUDRA to provide an advanced micro-loan assessment and accounting solution for last mile financiers All these disruptive measures together with the government’s other efforts at financial inclusion, Skill development, Digital India, Make in India expected to give a boost to the economic activity at the lowest level and help achieve the eradication of poverty at a much quicker pace. पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Thank you! पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Progress in Business front Intrest rates पूंजी सफलता की कुंजी S No.Institution Interest rate by MUDRA Ceiling on interest rate to be charged by lending institutions to the ultimate borrowers 1 Commercial Banks 6.72% Not more than base rate of refinanced banks 2 RRBs/Co- operative Banks 6.72% Shall not be more than 3.5% above MUDRA’s lending rate 3NBFCs Upto SIDBI’s PLR by adopting differential rate of interest based on rating Upto SIDBI’s PLR Shall not be more than 6% above MUDRA’s lending rate 4NBFC-MFIsShall be governed by the norms of priority sector lending by banks to MFIs

Empowering Micro, Small & Medium Enterprises Eligibility criteria Commercial Banks Continuous profit track record for 3 years Net Non Performing Assets (NPAs) not exceeding 3% CRAR < 9% Net worth < Rs 100 cr Regional Rural Banks  Having profitable operations  Not carrying any accumulated losses  Net NPA less than 3% ( can be extended to 5% on case by case basis)  Capital to Risk Assets (CRAR) < 9% पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Eligibility criteria (contd..) NBFCs  Minimum external rating of BB- for small NBFCs having total portfolio below Rs. 5 billion and BBB+ for NBFCs having portfolio of Rs. 5 billion or more.  Meeting the minimum CRAR and other norms stipulated by RBI and comply with all the prevailing RBI guidelines. For all categories of NBFCs, registration with RBI will be mandatory.  Net NPA should be 90% State Cooperative Banks Category A Net NPA up to 5% as on last audited statement. Should have earned net profit during the last 2 years. Should not carry any accumulated losses in their books of accounts. Category B Net NPA above 5% and up to 10% as on last audited statement. Should have earned net profit during the last 2 years. Should not carry any accumulated losses in their books of accounts. पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Eligibility criteria (contd..) Urban Cooperative Banks  Should be an Urban Co-operative Bank (UCBs) listed in RBI’s second schedule.  should have been in operation for minimum 3 years  should have earned net profits for the last two years  sizeable outstanding portfolio in respect of micro/small business entities engaged in manufacturing, trading and service activities,  Should have Strong financials i) net worth not less than Rs. 500 million ii) CRAR not less than 9% iii) level of net NPA not exceeding 3% and iv) should not carry any accumulated loss in their books of accounts. पूंजी सफलता की कुंजी

Empowering Micro, Small & Medium Enterprises Eligibility criteria (contd..) NBFC-MFIs  Should have been lending to micro units meeting the loan size criteria of MUDRA for at least 3 years or the promoters / management should have an experience of at least 10 years.  Having minimum out reach of 3000 existing borrowers.  Minimum rating of Mfr5 by CRISIL or its equivalent  Meeting the minimum CRAR and other norms stipulated by RBI.  Three years profitable track record, Recovery performance not less than 90%, Portfolio At Risk at 90 days below 5% and operational self sufficiency > 100%.  Should be a member of credit bureau.  Desirable to have undergone Code of Conduct Assessment (COCA) with a minimum score of 60 or equivalent. पूंजी सफलता की कुंजी