MUDRA Full Form - Embibe
  • Written By Team_Embibe
  • Last Modified 26-07-2022
  • Written By Team_Embibe
  • Last Modified 26-07-2022

MUDRA Full Form

The MUDRA full form is Micro Units Development and Refinance Agency Bank, whereas, in Hindi, it stands for  सूक्ष्म इकाई विकास पुनर्वित्त एजेंसी. MUDRA is a prominent Non-Banking Financial Corporation that focuses on uplifting all the functional micro, small and medium enterprises. It is also recognised as the primary public sector financial institution operating in the country.

MUDRA came into the spotlight for its characteristic of providing loans at considerably lower rates to all the non-banking financial institutions & micro-finance institutions. The organisation came into existence on April 8th, 2015 and it is currently headquartered in the financial capital of the country, Mumbai.

The Arrival and Prominence of MUDRA

The arrival of MUDRA at the national level was officially announced in the Union Budget of 2015 which was unveiled in February, whereas, it was formally launched two months after its announcement. The establishment of MUDRA Banks was carried out under the purview of the immensely successful Pradhan Mantri MUDRA Yojana Scheme which proved to be a massive success over the subsequent years. Such banks facilitated the small entrepreneurs with the much-needed financial help which they were deprived of earlier.

MUDRA loan was proposed by the Government of India in 2015’s finance budget which was solely aimed to reverse the deteriorating financial conditions of inexperienced and small businesses. Such entrepreneurs are entitled to a line of credit that MUDRA banks are exclusively established for and they aim to save such entrepreneurs from falling into the debt traps of money lenders. 

This is where the efficacy of MUDRA banks is precisely highlighted as it aims to elevate the overall financial conditions of such businesses. The steps taken by the Ministry of Finance to uplift the conditions of the overlooked businesses and fulfilling their funding requirements have been widely acclaimed across the country.

Functions of MUDRA

Here are some of the main functions of MUDRA that it is commonly known for:

  • The micro, small and medium enterprises are usually viewed as the essential backbone of any economy. The advent of this concept in the Indian economy is now considered the largest network of non-corporate structures that gives a source of earning to at least 50 crore people.
  • According to a survey conducted by the National Survey Service Office (NSSO) in 2013, it was revealed that more than 5.5 crore businesses operating in the country couldn’t be financed. All such small & medium enterprises struggled to find themselves a stable stream of funding. Hence, MUDRA functions as the lender of last resort to all such business entities that usually struggle to get any source of finance.
  • As per the latest estimation, about 50% of such businesses mainly originate from rural & semi-urban areas which are usually engaged in manufacturing, trading, and other essential service divisions.
  • Such struggling businesses were also confronted with repetitive complications as their sources of funding used to normally consist of their friends, family, and more often, traditional lenders. Such sources of finance either resulted in significantly lower funding or came with outrageously higher interest rates. Either way, such businesses were usually bound to fail amid such adverse conditions of financing. MUDRA eliminated all such complications at the drop of a hat.
  • MUDRA also works towards improving the overall infrastructure and providing timely guidance regarding financial matters to such struggling business entities. It does so to fill the gaps that deterred previous small and medium enterprises from even thinking of being financed from any source.

Benefits of MUDRA

Below mentioned are some of the predominant benefits of MUDRA:

  • MUDRA freely reaches out to all those business entities that face a critical shortage of funds or are currently not connected to any stable means of receiving financial assistance. Such businesses usually consist of rural businesses with no aid from any bank or those businesses that are generally run by the scheduled castes & scheduled tribes.
  • The Government of India provides a full guarantee along with a reasonable backup against the MUDRA loan. This suggests that there will always be liquidity in the proposed funds and a consistent flow of such funds without any risks.
  • The borrower of a MUDRA loan is not required to visit any bank on a regular basis just to receive the loan. This hassle has been successfully eliminated by the MUDRA scheme as the debit card which is provided under it allows the borrower to make withdrawals at various successions.

Different Sections of MUDRA Loans

The reason that marked the establishment of MUDRA banks in the first place can be attributed to the inadequacies that many businesses faced while trying to operate and function. They were not receiving much help from the commercial banks as their funding requirements were way higher than what they could cover. Furthermore, the lending rates were also quite significant that deterred them from being financed by any financial institution. This warranted a firm and reliable solution to eliminate such cases of missed opportunities and MUDRA became the final solution for all of it.

MUDRA specified different types and sections of the businesses that it aims to finance. It was later decided that it will finance three categories of businesses, i.e Shishu, Kishor, and Taruna with 45%, 35%, and 25% respectively.

Below mentioned is the specific loan limit that can be availed of from MUDRA:

  • Shishu: The maximum loan limit under this category has been specified at Rs.50,000/-
  • Kishor: The overall loan limit that this section of the business can receive is Rs.5,00,000/-
  • Taruna: This section of the business type is entitled to a total loan amount of Rs.10,00,000/-

Such loans are usually provided by micro-finance institutions and other banks that are associated with the non-banking financial company. According to the specific guidelines that have been laid down by MUDRA states that any Indian citizen that has a business plan can finance the business through MUDRA. They can easily apply for a fund requirement that usually ranges from Rs.50,000/- and goes all the way up to Rs.10,00,000/- depending upon their unique business requirements.

FAQs on MUDRA Full Form

Here are some common FAQs on MUDRA:

Q.1) What is the full form of MUDRA and when was it announced?
A.1) MUDRA full form is Micro Units Development and Refinance Agency Bank. It was announced in February 2015 and started its operations on April 8th, 2015.

Q.2) What is the main function of MUDRA?
A.2) MUDRA aims to improve the financial conditions of small and medium enterprises by facilitating them with the MUDRA loans depending on their business requirements.

Q.3) What is the maximum loan limit for businesses that fall in the Shishu category?
A.3) The maximum loan limit that has been decided for Shishu businesses is Rs.50,000/-

Q.4) What are the benefits of MUDRA?
A.4) The borrower of MUDRA loans do not have to make frequent visits to the bank to get the funding as they can avail of the debit card that comes with the scheme to make the necessary withdrawals. 

We hope this article on MUDRA full form proves helpful to you. Do let us know if you have any questions on the same through the comments section below, and we will get back to you at the earliest. For more such informative articles, keep visiting Embibe.

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