In a bid to create jobs and promote entrepreneurship, the Cabinet today approved Rs 8,000- crore funds that will stand guarantee for loans to new ventures and also announced ‘Stand up India’ scheme for credit facilities to SC, ST and women entrepreneurs at lower rates.
While the Rs 3,000 crore MUDRA Credit Guarantee Fund (CGF) will act as hedge against default of Rs 50,000 to Rs 10 lakh loan extended to small entrepreneurs, the Rs 5,000 crore Stand Up India CGF will stand guarantee for Rs 10 lakh to Rs 1 crore loans to be provided to least 2.5 lakh SC/ST and women.
It also gave its nod to convert MUDRA Ltd, a pet venture of the Centre for funding small businesses, into MUDRA-SIDBI Bank, a wholly owned subsidiary of Small Industries Development Bank of India (SIDBI).
The government had last year set up MUDRA Ltd as a non- banking finance company (NBFC).
Under the ‘Stand Up India’ scheme, Jaitley said banks will give loans at the “least applicable rate” of interest.
“Every bank branch, including private sector, will give loans between Rs 10 lakh and 1 crore to at least one SC/ST and one woman entrepreneur under the scheme,” he said.
Stand Up India scheme, which is likely to be launched along with Start up India scheme on January 16, will be implemented through 1.25 lakh bank branches.
Launched in April 2015, MUDRA scheme has already extended loans worth Rs 72,000 crore to 1.73 lakh beneficiaries and the target for the entire fiscal is Rs 1.22 lakh crore.
Financial Services Secretary Anjuly Chib Duggal said the National Credit Guarantee Trustee Company Ltd (NCGTC) would be the Trustee for both the CGFs of MUDRA as well as Stand Up India.
Under the Stand up India scheme, it is expected that the target of at least 2.5 lakh approvals will be met in 3 years from the launch of the scheme, Duggal said.
The scheme will handhold borrowers both at the pre-loan stage and during operations.
“This would include increasing their familiarity with factoring services, registration with online platforms and e-market places as well as sessions on best practices and problem solving,” an official statement said.
The overall intent of the scheme is to leverage the institutional credit structure to reach out to under-served segments of the society by facilitating bank loans repayable up to 7 years for greenfield enterprises in the non-farm sector, it added.
Under the Scheme, the margin money would be up to 25 per cent, while remaining would be funded by the bank.
“The convergence with state schemes is expected to reduce the actual requirement of margin money for a number of borrowers,” it said.
The ‘Start up India, Stand up India’ initiatives were announced by Modi in his Independence Day speech.
With regard to Micro Units Development Refinance Agency (MUDRA) Yojana, the official statement said “the MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management, data analysis etc apart from any other activity entrusted or advised by Government of India”.
The Credit Guarantee Fund is expected to guarantee more than Rs 1 lakh crore worth of loans to micro and small units in the first instance, it said, adding it will help in reducing risk taken by banks and financial institutions in case of default under the scheme.
Three products available under the PM MUDRA Yojana are Shishu, Kishor and Tarun to signify the stage of growth and funding needs of the beneficiary micro unit or entrepreneur.
Shishu covers loans up to Rs 50,000 while Kishor covers above Rs 50,000 and up to Rs 5 lakh. Tarun category provides loans of above Rs 5 lakh and up to Rs 10 lakh.