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Transforming lives of the poor hard working Indian class through PMMY

Date : 18.June.2018

MUDRA, which stands for Micro Units Development and Refinance Agency is a financial institution set up by Government of India for development and refinancing micro unit enterprises. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various Last Mile Financial Institutions like Banks, NBFCs and MFIs. It was formally launched by Honorable Prime Minister Narendra Modi on 8th April 2015. MUDRA is a refinance agency and not a direct lending institution. Prest Loans (www.prestloans.com) is one such NBFCs which is a pioneer in providing, Business Loans, MSME Loans (Long & Short term) for micro and small enterprises.

Micro- Enterprises

Micro Enterprises are the largest source of employment after agriculture sector and constitutes of about a major economic segment in our country. This segment includes micro units engaged in manufacturing, processing, trading and services sector. These are usually proprietorships or owned single handedly (formally known as Own Account Enterprises). These are also referred as Non-Corporate Small Business sector.

Majority of the Own account enterprises pertain to Rural sector and out of that too majority of them pertain to the manufacturing sector.

The Non-Corporate Small Business Sector

Non-Corporate Small Business Sector is perhaps one of the largest disaggregated business ecosystems in the world sustaining around 50 crore lives.

This sector comprises of myriad of small manufacturing units, shopkeepers, fruits / vegetable vendors, truck & taxi operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, street vendors and many others.

It is surprising that such financial needs of this sector are not being met actively and they are largely self-financed or rely on personal networks or moneylenders.

Pradhan Mantri MUDRA Yojana (PMMY) was launched to harness this untapped potential market. Meeting the financial needs of this sector would not only ensure higher productivity and higher employment rates but also give boost to the Indian economy.

 

As we can see from the following figures, majority of the loans under PMMY were disbursed to SC/ST/OBC categories and women. 

Types of Loans under PMMY

Under the PMMY, loans can be availed uptil 10 lakhs (following are the details). It was launched to ensure that cheaper loans with minimum documentation can be disbursed quickly to those in need.

  • Shishu: covering loans upto Rs. 50,000/-
  • Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
  • Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh

Prest Loans - wwww.prestloans.com - seeks to empower this sector by providing loans on above mentioned lines.

Critics' Notion

As per the data available on Mudra Yojana's official website almost 13 crore people were given loans under the scheme till May 25, 2018.

The total sanctioned amount of loan under Mudra Yojana was Rs 6 lakh crore out of which Rs 5.81 lakh crore had been disbursed to the beneficiaries.

However, the critics often point out that the amount of loan disbursed through this scheme cannot be considered large enough to launch a start up that could provide jobs to others. But this statement is misleading.

As per MUDRA Annual Report 2016-17; the average loan size under PMMY during FY 2016-17 increased to Rs. 45,471 as against Rs. 39,405 in the previous year. Similarly, the average loan size under Shishu category at Rs. 23,317 has been higher than that of Rs. 19,411 in the previous year. There is little change in the average loan size under Kishor and Tarun in FY 2016-17 with respect to FY 2015-16. But note that the average loan size under Kishor is Rs. 2 lakh and under Tarun is 7.75 lakhs.  

The government has won laurels in identifying the need of hour by launching various schemes to enable Micro Enterprises, SMEs and there is no doubt about the fact that PMMY will continue to provide the necessary boost to these enterprises and our economy. Prest Loans (www.prestloans.com) is one such NBFC through which hassle free small business loans and MSME loans can be availed with minimum documentation.

Sources:

https://bit.ly/2st8qEi

https://bit.ly/2sqYoUn

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    Credit Linked Capital Subsidy for Technology Upgradation

     Micro, Small and Medium Enterprises (MSMEs) play a vital role in the Indian Economy. It is a catalyst for socio-economic transformation of the country, as it enables in meeting of national objectives like generating employment, reducing poverty and discouraging rural-urban migration. These enterprises help to build a thriving entrepreneurial eco-system, and promote the use of indigenous technologies. They provide comparatively large employment opportunities at lower capital cost than large industries and also help in industrialization of the rural areas. 

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    Salient features

     

    • This scheme was launched on 1st October 2010.

    • This scheme aims at facilitating technology upgradation by providing 15% upfront capital subsidy to MSE units (including tiny, khadi, village and coir industrial units) on institutional finance availed of them on induction of well-established and improved technologies in specific sub-sectors/products approved under the scheme. (See https://bit.ly/2MWGFh2 for more details on list of approved technologies and specific sub-sectors/products)

    • Technological upgradation means induction of state-of-the-art technology or near state-of-the-art technology. This would result in:

      • Improved productivity

      • And/ improvement in quality of products –through introduction of in-house testing techniques and on-line quality control

      • And/ improved environmental conditions, anti-pollution measures, energy conservation machinery

      • And/improved packaging techniques

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    • Admissible capital subsidy is now calculated with reference to purchase price of plant and machinery; instead of term loan disbursed to beneficiary unit.

    • These changes were implemented retrospectively from 29th September, 2005.  

    • Eligible Beneficiaries

      • These include sole Proprietorships, Partnerships, Cooperative societies, Private and Public limited companies in the MSME sector.  Amongst these, women entrepreneurs shall be accorded priority

      • Industry graduating from small scale to medium scale on account of sanction of additional loans under CLCSS

      • MSMEs that have graduated from small scale industry in the last 3 years

      • Existing units registered with State directorate of Industries, which upgrade their existing plant and machinery with state-of-the-art technology, with or without expansion

      • New units which are registered with State directorate of Industries and have set up their facilities only with the appropriate eligible and proven technology duly approved by Governing and Technology Approval Board/ Technical Sub-Committee (GTAB/TSC)

      • Beneficiary unit shall continue commercial production for atleast 3 years after availing CLCSS subsidy

     

    Procedure of disbursement

     

      • MSMEs are required to approach Prime Lending Institution (PLI) (i.e. banks/financial institutions) and file an online application. (see https://bit.ly/2MWGFh2 for more details)

      • This application is sent to Nodal Agency (Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) who then sends it along with it recommendation to office of Development Commissioner, MSME.

      • After processing and subject to availability of funds, due approval is accorded and concurrence is also obtained from Internal Finance Wing.

      • Thereafter, funds are released to Nodal Agencies, and then from Nodal Agency to PLIs where the account of MSE is operated.

      • Subsidy amount is released with each loan instalment in a manner proportionate to the amount of term loan disbursed (on pro-rata basis)

     

    Performance of CLCSS

     Performance of Credit Linked Capital Subsidy Scheme (CLCSS) from the inception (2001-02) upto 2016-17 is given below:

    Year

    No. of MSE Beneficiaries

    Total Amount of subsidy released

    (Rs. Crore)

    2001-02

    to 2011-12

    16295

    854.05

    2012-13

    5713

    343.79

    2013-14

    6279

    421.48

    2014-15

    7246

    448.85

    2015-16

    5047

    322.44

    2016-17

    4011

    256.53

    2017-18

    (Upto 30.09.2017)

    4027

    257.39

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    Source

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    With all her knowledge Alankrita went to “kiraana vale uncle” to let him know the good news. She gave him all of the information she had gathered and asked him to just give a missed call on their number and get an easy-peesy solution to all his doubts and enquiries.

     

    A week or two later on her next visit to the kiraana shop, Alankrita discovered construction going on, she went closer and found the uncle supervising. With a warm heart he greeted and thanked her for the tip about Prest Loans as the loan was already sanctioned and he was expanding his shop with a fully exclusive modern look. He gave her a chocolate and told her to wait only a couple of weeks after which she could start calling him “badi dukaan vale uncle”.

     

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