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Development of Micro, Small and Medium Enterprises through MUDRA Loans

with Special Reference to Manipur

Article · January 2018

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Volume 7, Issue 1 (January, 2018) UGC APPROVED Online ISSN-2277-1166

Published by: Abhinav Publication

Abhinav National Monthly Refereed Journal of Research in
Commerce & Management
Development of Micro, Small and Medium Enterprises
through MUDRA Loans with Special Reference to Manipur
Dr. Kshetrimayum Ranjan Singh
Assistant Professor
Manipur University, Canchipur, Imphal, India.
E-mail: kshetrirs@gmail.com

ABSTRACT
Major problem being encountered by the entrepreneurs in the non-corporate small business sector is
the lack of financial support from the organized financial sector. Out of the total bank credit, less than
15% are available to MSMEs Priority Sector Lending. Though there is huge potential, a vast part of
the non-corporate sector operates as unregistered enterprises. Banks were reluctant to give credit
facilities to the unregistered non-corporate business enterprises, but with the refinancing facility from
MUDRA Bank, within a short period of its introduction, 66,00,261 enterprises have been given loans
under PMMY with Rs. 45,948.98 Crores being sanctioned and Rs. 42,521.28 Crores being disbursed.
According to the NSSO Survey of 2013, there are 5.77 crore small business units, mostly
proprietorship, which run small manufacturing, trading or service activities. Majority of such units do
not get institutional finance. Providing access to institutional finance to such micro/small business
units would turn them into strong instruments for GDP growth and also employment generation.
Mainstreaming these enterprises will not only help in improving the quality of life of these
entrepreneurs but will also contribute substantially to job creation in the economy leading to income
distribution and reduction in poverty.
Under this initiative, in North East India and especially in Manipur too, banks which are the partners
of MUDRA Bank have started providing Mudra Loans under three schemes – Shishu, Kishore and
Tarun. There is a need to assess the impact of these financing to MSMEs in the state and the
mechanism through which the banks are selecting the beneficiaries. It can be said that with the
introduction of this scheme, a great change is about to come especially in the development of Micro,
Small and Medium Enterprises.
The present study “Development of Micro, Small and Medium Enterprises through MUDRA Loans
with Special Reference to Manipur” will mainly focus on objectives of the PMMY Schemes, distinctive
features of this initiative, present status of the schemes in all the state and suggestions for the effective
implementation of the schemes.
Keywords: Mudra Loans, PMMY, Micro Business Units, MSMEs, Economic Development
INTRODUCTION
Major problem being encountered by the entrepreneurs in the non-corporate small business sector is
the lack of financial support from the organized financial sector. Out of the total bank credit, less than
15% are available to MSMEs. Though there is huge potential, a vast part of the non-corporate sector
operates as unregistered enterprises.
According to the NSSO Survey of 2013, there are 5.77 crore small business units, mostly
proprietorship, which run small manufacturing, trading or service activities. Majority of such units do
not get institutional finance.
Available online on www.abhinavjournal.com 55
 Abhinav National Monthly Refereed Journal of Research In
Commerce & Management
Banks were reluctant to give credit facilities to the unregistered non-corporate business enterprises, but
with the refinancing facility from MUDRA Bank, within a short period of its introduction, 84,39,389
enterprises have been given loans under PMMY with Rs. 28,16,33,523 Crores being sanctioned and
Rs. 28,16, 29,770 Crores being disbursed.
Table No. 1: Size of MSMEs in India (in Millions)
Year Registered Unregistered Total Units
2006-2007 1.5 (6%) 24.6 (94%) 26.1
2009-2010 1.8 (6%) 28.0 (94%) 29.8
Source: MSME Census, Ministry of MSME, Annual Reports, 2009-2010
It is seen that majority of the MSMEs are unregistered in India. There is a need for special effort to
make them registered and bring them under monitored and regulated. This can be achieved with the
introduction of this PMMY where such a registration is compulsory.
Table No. 2: Percentage of Enterprises by Sources of Finance
Sources of Finance Self Finance Through Institutional Through Non-
Sources Institutional Sources
Percentage of 92.8% 5.2% 2.1%
Enterprises
Source: MSMEs Census, 2007
It can be clearly observed that most of these MSMEs are self financing. There is a need for bank and
institutional financing in order to expand their businesses and bring growth in the volume of
businesses.
DEFINING MUDRA LOAN
As per Department of Financial Services, Ministry of Finance, Govt. of India’s letterNo.27/01/2015-
CP/RRB dated May 14, 2015 loans given to non-farm income generating enterprises in manufacturing,
trading and services whose credit needs are below Rs.10 lakh by all the Public Sector Banks, Regional
Rural Banks, State Cooperative Banks and Urban Co-operative Banks will be known as MUDRA
Loans under the Pradhan Mantri MUDRA Yojana (PMMY).
In addition to these Banks, NBFCs and MFIs operating across the country can also extend credit to this
segment, for which they can avail financial assistance from MUDRA Ltd., subject to their conforming
to the approved eligibility criteria.
Table No. 3: Initial Products/Schemes of MUDRA
1. Shishu Covering Loans up to Rs. 50,000/-
2. Kishor Covering Loans above Rs. 50,000/- and up to Rs. 5 Lakh
3. Tarun Covering Loans above Rs. 5 Lakh and up to Rs. 10 Lakh

OTHER SALIENT FEATURES & INNOVATIVE PRODUCTS UNDER MUDRA

1. Sector/Activity Focused Schemes - Land Transport Sector/Activity, Community, Social &
Personal Service Activities, Food Products Sector, Textile Products Sector/Activity
2. Micro Credit Scheme
3. Missing Middle Credit Scheme

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 Abhinav National Monthly Refereed Journal of Research In
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4. Refinance Scheme for RRBs/Co-operative Banks
5. Mahila Uddyami Scheme
6. Business loans for Traders and Shopkeepers
7. Equipment Finance Scheme for Micro Units
8. Innovative Offerings - MUDRA Card, Underwriting for Intermediaries, Business/Banking
Correspondent Model
MUDRA OFFERING – ADDRESSING THE NON-CREDIT GAPS
1. Supporting Financial Literacy
2. Promotion and Support of Grass Root Institutions
3. Creation of Framework for "Small Business Finance Entities"
4. Synergies with National Rural Livelihoods Mission
5. Synergies with National Skill Development Corporation
6. Working with Credit Bureaus
7. Working with Rating Agencies
8. The MUDRA Pricing
NO. OF PARTNERS FINANCIAL INSTITUTIONS UNDER MUDRA SCHEM
To begin with, based on eligibility criteria, MUDRA has enrolled 27 Public Sector Banks, 17 Private
Sector Banks, 27 Regional Rural Banks and 25 Micro Finance Institutions as partner institutions for
channelizing assistance to the ultimate borrower.
WHOM TO APPROACH AND CONTACT FOR MUDRA ASSISTANCE
Borrowers, who wish to avail assistance under Pradhan Mantri MUDRA Yojana (PMMY), can
approach the local branch of any of the above referred institutions in their region.
MUDRA has identified 97 Nodal Officers at various SIDBI Regional offices/Branch Offices to act as
“first contact persons” for MUDRA.
ADVANTAGES OF MUDRA LOAN
1. Formalizing the Informal
2. Apex Refinancer
3. MUDRA Architecture Indigenously Conceived for Indian context
4. Inclusion of Last Mile Financiers - a game changing idea
5. Help expand Access to finance for micro enterprises
6. Lower Cost of Finance
7. Credit plus Approach
8. Mass Entrepreneurship Development and Growth
9. Employment Generation, Higher GDP Growth
BANK-WISE SUMMARY OF MUDRA SCHEME IN MANIPUR
Various banks operating in the state have taken their own initiatives to support the scheme. They have
been rendering Mudra loans to various MSMEs of the state. An amount of 11,286.09 lakhs have been
disbursed as Mudra loans to various categories of Mudra Schemes. Manipur Rural Bank (MRB) stands
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 Abhinav National Monthly Refereed Journal of Research In
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to be the first in terms of amount of loans distributed to their MSME customers with a total amount of
Rs. 3,150.45 Lakhs, followed by SBI with 5,006. 58 Lakhs and BOI at the third position with an
amount of 457.26 Lakhs. There are seven banks who have not given any loan under the scheme. They
are DNB, AXB, BAND, IIB, YES, MPCB and MWCB. Total number of accounts provided the Mudra
Laons stands at 11377 Accounts for all the banks providing the Mudra Loans comprising of 8347
Accounts of Shishu, 2740 Accounts of Kishore and 290 Accounts of Tarun.
Table No. 5: Percentage of Mudra Loan according to Types of Loan
Sl. No. Loan Type Amount Disbursed Percentage to Total
1 Shishu 3,195.26 28.31
2 Kishore 5,857.14 51.90
3 Tarun 2,233.69 19.79
Total 11,286.09 100
Source: Calculated from SIDBI, Imphal Data
Out of the total amount of Rs. 11,286.09 Lakhs that has been disbursed, 28.31 per cent is that of
Shishu Loans, 51.90 per cent of Kishore Loans and another 19.79 per cent of Tarun Loans. Amount of
Mudra Loans given in the form Tarun has been the lowest and that of Kishore Loan being the highest
with 51.90 per cent. It has been observed that more than 60 per cent of loan has been given under
Shishu and Kishore and lesser amount of loan has been given under Tarun. It is expected that in the
years to come, amount being sanctioned to Tarun may increase though special emphasis has been
given to Shishu and Kishore loans at the initial years of the Mudra Scheme.
Table No. 5: Bank-Wise Summary of MUDRA Loan as on June 2017
(Amount in Lakhs)
BANK Shishu Kishore Tarun Total
A/C AMT A/C AMT A/C AMT A/C AMT
1 ALB 262 124.73 13 32.50 0 0.00 275 157.23
2 AXB 0 0.00 0 0.00 0 0.00 0 0.00
3 BAND 0 0.00 0 0.00 0 0.00 0 0.00
4 BOB 130 43.85 1 3.00 1 6.00 132 52.85
5 BOI 162 65.07 90 357.25 5 34.94 257 457.26
6 BOM 19 7.81 3 6.06 13 97.67 35 111.54
7 CNB 98 33.00 2 9.95 0 0.00 100 42.95
8 CBI 134 41.66 6 16.04 1 5.00 141 62.70
9 DNB 0 0.00 0 0.00 0 0.00 0 0.00
10 HDF 3 1.11 3 10.00 0 0.00 6 11.11
11 ICI 740 267.09 2 9.00 2 13.96 744 290.05
12 IDB 32 15.90 21 64.93 6 50.79 59 131.62
13 INB 0 0.00 2 1.80 0 0.00 2 1.80
14 IIB 0 0.00 0 0.00 0 0.00 0 0.00

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 Abhinav National Monthly Refereed Journal of Research In
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15 IOB 9 4.20 34 74.60 2 13.20 45 92.00
16 PNB 102 48.50 0 0.00 5 15.00 107 63.50
17 PSB 30 16.00 0 0.00 2 20.00 32 36.00
18 SBI 2049 882.35 1261 2660.20 187 1464.03 3497 5006.58
19 SYB 25 12.00 50 180.00 0 0.00 75 192.00
20 UBI 1050 390.78 272 795.54 3 21.00 1222 1122.32
21 UCO 130 41.50 2 10.00 1 10.00 133 61.50
22 UOB 11 5.50 39 40.38 1 7.30 51 53.18
23 VJB 137 58.29 14 38.66 0 0.00 151 96.95
24 YES 0 0.00 0 0.00 0 0.00 0 0.00
25 MRB 3224 1135.92 922 1539.73 61 474.80 4207 3150.45
26 IUCB 0 0.00 0 0.00 0 0.00 0 0.00
27 MSCB 0 0.00 3 7.50 0 0.00 3 7.50
28 MPCB 0 0.00 0 0.00 0 0.00 0 0.00
29 MWCB 0 0.00 0 0.00 0 0.00 0 0.00
TOTAL 8347 3195.26 2740 5857.14 290 2233.69 11377 11286.09
Source: SIDBI, Imphal
DISTRICT-WISE DISBURSEMENT OF MUDRA LOANS IN MANIPUR
From the below table it has been observed very clearly that Imphal West stands at the first rank in
terms of amount of loans disbursed under Mudra Scheme. It is followed by Imphal East with Rs.
1,126.05 Lakhs. Churachandpur district stands the 3rd highest Mudra loan providing district in the
state. Out of the newly created districts, Jiribam and Pherzawl do not have any record of providing
Mudra loans. Thoubal Districts and Senapati districts stand at 4th and 5th positions respectively.
Tamelong district recorded lowest distribution of Mudra loans among the old districts as banks in this
district has come under newly created Noney district.

Table No. 7: District-Wise Disbursement of MUDRA Loans in Manipur

Bank Shishu Kishore Tarun Total Rank
A/C AMT A/C AMT A/C AMT A/C AMT
Thoubal 536 165.52 286 745.39 8 56.99 830 967.90 4
Kakching 468 166.00 128 244.09 8 62.00 604 472.09 6
Chandel 52 24.50 69 181.57 7 48.61 128 254.68 9
Tengnoupal 44 20.41 37 63.73 4 28.00 85 112.14 12
Churachandpur 589 266.75 235 538.10 28 217.00 852 1021.85 3
Pherzawl 0 0.00 0 0.00 0 0.00 0 0.00 15
Senapati 262 128.40 221 570.70 20 162.20 400 776.30 5

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 Abhinav National Monthly Refereed Journal of Research In
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Kangpokpi 91 39.00 85 196.31 9 68.90 185 304.21 8
Imphal West 4455 1720.65 1254 2445.95 145 1144.95 5854 5311.55 1
Imphal East 1094 398.56 176 419.91 44 307.58 1314 1126.05 2
Jiribam 0 0.00 0 0.00 0 0.00 0 0.00 16
Bishnupur 408 119.21 118 192.56 12 96.26 538 408.03 7
Tamenglong 0 0.00 0 0.00 0 0.00 0 85 14
Noney 57 26.28 55 86.20 0 0.00 112 112.48 11
Ukhrul 141 44.98 63 147.63 4 31.20 208 223.81 10
Kamjong 150 75.00 13 25.00 1 10.00 164 110.00 13
Total 8347 3195.26 2740 5857.14 290 2233.69 11274 11286.09
Source: SIDBI, Imphal
EXPECTED OUTCOME OF THE MUDRA SCHEME
1. Expanding MSMEs’ business operations
2. Bringing the unregistered small businesses into the fold of registered or formal sector
3. Strengthening MSMEs’ financial positions and profitability
4. Safeguarding the MSMEs from being exploited by moneylenders
5. More entrepreneurship development by encouraging the youths to take up new enterprises
6. Contribution in solving the problem of unemployment
7. Paradigm shift in the choice of jobs
8. Growth in the GDP of this region and these MSMEs will turn out to be strong instruments in
building the economy of the region.
SUGGESTIONS FOR EFFECTIVE IMPLEMENTATION OF THE MUDRA SCHEME
1. There should be transparency and fairness in selecting the beneficiaries of the PMMY by the
partner banks, financial institutions and MFIs in the state.
2. Those MSMEs which have never before received any kind of financial assistance or loans from
organized financial institutions should be given priority while sanctioning loans.
3. Not only the financial assistance, but other specialized Developmental and Support Services
needed for the proper functioning and growth of these enterprises should also be extended.
4. There should be awareness programmes about the policy & schemes especially for the registered
as well as unregistered MSMEs so that they can get its benefits.
5. There should be easy and proper mechanism for enhancing the loans of those MSMEs having
good repayment records from Shishu to Kishore and then to Tarun.
CONCLUSION
If implemented fairly and effectively with coordinated efforts from all the concerned ministries and
departments, this new policy of MUDRA Bank and PMMY will certainly be a game changer for the
industrially backward region.

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 Abhinav National Monthly Refereed Journal of Research In
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It is right opportunity for both the existing as well as potential entrepreneurs of the state to develop
manufacturing as well as service industries in the light of India’s Act East Policy and opening up of
Eastern Gate by taking maximum benefit out of this policy.
By observing the trend of sanctioning loans under PMMY in the country and especially in Manipur
state, it can be said that it is a scheme which has never been unprecedented by any earlier schemes in
India.
REFERENCES
1. Cull, R., Davis, L.E., Lamoreaux, N.R., Rosenthal, J.L. (2006). Historical Financing of Small and
Medium Size Enterprises. Journal of Banking and Finance. 35-43.
2. Hallberg, K. (2001). A Market-Oriented Strategy for Small and Medium-Scale Enterprises. IFC
Discussion Paper # 48.
3. Venkatesh, J. and Kumari, R. L.(2015). Performance of Mudra Bank: A Study on Financial
Assistance to MSME Sector. International Journal of Research in Economics and Social Sciences.
72-79.
4. http://www.moneycontrol.com
5. http://www.business-standard.
6. http://www.mudra.org.in.

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