‘MUDRA’ bank is the real game changer, says Vaidyanathan

http://www.newsroompost.com/184951/mudra-bank-real-game-changer-says-vaidyanathan/

New Delhi, April 8:

MudraR Vaidyanathan, a renowned professor of finance and control at the Indian Institute of Management, Bangalore (IIM-B) says that the Micro Units Development Refinance Agency (MUDRA) bank launched today is the real game changer and may increase the GDP by one to two per cent. He is also of the opinion that it will alter the way, the Indian economy functions. Author of the famous book titled ‘India Uninc’ – about the Unincorporated Sector in the Indian economy, Vaidyanathan spoke to newsroompost.com about this initiative of the Narendra Modi government:

Newsroompost: Prime Minister Narendra Modi has launched MUDRA bank today. What is your take on this initiative?

R Vaidyanathan: This is the real game changer. It is good that the government has thought about those people who contribute to more than 50 per cent of our economic activity. It is a serious attempt by the government to facilitate funding the ‘unfunded and integrating the unintegrated’. This will definitely alter the way the Indian economy functions.

Newsroompost: Will you elaborate a bit more on ‘MUDRA’ bank initiative?

R Vaidyanathan: It will impact our financial markets and that is the most important fact about this. This will alter the face of the un-organised sector in India. Small traders like vegetable vendors, barbers, etc. are the non corporate sector which contribute to about 50 per cent of the GDP. But unfortunately they do not get adequate funding, as the banks lend only 30 per cent to this sector. So, now these unfunded entities will be funded.

Newsroompost: What about the integration of unintegrated that you spoke about?

R Vaidyanathan: Actually, our financial markets are segmented. There are banking institutions on the one side, and there are other money lenders on the other side, which also include private operators and chit funds. The non-corporate sector is funded by the latter more than the former. There is a need to integrate our financial markets. MUDRA bank will serve that purpose. It will integrate all those in the un-organised sector under an umbrella.  The other benefit of this will be that the cost of operation will also come down. MUDRA is going to focus on small vendors with its refinancing activity. It will integrate the markets.

Newsroompost: How significant step will it be for the economy?

R Vaidyanathan: As I said it would definitely change the way India’s economy functions. If it goes as per the plan, it will increase the GDP by one to two per cent. It is the non-company sector which is growing at eight per cent but does not get credit for accelerating growth. This will be addressed by MUDRA now. Significantly, it will bring into mainstream those sectors which are not part of the system at present.

Newsroompost: There are other banks in the market in the money lending business. Will they be impacted?

R Vaidyanathan: No. They will continue to do their jobs as they are doing at the moment. MUDRA is responsible for regulating and refinancing all micro-finance institutions which are in the business of lending to micro or small business entities engaged in manufacturing, trading and service activities. The bank would partner with state/regional level coordinators to provide finance to last mile financier of small/micro business enterprises.

Newsroompost: Farmers’ plight is the main focus now-a-days with this farming community under huge distress due to debt and other related problems. Can MUDRA also help farmers out?

R Vaidyanathan: Actually, I don’t know about this feature of it. But as far as I think the refinancing facility may be available for the certain activity of the farmers. They can borrow money for hiring or purchasing machinery which are used for cultivation and other agricultural activity. They can get financial support for renting a tractor or purchasing it.

 

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