Interest Rate in Mudra Bank
By now almost everyone in this country is aware about the Mudra Bank Loan Yojana which was recently launched by India’s current Prime Minister, Mr. Narendra Modi. The whole idea behind the scheme boils down to one single objective:
“Provide funding the small and medium scale business units in India which can help to drive Indian economy towards a sustained growth trajectory.”
Why? While the Union Ministry has been busy talking about several things like organizing micro finance sector, funding the scarcely funded small and medium business in India and bla bla, all these are just superficial talks. Buried deep inside is one core objective:
India needs to become a global economic power.
Take examples of US and now China. US currently the biggest economy in world. China is about to overtake US economy by 2016. Very soon, we will see China rise as the greatest economic power of world. With US nose diving towards a catastrophic economic collapse, Eurozone countries already facing economic turmoil and Russia experience near-zero economic growth, the world is heading for a major power redistribution. World experts are look at China and new superpower of world and India as the counterbalance the same way Russia has been to USA.
Now the question is, ‘If India is to become a global superpower, what will she need?’ Military power is not the only thing that helps a country emerge as a superpower. It also needs a massive economy. Since Modi government took control of the reins India, the country has experience massive growth in military power. But Modi knows pretty well that the economy has to grow as well and he knows that if Indian economy is experience massive growth in coming decade, only thing that can help is a new era of capitalism.
How to achieve that? Well, turn your attention to small and medium business that have potential to emerge as big business houses. This is where Mudra Bank comes in handy. The idea is to provide funds to these business so that they grow quickly.
As the business grow, employment increases, income increases, lifestyle improves, demand grows, which in turn drives supply side of the economy. Also, as more indigenous companies come into existence, India’s reliance on exports decreases and imports grow. Everything is liked!
So, Mudra Bank was an extremely well-planned scheme. As far as the loans are concerned, Mudra aimed towards offering low-interest loans to businesses. The reason was simple! Low interest loans help to increase lending. Staying true to its promise, the loans under Mudra Bank loan Yojana are now offered at a paltry rate of 7% interest. Interestingly however, this 7% interest rate is applicable for microfinance institutions. In other words, Mudra Bank is lending at that rate to microfinance institutions. These institutions will then lend to end borrowers at a slightly higher rate.
This is table which shows interest rate offered by some of the banks.
|Mudra Loan Bank||Interest Rate|
|ICICI||11% – 12%|
|Corp Bank||11% – 11.9%|
|HDFC Bank||11% – 13%|
|PNB||11% – 13%|
Exactly how high? According to Jiji Memon, CEO of Mudra Bank, the lending rate decide by microfinance institutions will be dependent on the risk margin. Put in other words, it will depend on the credit worthiness of the borrowers and of course the nature of the business. A high-risk business owner may have to pay higher interest rate compare to a low-risk business owner. However, there will definitely be an outer limit to the interest rate which will be set by Mudra Bank. Anything higher than that set rate cannot be charged. That’s all! No further information is available currently.
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