Discuss the key roles and responsibilities of MUDRA Bank throwing light on three-pronged classification of the borrowers. Do you see any conflict in its roles versus responsibilities. Discuss?

Model Answer:
Micro Units Development and Refinance Agency’s aim is to finance the Non – Corporate Small Business Sector (NCSBS), thus encouraging entrepreneurs and small business units. Categorized into three schemes:

• ‘Shishu’ Scheme, loans up to Rs 50,000
• ‘Kishor’ Scheme, loans above Rs 50,000 and up to Rs 5 Lakh
• ‘Tarun’ category, loan of above Rs 5 Lakh and up to Rs 10 Lakh

Conflict of roles may be on four points

• Mudra Bank versus regulation of micro-finance: The bank will provide refinance and will regulate the micro-finance also. So, this is a conflict of role.
• Financial Challenges: Currently, the shortfalls in PSL go to RIDF. The same money would be shared with Refinance Fund managed by MUDRA. But since, domestic banks are doing well in giving out PSL loans, this might create crunch of funds.
• Yet another refinancing agency? There are several well doing refinancing agencies such as NABARD, SIDBI. So, we should focus on strengtheing them or create yet another such organization.

Promotion of Shadow Banking? Mudra bank seems to be promoting shadow banking as its operations are not under the administration and regulation of Reserve Bank of India (RBI).  This has its own problems. (200 words)