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The Centre may relax the eligibility criteria for non-banking finance companies (NBFCs) under the MUDRA, which could help increase the uptake of loans under the scheme.
Experts believe the existing norms are focussed on large NBFCs whereas it is the small- and medium-sized ones that would be more suited for refinancing under the Micro Units Development and Refinance Agency (MUDRA) scheme.
Cap on margin
“The cap on margin makes MUDRA unattractive for large NBFCs. But there are over 11,000 small and medium NBFCs that can be harnessed for the scheme,” said Raman Aggarwal, Chairman, Finance Industry Development Council.
The Finance Ministry and MUDRA are understood to have held discussions with stakeholders as well as the RBI on the norms. “There are two issues that need review: the internal norms for NBFCs and the RBI provisions for the sector,” said an official, adding that discussions are on to explore how wider margins can be given to NBFCs for refinancing under MUDRA. At present,there is a 6 per cent interest cap for NBFCs over the MUDRA refinance rate.
The Centre is looking to ease norms for registering NBFCs under the scheme as well. Officials said a decision is likely in a few months.
The flagship scheme, which provides loans up to ₹10 lakh to small businesses, is among the Centre’s initiatives to boost employment amidst claims that economic growth is not generating sufficient jobs.
Noting that NBFCs can be a “powerful vehicle” for delivering loans under the MUDRA scheme, Union Minister Arun Jaitley had, in his Budget speech, said the Centre would review the refinancing policy and eligibility criteria for them under the scheme.
However, NBFCs have played only a small part under MUDRA. According to the Agency’s annual report, of the total loans worth ₹3,783.20 crore sanctioned under the scheme in FY16, refinance assistance to NBFCs amounted to just ₹250 crore. Similarly, in FY17, refinance through NBFCs was just ₹549 crore compared to the ₹3,708.94 crore sanctioned under the scheme.
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