Page 84 - MUDRA ANUBHAV

is ensured by strong backing of assets. Non-
Performing Assets (NPAs) is a very large problem
faced by the financial institutions. Asset based

Collaterals provide some comfort against the rising
NPAs to the FIs. Being a commercial institution,
FIs aim to ensure that the money they lend to
borrowers is well rewarded with appropriate interest

and is repaid in time. However, the mandate of no
collateral for MUDRA scheme is discouraging as
it increases the credit risk faced by these lending
institutions. Also, PMMY bears no processing fee,

which is a big opportunity cost to these institutions.

To provide some incentive and security to these
lenders, refinancing helps relieve some burden
off these institutions. Also, the portfolio credit

guarantee by way of National Credit Guarantee
Trustee Company Ltd. [NCGTC], is a very big
assistance to these institutions. A fund called
“Credit Guarantee Fund for Micro Units” [CGFMU]

has been created to guarantee all eligible loans.
Usually, high risk and low or no collaterals lending
bears higher cost to the borrower. These steps
ensure that the borrower is able to avail the funds

at reasonable prices. Empowering the Financial
institutions with credit rating framework is also one
of the steps by MUDRA which aids to the efficiency
of the scheme from the lenders’ perspective.

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