This refers to the report "PM launches MUDRA to fund small biz" (April 9). When banks were nationalised in July 1969 and April 1980, one of the objectives was to give a boost to the neglected sectors of the economy. These were later came to be known as priority sectors and the central bank directed public sector banks (PSBs) to earmark certain percentage of credit to this sector. Currently, there are a number of state and central financial institutions that are supposed to finance this segment in a big way. Even then, a large chunk of the sector has not been covered by institutional finance.
Now, the MUDRA (Micro Units Development and Refinance Agency) Bank has been added to the list. It has been said that the initial corpus of the MUDRA Bank would be provided by banks from their priority sector lending shortfall. If MUDRA Bank encourages "indirect financing" by banks, that would go against the fundamental objectives for which these banks were taken over by the state.
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Now, the MUDRA (Micro Units Development and Refinance Agency) Bank has been added to the list. It has been said that the initial corpus of the MUDRA Bank would be provided by banks from their priority sector lending shortfall. If MUDRA Bank encourages "indirect financing" by banks, that would go against the fundamental objectives for which these banks were taken over by the state.
K V Rao Bengaluru
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number