MUDRA Loan Disadvantages
Micro Units Development Refinancing Agency has so many benefits. However the agency has some unclear details that make people confused about the scheme. There are some points/disadvantages that can be discussed about MUDRA. They are as follows:
Not clear whether RBI is supervising it or not:
Since MUDRA loan was announced no single notification has said whether the entire process is supervised by Reserve Bank of India or not. As there is no clear picture of active involvement of RBI in this it can be assumed that RBI isn’t leading this PM Modi-led loan scheme. In this case if MUDRA grows and takes over micro financing market in India in future, it will be risky investment for many.
At this moment all the leading micro financing institutions are led and supervised by RBI in India. If RBI does not get involved actively with MUDRA then regulations on and for the micro financing agencies will be diverse. It may create shadow banking in the financial system.
Already there exists handful of micro financing companies in India
MUDRA loan agency sounds convincing, there is no doubt in that. However a doubt still remains as there are already many micro financing companies existing at this moment in this country. Not only that central government run schemes are also there to finance micro and small scale industries in India. In this situation launching a new micro financing scheme has left many doubts. It can be assumed that this may lead to unregulated banking or financing system in India.
MUDRA is no different from any other micro finance institution
MUDRA is launched at a time when already a fully fledged micro financing industry is operating with many firms under it. All of them have diverse sort of benefits that are given to the applicants. MUDRA is not much different from all of them. Under MUDRA scheme same type of loan, interest and repayment facilities are available like any other micro financing agency at this moment in India. Hence MUDRA is not looking like a promising scheme at this moment.
Not a clear picture of time and process under MUDRA
As said that no such confirmation has come out that RBI will regulate MUDRA, it has been in news that MUDRA may work with Post Office lending process as it will be easier to reach more people. However there is no fixed time of processing is mentioned by the authority. That is no one knows how much time will take to process the loan after getting a sanction. It confuses people more about the scheme. Also if it really associate with Post Office then it shall be slower process than any other micro financing company.
Better options for Micro financing exist in economy
Generally these micro financing institutions operate in areas where people can’t get access t banks. Rather than having so many micro financing institutions if the banks can extend their channels and networks to the remote areas to reach out people it would be helpful. MUDRA can reach out to many people as it is following the post office network. However it cannot be as trusted as a bank can be.
MUDRA Card, Portfolio Credit and Credit Enhancement under MUDRA
MUDRA offers a MUDRA Card with which the user can make payments. It will work as a Credit Card in banks. The limit for the payment in MUDRA card is Rs. 20, 000/- which is quite less than the other financing agencies offer. This can be a disadvantage of the scheme. Apart from that, some details are not given in MUDRA. There is no information regarding portfolio credit as well as credit enhancement in MUDRA. It is still not clear that how the credit enhancement will take place.