Sunday, June 28, 2015

Mudra Bank ATM Cards-One step forward, two steps backward

          Government of India is making all efforts to migrate cash transactions to Safe eTransactions. The ‘Draft Proposals For Facilitating Electronic Transactions’ invites suggestions from general public to increase the number of Safe eTransactions in our country.

          In this respect, the proposal of Mudra Bank to issue  ATM Cards to enable Loan beneficiaries to withdraw loan amount through cash is a retrograde step.

8        (i)       MUDRA Card
-         Going forward, MUDRA would look at improving the offerings basket by looking at innovative ideas like a pre-loaded MUDRA Card, say with an assessed value.
-         The credit limit available on MUDRA Card could be 20% of the loan limit sanctioned to the enterprise, with a maximum credit limit on the card being 10,000/-. The principal issuer will be MUDRA and credit risk of upto 20% of the card portfolio could also be covered under the Credit Guarantee Scheme of MUDRA. The remaining risk would remain with the MFI partners.
-         The card offering will help provide pre-approved credit line to the members by providing a card that can be utilized to purchase raw materials and components, from registered producers on an online platform.
-         The card could be linked with Pradhan Mantri Jan Dhan Yojana Savings Account of the borrower and the drawals could also be enabled through the Bank’s ATM network for meeting the immediate liquidity problems of the micro enterprise.

Instead only digital modes of transfer should be allowed. All business associates of MUDRA Loan beneficiaries should be encouraged to open Bank Accounts/Post Office Saving Bank Accounts/eWallets.

          This would enable direct credit into the respective accounts and cash transactions can be discouraged.

          As the MUDRA card would be RUPAY enabled, online transactions can also be safely executed.

          In fact the complete loan disbursement has to done in digital mode only, nowhere cheques or cash should be involved.