Money & Banking
Mudra Bank's refinance scheme is a non-starter says Religare
Strict caps on onward-lending spreads have derailed Mudra Bank’s micro unit refinance scheme, with only Rs150 crore disbursed to banks and MFIs since April 2015 against the current corpus of Rs5,000 crore, says a report from Religare Capital 
 
Mudra Bank's micro unit refinance scheme has turned out to be a non-starter due to the strict caps on onward lending spreads, says a research report. According to a report from Religare Capital Markets Ltd, as against a current corpus of Rs5,000 crore, Mudra Bank has disbursed just Rs150 crore to banks and micro-finance institutions (MFIs) since April 2015. "The Reserve Bank of India (RBI)'s mandate that banks utilise Mudra funds to lend at base rates and non-banking financial companies (NBFCs) and MFIs restrict spreads to 6% and 10% renders the refinancing scheme untenable, considering the high operating and credit costs involved in unsecured microfinance lending," it said.
 
The RBI has fixed the rates at which Mudra Bank can lend funds under its refinance scheme for unsecured micro loans. For banks, this will be at cost of funds (COF) + 0.75%, for co-operative or regional rural banks at COF + 3.5%, and NBFCs or MFIs at COF + 4 to 6%. The central bank has also capped the spreads that banks, NBFCs and MFIs (Fig2) can charge borrowers if they avail of refinancing from Mudra. While banks have to lend at base rates, NBFCs and MFIs cannot earn spreads over 6% and 10% respectively, implying lending rates of 16-18% for NBFCs and 20-22% for MFIs. This renders Mudra refinancing unattractive due to the high operating and credit costs involved in unsecured microfinance lending.
 
 
The borrowing cost of NBFCs and MFIs is already at 10-11%, and even if they avail the refinance from Mudra Bank, there is little or no reduction in cost of funds for them. Religare said, "The government has not yet decided on the rates for borrowings and on-lending for small finance banks (SFB). If the on-lending rate is relaxed in order to attract more borrowers to the banking system, SFBs will benefit from higher growth and lower lending rates for micro loans."
 
Unused priority sector lending (PSL) funds of commercial banks will be used to set up Mudra’s Rs20,000 crore corpus. These funds will come at 6% interest, which will enable Mudra to refinance at a much cheaper rate to banks and NBFCs for on-lending. Religare said, the priority sector shortfall is about Rs30,000 crore per year and Mudra will have to compete with other agencies like National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank of India (SIDBI) for the allocation.
 
"Higher achievement of priority sector targets, poor loan growth and trading of PSL bonds could reduce the shortfall in the medium term, thereby restricting the availability of cheaper sources of funds. In addition, we believe that Mudra’s Rs20,000 crore corpus over the next five years will not suffice considering the large borrowing needs of small entrepreneurs. Clarity on market borrowings or borrowings through the international route is awaited – even if these materialise, Mudra’s cost of funds will be much higher," the research note said.
 
According to Religare, innovative credit guarantees may provide some relief to lenders. Mudra is proposing to give a credit guarantee for defaults on pools and to offer credit enhancement securitisation pools sold by NBFCs, MFIs and banks. The government has allocated Rs3,000 crore in budgetary support for this purpose and Mudra is finalising the scheme’s structure (fees and guarantee percentage). 
 
"In our view, this guarantee is most likely to apply only if the default is over and above the spread earned by banks, NBFCs or MFIs – not an attractive proposition for private banks and NBFCs," Religare concluded.
 
Mudra Bank was set up by the Indian government through a statutory enactment to refinance micro units under the Pradhan Mantri MUDRA Yojana (PMMY) scheme. It is a refinance agency and not a direct lending institution, set up to provide refinance support to intermediaries such as banks, MFIs and NBFCs for on lending. Mudra is a wholly-owned subsidiary of SIDBI and is currently registered with the RBI as an NBFC. Conversion to a bank will likely take place through a bill to be introduced in the Budget session of Parliament in 2016.

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National Cancer Institute at Jhajjar: PMO pushes but ministry delays?

The institute is slated to come up at the Jhajjar, Haryana campus of the All India Institute of Medical Sciences (AIIMS), about 60 km from Delhi, and will offer tertiary care facilities other than those meant for cancer

 

The Rs2,035-crore National Cancer Institute (NCI) - touted as one of the biggest government-run health projects in the country - has got a nudge from the Prime Minister's Office (PMO). The project was delayed by almost a year, but the PMO has directed that it should be completed before the September 2017 deadline. And there lies the catch - a key minister doesn't have the time for it.
 
The institute is slated to come up at the Jhajjar, Haryana campus of the All India Institute of Medical Sciences (AIIMS), about 60 km from Delhi, and will offer tertiary care facilities other than those meant for cancer.
 
AIIMS sources, however, say the delays have mainly been because of the inability to hold a meeting of the Institute Body headed by Health Minister J.P. Nadda to award the tender for the construction work. Such important decisions are taken by the Institute Body that is the apex decision-making panel for AIIMS. The Institute Body also chooses the governing body members. However, after the Narendra Modi government assumed power last May, the new Institute Body has not even been appointed.
 
After a meeting chaired by principal secretary to the prime minister Nripendra Misra, on July 11, 2015, a decision was taken that: "The project of NCI should be viewed as a flagship health institute project and the construction should be completed six months before the targeted date of completion." IANS has seen the document.
 
The meeting was attended by secretary of the union health ministry, the chief secretary of the Haryana government, the AIIMS director, the joint secretary in charge of AIIMS in the health ministry, the AIIMS deputy director (Administration), the chief of the Institute Rotary Cancer Hospital (IRCH) at AIIMS; the chirmen of NBCC and HSCC chairman and the head of the AIIMS gastroenterology department.
 
A senior health ministry official, however, told IANS: "The ministry had taken a decision to grant total autonomy to the new AIIMS. Greater powers in terms of administration and financial decisions should be given to the institute bodies. That is why a decision has been taken that the contract for the campus in Jhajjar should be granted by the institute body and not the ministry. This will give them a sense of empowerment, responsibility and help in expediting the decision making in the long run. The AIIMS Institute Body is all set to be constituted within a fortnight and the contract for the construction will be granted immediately after that by the newly appointed body.
 
"This would help to make the AIIMS project run more efficiently in a time-bound manner," the official added.
 
The parliamentary standing committee on health and family welfare, on August 11, had also observed that the development of AIIMS campus-II in Jhajjar, Haryana was an ambitious project and would require not only massive allocation of funds but also sustained monitoring.
 
The committee wanted health ministry to ensure that development of the project was executed within the initial estimated project costs and time-frame to avoid any time-overruns and cost escalation.
 
The cabinet approved the project on December 26, 2013. About 300 acres has been earmarked, out of which 32 acre has been allotted for the National Cancer Institute (NCI), which has been assigned more than 700 beds.
 
But the question remains whether the project will be accomplished within the targeted date. The proposed date of the start of the project was January 1, 2014 and the duration of the project was 45 months. The target date of completion is September 2017.
 
"The award of work for the institute block at NCI should have been completed within nine months (September, 2014) of the start of the project (January 1, 2014) and the construction should have started in the tenth month (October, 2014). It's been more than year-and-a-half now, but still the award of work has not been done. How is it possible to complete the work within the stipulated time-frame," asked an AIIMS source, not wishing to be identified.
 
The decision to award the tender to Shapoorji Pallonji & Company Ltd. was taken in the standing finance committee (SFC) meeting of AIIMS on May 26, but the approval had to come from the highest decision-making bodies of AIIMS. The Institute Body has to convene to constitute the Governing Body of AIIMS. The Institute Body meeting is now likely to take place in October.
 
"The award of work has been stalled for four months, even if it was decided in the last SFC meeting. The Institute Body meeting which was scheduled on August 6 was cancelled by Health Minister J P Nadda. By doing so, the project is getting delayed further," the source added.
 
Reacting to this, the AIIMS deputy director (Administration), V. Srinivas said: "Statutory clearances from the Ministry of Environment & Forests, National Board of Wildlife, State Board of Wildlife, Haryana, and the Departments of Town & Country Planning, Fire, Irrigation, Electricity Board, PHED and Labour in the government of Haryana for the National Cancer Institute have been received. All efforts are being made to ensure timely commencement of works and adherence to prescribed timelines."
 
The other institutes proposed for the Jhajjar campus are National Cardiovascular Centre, General Purpose Hospital, National Transaction and Training Centre, National Centre for Child Health, Digestive Diseases Centre, National Institute of Geriatrics, Comprehensive Rehabilitation Centre and National Institute of Nursing Research.
 
* Project cost Rs 2,035 crore 
 
* Building Services: Rs 933 crore
 
* Special works (furniture, IT, infrastructure): Rs. 136 crore
 
* Medical equipment: Rs.713 crore
 
* Project consultancy fee: Rs.100 crore
 
* Recurring cost for first year of operation: Rs.153 crore
 
Manpower requirements
 
* Administrative staff: 61
 
* Clinical staff: 1,080
 
* Research staff: 88
 
* Nursing staff: 498
 
* Engineering staff: 55
 
* Staff outsourced: 923
 
* Total staff: 2,705
 
Number of beds required at NCI: 710
 

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Mayo Clinic to set up cancer institute in Odisha

Apart from treatment of cancer patients, the institute will also carry out research and training programme in cancer

 

US-based cancer institute Mayo Clinic will set up a national-level cancer institution in Odisha for treatment of cancer patients, an official said on Monday.
 
Apart from treatment of cancer patients, the institute will also carry out research and training programme in cancer. This was decided on Monday, when Debabrat Mukhopadhyaya, representative of the clinic met Odisha Chief Minister Naveen Patnaik at state secretariat here.
 
"Mayo clinic in the US, a top global cancer research institute, is interested in setting up a cancer research institute in Odisha," said a release from the Chief Minister's Office.
 
The chief minister assured that the state government would provide all possible support for materialising the project.
 
The All India Institute of Medical Sciences (AIIMS) and Council of Scientific and Industrial Research (CSIR) will also provide support for setting up the state-of-art cancer research institute in Odisha, said the release. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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