11 years of Pradhan Mantri Mudra Yojana (PMMY)

• The Ministry of Finance marked the 11th anniversary of Pradhan Mantri Mudra Yojana (PMMY) on April 8.

• With over Rs 40.07 lakh crore sanctioned to more than 57.79 crore MUDRA loan accounts, the scheme has proved to be an important milestone in giving wings to the aspirations of entrepreneurs, particularly those belonging to marginal sections of society.

• In these, over 12 crore accounts belong to new entrepreneurs. New entrepreneurs constituted 21 per cent of total loan accounts and accounted for a 30.09 per cent share of the total disbursed amount.

• Women borrowers accounted for 59.81 per cent of the total number of loan accounts, with a total share of 37.45 per cent in disbursed amount.

• The cumulative share of SC, ST, and OBC categories stood at 45.52 per cent in terms of loan accounts and 31.77% in terms of the total disbursed amount.

• Among all states, Uttar Pradesh recorded the highest loan disbursement at Rs 58,111 crore, followed by Bihar with Rs 54,064 crore, while Maharashtra ranked third at Rs 50,762 crore.

What is Pradhan Mantri Mudra Yojana?

• Pradhan Mantri Mudra Yojana (PMMY), an important aspect of financial inclusion,  is enabling the flow of credit to small businesses. In pursuance of the announcement in the Union Budget 2015-16, the Micro Units Development Finance Agency (MUDRA) Ltd was established as a wholly owned subsidiary of Small Industries Development bank of India (SIDBI).

• PMMY was launched on April 8, 2015, by Prime Minister Narendra Modi to facilitate easy collateral-free micro-credit of up to Rs 10 lakh to non-corporate, non-farm small and micro-entrepreneurs for income-generating activities.

• In the Union Budget 2024-25, the government announced an increase in the loan limit to Rs 20 lakh.

• These loans are given by commercial banks, regional rural banks (RRBs), Small Finance Banks, Micro Finance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs).

• Under the aegis of PMMY, MUDRA has created products namely, ‘Shishu’, ‘Kishore’, ‘Tarun’ and ‘Tarun Plus’ to signify the stage of growth or development and funding needs of the beneficiary micro unit or entrepreneur.

i) Shishu: It covers loans up to Rs 50,000 and is intended for very small or early-stage business activities. It typically supports individuals who are starting new enterprises or operating at a minimal scale, including activities such as small retail outlets, repair services, etc. The accessibility of the Shishu category loan includes entrepreneurs with no credit history or collateral. This provision helps even the most marginalised entrepreneurs to transform an idea into an actual business.

ii) Kishor: It covers loans above Rs 50,000 and up to Rs 5 lakh. This category is designed for new as well as enterprises that have already commenced operations and require additional funds for stabilisation, working capital or modest expansion of business activities.

iii) Tarun: It covers loans above Rs 5 lakh and up to Rs 10 lakh. It supports growing enterprises seeking to scale up operations, invest in equipment or increase production capacity.

iv) Tarun Plus: It covers loans above Rs 10 lakh and up to Rs 20 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category. The provision enables further expansion and progression to higher levels of enterprise activity.

• Mudra loans are extended for a wide range of activities that promote income generation and employment creation. 

These loans are primarily provided for:

i) Business loans for vendors, traders, shopkeepers and other service sector activities, such as community, social & personal services, food products, textiles, etc.

ii) Working capital loans through MUDRA cards.

iii) Equipment finance for micro units such as purchase of necessary machinery, equipment, etc.

iv) Transport vehicle loans for commercial use only such as auto rickshaws, small goods transport vehicles, three wheelers, e-rickshaws, etc.

v) Loans for agri-allied non-farm income generating activities such as pisciculture, bee keeping, poultry, livestock-rearing, grading, sorting, aggregation agro-industries, dairy, fishery, agri-clinics and agri-business centres, food & agro-processing, etc.

• The rate of interest is decided by lending institutions in terms of RBI guidelines. In case of working capital facility, interest is charged only on money held overnight by the borrower.

How PMMY helps in financial inclusion?

• Implementation of financial inclusion programme in the country is based on three pillars — ‘Banking the Unbanked’, ‘Securing the Unsecured’ and ‘Funding the Unfunded’. 

• ‘Funding the Unfunded’, is reflected in the financial inclusion programme through Pradhan Mantri Mudra Yojana (PMMY), which is being implemented with the objective to provide access to credit for small entrepreneurs. 

• PMMY focuses on the financial needs of all stakeholders, ranging from budding entrepreneurs to the hard-working farmers, through various initiatives of the scheme.

• It is a key initiative towards providing financial support to the marginalised and hitherto socio-economically neglected classes, PMMY has given wings to the dreams and aspirations of millions.