09 Apr A Decade of Growth with PM Mudra Yojana
This article covers “Daily Current Affairs” and the Topic. A Decade of Growth with PM Mudra Yojana
SYLLABUS MAPPING:
GS-3-Economic- A Decade of Growth with PM Mudra Yojana
FOR PRELIMS
What is the Pradhan Mantri MUDRA Yojana (PMMY)? Discuss about PMMY’s vision, purpose, and mission.
FOR MAINS
What are the Salient features of PMMY? and achievements of PMMY
Why in the News?
The Pradhan Mantri MUDRA Yojana (PMMY) was in the news recently as it marked the completion of 10 years since its launch in 2015. Prime Minister Narendra Modi hailed the scheme as a journey of “empowerment and enterprise,” highlighting its significant contribution to promoting entrepreneurship across the country. Under the scheme, over 52 crore collateral-free loans amounting to ₹33 lakh crore have been disbursed over the decade. Notably, nearly 70% of the loan beneficiaries are women, and around 50% belong to SC/ST/OBC communities, reflecting the scheme’s focus on inclusive growth. The MUDRA Yojana has also played a crucial role in supporting first-time business owners by providing credit of up to ₹10 lakh, and it generated over 1 crore jobs within the first three years of implementation. States like Bihar have emerged as frontrunners, with nearly 6 crore loans sanctioned, demonstrating a robust spirit of grassroots entrepreneurship.
What is Pradhan Mantri MUDRA Yojana (PMMY)?
Pradhan Mantri MUDRA Yojana (PMMY) is a flagship scheme launched by Prime Minister Shri Narendra Modi on 8th April 2015 with the objective of “Funding the Unfunded.” The scheme aims to provide collateral-free loans of up to ₹10 lakh (now increased to ₹20 lakh) to non-corporate, non-farm micro and small enterprises.
These loans are extended by Banks, NBFCs (Non-Banking Financial Companies), MFIs (Microfinance Institutions) and other financial institutions. The loans fall under three categories based on the stage of the business:
Shishu (up to ₹50,000)
Kishore (₹50,001 to ₹5 lakh)
Tarun (₹5 lahks to ₹10 lakh)
Now expanded with Tarun Plus (₹10 lakh to ₹20 lakh) for eligible repeat borrowers.
Mantri MUDRA Yojana (PMMY) Vision, Mission and Purpose
| Aspect | Details |
|---|---|
| Vision | To create an inclusive and sustainable entrepreneurial ecosystem by facilitating access to formal financial services for underserved and unserved micro-enterprises, thereby driving self-employment, income generation, and grassroots development. |
| Mission | To “Fund the Unfunded” by providing collateral-free institutional credit to micro and small enterprises, empowering first-generation entrepreneurs, women, and marginalized communities to become part of the economic mainstream. |
| Purpose | • Promote financial inclusion through easy access to credit. • Support non-corporate, non-farm micro businesses in manufacturing, trading, and services. • Generate employment and self-employment opportunities. • Bridge the credit gap with loans up to ₹20 lakh via formal financial institutions. • Empower SCs, STs, OBCs, minorities, and women with affordable credit. • Reduce dependence on informal lenders and promote financial discipline. |
Salient features of PMMY
| Feature | Details |
|---|---|
| Launch Date | 8th April 2015 |
| Implementing Agency | MUDRA (Micro Units Development and Refinance Agency) under the Government of India |
| Target Segment | Non-corporate, non-farm micro and small enterprises engaged in manufacturing, trading, processing, and services |
| Loan Amount | Collateral-free institutional credit up to ₹20 lakh |
| Loan Categories | – Shishu: Loans up to ₹50,000 – Kishor: Loans from ₹50,001 to ₹5 lakh – Tarun: Loans from ₹5,00,001 to ₹10 lakh – Tarun Plus (introduced in 2024): ₹10 lakh to ₹20 lakh (for eligible previous Tarun borrowers) |
| Collateral Requirement | No collateral required |
| Lending Institutions | Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), NBFCs, Micro Finance Institutions (MFIs), and other eligible financial institutions |
| Credit Guarantee | Coverage under the Credit Guarantee Fund for Micro Units (CGFMU) |
| Target Beneficiaries | First-time entrepreneurs, women, SC/ST/OBCs, minorities, small and micro-business owners |
| Objective | “Funding the Unfunded” – providing affordable credit to underserved entrepreneurs. |
| Support for Repeat Borrowers | Tarun Plus loans for those with a successful repayment history under the Tarun category |
| No Processing Fee | No processing fee for Shishu loans |
| Technology Support | Loan applications and tracking are enabled via digital platforms and online portals. |
Achievements Under PMMY
1. MSME Credit Boom A Stronger Business Ecosystem: Driven by Mudra’s impact, MSME lending rose from ₹8.51 lakh crore in FY14 to ₹27.25 lakh crore in FY24 and is expected to exceed ₹30 lakh crore in FY25. Its share in total bank credit increased from 15.8% to nearly 20%, enabling greater financial access in small towns and rural areas—boosting grassroots entrepreneurship and India’s self-reliant growth.
2. Financial Inclusion: Empowering Women: Women make up 68% of Mudra beneficiaries, highlighting the scheme’s role in promoting women-led enterprises. From FY16 to FY25, average loan disbursement per woman grew at a 13% CAGR to ₹62,679, and deposits at 14% to ₹95,269. States with higher women disbursement saw greater job creation, affirming Mudra’s impact on women’s economic empowerment and participation.
3. Financial Inclusion Reaching Marginalised Groups: PMMY has enabled 50% of SC/ST/OBC entrepreneurs and 11% from minority communities to access formal credit, promoting inclusive economic participation.
4. Progressive Lending: From Shishu to Tarun: Over 52 crore loans have been sanctioned, with Kishor loans rising from 5.9% in FY16 to 44.7% in FY25, reflecting a shift towards scaling up businesses. The Tarun category is also growing, supporting business expansion.
Still, the Issue persists
1. Rising NPAs: Non-performing assets under PMMY, especially in higher-ticket categories like Tarun, are increasing, raising concerns over credit quality and borrower repayment capacity.
2. Regional Imbalances: States like Tamil Nadu, Uttar Pradesh, and Karnataka dominate disbursals, while many backward and aspirational districts lag behind in both access and outreach.
3. Lack of Monitoring Mechanisms: There is inadequate tracking of loan utilization, leading to possible diversion of funds and limited evaluation of actual business outcomes.
4. Low Transition to Formalisation: Many micro units remain outside the formal economy, with limited adoption of GST registration, digital payments, or structured accounting.
5. Credit Not Always Leading to Business Scaling: A significant portion of loans are repeat or consumption-based rather than for genuine business expansion or productivity enhancement.
6. Dependence on Government Push: The scheme’s momentum is heavily dependent on policy initiatives and public sector banks, with limited private sector participation in some areas.
Way Forward
2. Boosting Awareness and Financial Literacy: Launch targeted awareness campaigns in underserved regions to ensure eligible entrepreneurs understand loan processes, repayment obligations, and financial planning.
3. Improving Regional Balance: Address geographic disparities by incentivizing lending in low-performing states and strengthening outreach through local institutions like Self-Help Groups and cooperative banks.
4. Capacity Building of Entrepreneurs: Introduce business development support services, mentoring, and training programs, particularly for first-time borrowers and women entrepreneurs.
5. Technology-Driven Monitoring: Leverage fintech and digital platforms to improve loan disbursement, track fund utilization, and ensure real-time monitoring for better accountability.
6. Encouraging Formalisation: Integrate Mudra beneficiaries with GST registration, Udyam portal, and digital payment ecosystems to promote formalisation and scale-up opportunities.
7. Impact Assessment and Feedback Mechanism: Conduct regular, independent impact studies and beneficiary feedback surveys to measure outcomes and fine-tune policy and implementation.
Conclusion
In ten years, Pradhan Mantri Mudra Yojana has consistently demonstrated the power of financial inclusion and the strength of grassroots innovation. Before 2014, access to credit often favoured the well-connected, while small entrepreneurs faced hurdles like complex paperwork or were forced to rely on informal finance. Banks handed out reckless loans to large corporates, while genuine borrowers lost access to credit. MUDRA stepped into this vacuum, offering a cleaner, inclusive alternative that gave everyone an equal chance. With over 52 crore loans sanctioned, the scheme has empowered women, SC/ST/OBC communities, and rural entrepreneurs by expanding access to formal credit. The rise in average loan size, the growing share of MSME credit, and the shift from micro to small enterprises reflect its growing impact. PMMY is not only fuelling self-employment and job creation but also strengthening India’s grassroots economy and advancing equitable growth.
Download Plutus IAS Current Affairs (Eng) 9th April 2025
Prelims Questions
Q. Consider the following statements regarding the Pradhan Mantri MUDRA Yojana (PMMY):
1. It provides collateral-free loans up to ₹20 lakh to micro and small enterprises.
2. Loans under PMMY are only available through Scheduled Commercial Banks.
3. The scheme classifies loans into Shishu, Kishor, and Tarun categories based on loan amount.
Which of the statements given above is/are correct?
A. 1 and 3 only
B. 2 and 3 only
C. 1 and 2 only
D. 1, 2 and 3
Answer: A
Mains Questions
Q. Critically examine the achievements and challenges of PMMY. Suggest measures to enhance its effectiveness.
(250 words, 15marks)
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