Launched in 2015, the Pradhan Mantri Mudra Yojana (PMMY) aims to provide hassle-free microcredit up to ₹10 lakh to small and micro entrepreneurs. The scheme seeks to overcome challenges such as the absence of collateral, procedural hurdles, and limited access to institutional finance that small businesses, especially in manufacturing, trading, and services, often encounter.
The genesis of PMMY can be traced back to the 2013 NSSO Survey, which uncovered that around 5.77 crore small business units were operating without formal financial backing. These mostly sole proprietorships struggled to secure timely credit due to issues like inadequate creditworthiness, complex procedures, and a lack of financial literacy. This prompted the government to create a targeted intervention to support the informal micro-sector.
Mudra loans are categorized to match the growth stage and funding requirements of enterprises:
An additional category, Tarun Plus, extends support to entrepreneurs who have repaid earlier loans successfully, offering up to ₹20 lakh.
Member Lending Institutions (MLIs) provide loans under PMMY. These include scheduled commercial banks, regional rural banks, non-banking financial companies (NBFCs), and microfinance institutions (MFIs).
To simplify and expedite loan applications, several digital innovations have been introduced. Portals such as Jan Samarth and PSB Loans in 59 Minutes allow borrowers to apply online, using digital data for swift decision-making. Additionally, many banks have their own apps and platforms to minimize paperwork and physical visits.
For borrowers lacking credit history or collateral, the Credit Guarantee Fund, managed by the National Credit Guarantee Trustee Company Ltd (NCGTC), provides loan guarantees to lenders. This encourages lenders to confidently extend credit to high-risk groups.
As of now, over 52 crore loans amounting to ₹33.5 lakh crore have been sanctioned. A significant 20% of these beneficiaries are new entrepreneurs. The scheme has witnessed notable growth in the Kishore and Tarun categories, which constitute 65% of the total sanctioned amount.
PMMY has played a crucial role in financial inclusion by targeting disadvantaged groups. Over 50% of Mudra loans have been approved for SC/ST/OBC beneficiaries, and 68% have been granted to women entrepreneurs. The scheme has expanded institutional credit access to rural and marginalized populations, fostering self-reliance and entrepreneurship.
By facilitating easy credit access to micro and small businesses, PMMY aligns with the Atmanirbhar Bharat vision, supporting grassroots economic development. It promotes self-employment, reduces reliance on informal financial sources, and encourages entrepreneurship among vulnerable sections.
PMMY has significantly contributed to formalizing the informal economy, enhancing the financial ecosystem, and fostering livelihood generation. As more micro enterprises gain institutional access, it leads to increased employment, productivity, and GDP growth. This initiative is seen as a long-term investment in building a self-sustained entrepreneurial economy.
“The future belongs to those who prepare for it today.” Empowering micro-entrepreneurs through institutional finance sets the stage for India's inclusive and sustainable growth.
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