Understanding the Pradhan Mantri Mudra Yojana

Overview of the Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana (PMMY) is a pivotal government initiative launched on April 8, 2015. Its primary aim is to provide collateral-free institutional credit to small and micro enterprises. By facilitating access to credit through banks, NBFCs, and microfinance institutions, PMMY enables small entrepreneurs to secure loans without the burden of heavy collateral requirements.

Eligibility for Mudra Loans

Individuals with a viable business plan for small enterprises in sectors such as manufacturing, trading, services, or allied agricultural activities can apply for a Mudra loan. This scheme particularly benefits first-time entrepreneurs, self-employed individuals, and small business owners seeking working capital.

Categories of Mudra Loans

Mudra loans are classified into three categories based on funding requirements:

• Shishu: Loans up to ₹50,000 for startups and small businesses in their early stages.
• Kishore: Loans ranging from ₹50,000 to ₹5 lakh for businesses seeking expansion.
• Tarun: Loans between ₹5 lakh and ₹10 lakh for established businesses needing higher credit for growth.

Loan Disbursement Under PMMY

As of February 2025, ₹31.85 trillion has been disbursed from the allocated ₹32.61 trillion since the scheme's inception. This substantial disbursement showcases a strong demand for small business financing and highlights PMMY's role in enhancing credit accessibility for micro-enterprises.

Top States for Loan Disbursement

Among the states, the highest disbursement figures are:

• Tamil Nadu – ₹3.21 trillion
• Uttar Pradesh – ₹3.07 trillion
• Karnataka – ₹2.98 trillion
• West Bengal – ₹2.78 trillion
• Bihar – ₹2.77 trillion
• Maharashtra – ₹2.69 trillion

Recent Changes in the Union Budget 2024-25

In the recent Union Budget, the government announced an increase in the Mudra loan limit from ₹10 lakh to ₹20 lakh, effective October 2024. This change aims to provide enhanced credit availability for medium-sized enterprises that require more capital but face challenges in accessing traditional bank loans.

Contribution of PMMY to Economic Growth

The PMMY significantly bolsters India’s economic foundation by:

• Promoting Financial Inclusion: The scheme provides banking services to individuals traditionally lacking access to credit, especially in rural and semi-urban regions.
• Encouraging Entrepreneurship: PMMY has aided millions of small entrepreneurs in establishing and expanding their businesses, subsequently reducing unemployment.
• Supporting Women Entrepreneurs: A considerable portion of PMMY loans is acquired by women, promoting gender inclusivity in business.
• Boosting Job Creation: By supporting micro and small businesses, PMMY indirectly fosters employment opportunities across various sectors.
• Strengthening Rural Economies: Beneficiaries often come from rural areas, where formal credit access is minimal. PMMY enhances local economic activity.
• Reducing Dependence on Informal Credit: By offering collateral-free institutional loans, PMMY mitigates reliance on moneylenders charging exorbitant interest rates.

In essence, a developed nation thrives on the strength of its entrepreneurs and small businesses.

Frequently Asked Questions (FAQs)

Q1. What is the objective of the Pradhan Mantri Mudra Yojana?
Answer: The PMMY aims to provide collateral-free credit to small and micro enterprises, facilitating access to loans for entrepreneurs without heavy collateral requirements.

Q2. Who can apply for a Mudra loan?
Answer: Any individual with a viable business plan in manufacturing, trading, services, or agriculture can apply, especially first-time entrepreneurs and self-employed individuals.

Q3. What are the different categories of Mudra loans?
Answer: Mudra loans are categorized as Shishu (up to ₹50,000), Kishore (₹50,000 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh) based on the funding requirement.

Q4. How much has been disbursed under PMMY?
Answer: As of February 2025, ₹31.85 trillion has been disbursed under PMMY, highlighting the demand for small business financing since its launch.

Q5. What changes were made in the Union Budget 2024-25 regarding Mudra loans?
Answer: The loan limit was increased from ₹10 lakh to ₹20 lakh to enhance credit availability for medium-sized enterprises requiring additional capital.

UPSC Practice MCQs

Question 1: What is the primary aim of the Pradhan Mantri Mudra Yojana?
A) Provide loans for large enterprises
B) Support small and micro enterprises with collateral-free loans
C) Offer grants to startups
D) Facilitate international loans
Correct Answer: B