MUDRA Scheme: A Boon for Micro Enterprises in India

Context-

Pradhan Mantri MUDRA Yojana (PMMY) completed 10 years on April 8, 2025.

Introduction

India’s vast informal sector is home to over 6.3 crore micro and small enterprises (MSEs)—the backbone of rural and semi-urban employment. However, most of them lack access to formal finance. To address this gap, the Pradhan Mantri MUDRA Yojana (PMMY) was launched on 8th April 2015, under the aegis of the Micro Units Development and Refinance Agency Ltd. (MUDRA).

The scheme aims to “fund the unfunded”, promote financial inclusion, and boost grassroots entrepreneurship, especially among SC/ST, OBC, women, and minorities.

🎯 Objectives of the MUDRA Scheme

• Provide collateral-free institutional credit to non-corporate, non-farm small enterprises.
• Enable formalization of the informal sector.
• Promote inclusive growth by empowering weaker sections.
• Contribute to the broader missions of Make in India, Startup India, and Skill India.
• Generate self-employment and livelihood opportunities.

Loan Categories under PMMY

The scheme offers credit up to ₹10 lakh in three segments:

Category	Loan Limit	Purpose / Target Group
Shishu	Up to ₹50,000	For budding entrepreneurs/start-ups
Kishore	₹50,001 to ₹5 lakh	For businesses needing moderate capital
Tarun	₹5 lakh to ₹10 lakh	For expanding established enterprises

🏦 Implementation and Delivery Mechanism

• Loans are disbursed through a wide network of:
  • Public and private sector banks
  • Regional Rural Banks (RRBs)
  • Cooperative banks
  • Small Finance Banks
  • Non-Banking Financial Companies (NBFCs)
  • Micro Finance Institutions (MFIs)
• MUDRA Ltd. provides refinance support to lending institutions.

📈 Performance and Achievements (As of FY 2023–24)

• Total amount disbursed: ₹23.2 lakh crore
• Total number of loans sanctioned: Over 45.5 crore
• Share of women beneficiaries: ~68%
• Share of SC/ST/OBC beneficiaries: Over 50%
• Average ticket size of loan: ₹52,000 (FY23)

🔹 India now has the world’s largest micro-finance ecosystem due to MUDRA.

🌟 Why MUDRA is a Boon for Micro Enterprises

1. Financial Empowerment

• Enables first-time entrepreneurs to access formal credit.
• Helps build credit history and financial discipline.
• Reduces dependency on moneylenders and informal sources.

2. Employment Generation

• According to SBI Research (2022), PMMY created an estimated 1.12 crore jobs between 2015–2018 alone.
• Supports self-employment and local enterprise development.

3. Women-Led Development

• 7 out of 10 MUDRA borrowers are women, driving gender-inclusive growth.
• Enhances female labor force participation, especially in rural areas.

4. Boost to MSMEs and Informal Sector

• Aiding India’s 63+ million MSMEs, many of which are micro units.
• Supports enterprises in trade, manufacturing, services, transport, etc.

⚠️ Challenges and Criticism

• Rising NPAs (Non-Performing Assets): Estimated ~9.5% in MUDRA loans as per 2022 reports.
• Small ticket size often inadequate for scaling or upgrading technology.
• Lack of business support services or financial literacy among first-time borrowers.
• In some cases, political interference and over-targeting may lead to unsustainable lending.

🧭 Way Forward

• Introduce a credit guarantee framework for small loans under PMMY.
• Integrate with Digital India, UDYAM portal, and e-commerce platforms to support market access.
• Provide entrepreneurship training and mentorship, especially in tribal and backward areas.
• Ensure better credit appraisal, monitoring, and financial literacy drives.

CBL Practice Questions for Prelims

Consider the following with reference to MUDRA Yojana beneficiaries:

1. A large proportion of MUDRA loans have been availed by women.
2. The scheme covers only manufacturing and excludes services and trade.
3. The scheme is aimed at first-time borrowers without collateral.

Which of the above are correct?
A) 1 and 2 only
B) 1 and 3 only
C) 2 and 3 only
D) 1, 2, and 3

Answer: B
🔍 Explanation: PMMY includes services and trade as eligible activities.

CBL Mains Practice Question

How does the MUDRA scheme align with the vision of Atmanirbhar Bharat?

Chetan Bharat Learning is the best institute in Chandigarh for UPSC IAS ,PCS preparation. To know more about Chetan Bharat Learning’s Online & Classroom Courses, click on the following links: