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Pradhan Mantri Mudra Yojana — Govt Scheme for UPSC | Vaidra
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Pradhan Mantri Mudra Yojana

Ministry of FinanceactivefinancialLaunched: 2015-04-08

About the Scheme

PM Mudra Yojana (PMMY) provides loans up to ₹20 lakh to non-corporate, non-farm micro/small enterprises. Completed 10 years in April 2025. Cumulative: 52+ crore loans; ₹32.61 lakh crore disbursed. Budget 2024-25 introduced new Tarun Plus category (₹10-20 lakh). 68-70% women beneficiaries.

Target Beneficiaries: 52+ crore loans; ₹32.61 lakh crore disbursed since 2015; 68-70% women beneficiaries; MSMEs, small traders, artisans, shopkeepers

Implementing Agency: Public Sector Banks, Private Sector Banks, Regional Rural Banks, Cooperative Banks, Micro Finance Institutions (MFIs), Non-Banking Financial Companies (NBFCs)

Official Website →

✦Key Features

  • Shishu: loans up to ₹50,000; Kishore: ₹50,001-5 lakh; Tarun: ₹5-10 lakh; Tarun Plus: ₹10-20 lakh (Budget 2024-25)
  • No collateral required for Shishu and Kishore loans
  • 52+ crore loans sanctioned; ₹32.61 lakh crore disbursed cumulatively since 2015
  • 68-70% women beneficiaries; special focus on SC/ST/OBC entrepreneurs
  • Mudra Card (RuPay debit card) for working capital up to ₹10,000
  • Credit Guarantee Fund for Micro Units (CGFMU) provides guarantee cover
  • Tarun Plus category introduced Budget 2024-25 — for repeat Tarun borrowers

✓Eligibility Criteria

  • Indian citizens.
  • Individuals engaged in non-farm sector income-generating activities.
  • Micro and small enterprises including proprietorships, partnerships, and small companies.
  • Applicants must not be defaulters to any bank or financial institution.

★Benefits

  • Access to formal institutional credit for micro-enterprises.
  • Support for business expansion, modernization, and working capital needs.
  • Promotion of entrepreneurship and self-employment.
  • Financial inclusion for marginalized and underserved sections of society.

▶Application Process

  • Approach a bank, MFI, or NBFC that offers Mudra loans.
  • Fill out the Mudra loan application form.
  • Submit the required documents along with the business proposal.
  • Undergo the bank's assessment and verification process.
  • Upon approval, the loan amount is sanctioned and disbursed.

₹ Budget Allocation

3000

Funding Ratio (Centre:State): Refinance provided by MUDRA Ltd. (subsidiary of SIDBI) to Banks/NBFCs/MFIs.

Exam Relevance

GS Paper: GS3

Prelims Relevance8%
Mains Relevance9%

Syllabus Tags

MSMEFinancial InclusionEntrepreneurshipSelf EmploymentGS3

Historical Context

Launched on April 8, 2015, to fund the 'unfunded' micro-enterprises.

Exclusion Criteria

  • Corporate sector companies.
  • Agricultural loans (though allied activities like poultry/dairy are included).
  • Loans exceeding ₹20 lakh.

Sub-Schemes

Kishore Loans

For entrepreneurs in early stages of growth.

Tarun Plus (up to 20L)

For established micro-units requiring expansion capital.

Challenges

  • Rising NPAs in public sector banks under the Mudra category.
  • Bankers' reluctance to lend without collateral despite government guarantees.
  • Limited hand-holding/mentorship for first-time entrepreneurs.
  • Diversion of funds for personal consumption instead of business.

Reforms & Recommendations

  • Integration of Mudra loans with GST data to assess creditworthiness.
  • Introduction of a 'Credit Guarantee Enhancement' for the Tarun Plus category.
  • Mandatory financial literacy training for Shishu loan applicants.

Performance Statistics

Metric

52.49 Crore

Source: PIB/FinMin

Metric

₹32.61 Lakh Crore

Source: PIB

Metric

Approx 70%

Source: FinMin

Critical Analysis

PMMY has democratized credit by replacing 'collateral-based lending' with 'character-based lending'. Its biggest success is the financial inclusion of women (70% of loans) and SC/ST/OBC categories. However, the 'Shishu' category (up to 50,000) dominates the volume, suggesting that most loans are used for subsistence entrepreneurship rather than scalable business growth. Rising Non-Performing Assets (NPAs) in the Mudra portfolio, especially in the Shishu segment, pose a risk to the banking sector. The 2024 reform doubling the limit to ₹20 lakh for 'Tarun Plus' is a strategic move to help successful micro-units transition to small enterprises.

SDG Linkages

SDG 5 (Gender Equality)SDG 8 (Decent Work)

Constitutional Backing

Article 39(b) (Ownership and control of material resources to subserve common good).Article 19(1)(g) (Right to practice any profession, trade or business).

Technology Used

Udyam Assist PlatformMudra Card (Rupay)Digital lending through PSB59minutes

Success Stories

Mudra Success in Self-Help Groups

Key Takeaways

  • Three tiers: Shishu (up to 50k), Kishore (50k-5L), Tarun (5L-10L).
  • New 'Tarun Plus' category (10L-20L) introduced in 2024.
  • No collateral required.
  • Mudra Card for working capital needs.

Previous Year Questions

2023
2023

Probable Questions

Pradhan Mantri Mudra Yojana has been a game-changer for 'bottom-of-the-pyramid' entrepreneurship. Critically evaluate.

MediumHigh

Mains Answer Fodder

Use in GS3 for 'Inclusive Growth', 'Employment Generation', and 'MSME Sector'. It highlights the 'funding the unfunded' philosophy. It is a key tool for 'Economic Empowerment' of women.

Convergence Schemes

  • Stand Up India
  • PM-SVANidhi
  • PM Vishwakarma

Sector Tags

Financial InclusionMSMEEntrepreneurship