PM Mudra Yojana

Syllabus: Government Schemes

Source: FE

Context: Pradhan Mantri Mudra Yojana (PMMY) celebrated its 10th anniversary in April, 2025. Prime Minister of India and key ministers hailed the scheme’s role in financial inclusion and grassroots entrepreneurship.

About PM Mudra Yojana (PMMY):

• Launched: April 8, 2015

• Ministry: Ministry of Finance (implemented by MUDRA Ltd under SIDBI)

• Objective: To provide collateral-free credit up to ₹10 lakh to non-corporate, non-farm micro and small enterprises (MSEs)

• Extended Coverage: Loans now go up to ₹20 lakh under Tarun Plus category.

• Key Features

• Loan Types: Shishu (up to ₹50,000) Kishor (₹50,000–₹5 lakh) Tarun (₹5 lakh–₹10 lakh) Tarun Plus (₹10–₹20 lakh)

• Shishu (up to ₹50,000)

• Kishor (₹50,000–₹5 lakh)

• Tarun (₹5 lakh–₹10 lakh)

• Tarun Plus (₹10–₹20 lakh)

• Lending Institutions: SCBs, RRBs, NBFCs, MFIs, SFBs, Cooperative Banks

• No collateral required and nominal interest rates set by lending institutions as per RBI norms

• Focus on underserved groups: Women, SC/ST/OBC, minorities

Achievements in 10 Years (2015–2025)

• Loan Outreach: Over 52 crore loans sanctioned worth ₹32.61 lakh crore

• Rise in Loan Size: Average loan increased from ₹38,000 (FY16) to ₹1.02 lakh (FY25)

• Women Empowerment: 68% of loans disbursed to women Women’s average loan grew at 13% CAGR, reaching ₹62,679 Women-led startups showed higher job creation rates

• 68% of loans disbursed to women

• Women’s average loan grew at 13% CAGR, reaching ₹62,679

• Women-led startups showed higher job creation rates

• Social Inclusion: 50% of beneficiaries belong to SC/ST/OBC 11% of accounts held by minority communities

• 50% of beneficiaries belong to SC/ST/OBC

• 11% of accounts held by minority communities

• Shift in Lending Pattern: Kishor loans rose from 5.9% (FY16) to 44.7% (FY25) Increasing demand for higher credit indicates scaling up of enterprises

• Kishor loans rose from 5.9% (FY16) to 44.7% (FY25)

• Increasing demand for higher credit indicates scaling up of enterprises

• Credit Expansion: MSME lending rose from ₹8.51 lakh crore (FY14) to ₹27.25 lakh crore (FY24) MSME credit share in bank lending grew from 15.8% to nearly 20%

• MSME lending rose from ₹8.51 lakh crore (FY14) to ₹27.25 lakh crore (FY24)

• MSME credit share in bank lending grew from 15.8% to nearly 20%

• Geographical Spread: Tamil Nadu leads with ₹3.23 lakh crore disbursal, followed by UP and Karnataka Among UTs, J&K recorded highest disbursal: ₹45,816 crore

• Tamil Nadu leads with ₹3.23 lakh crore disbursal, followed by UP and Karnataka

• Among UTs, J&K recorded highest disbursal: ₹45,816 crore

• Global Recognition: IMF praised PMMY in multiple reports for promoting women-led MSMEs and inclusive entrepreneurship

• IMF praised PMMY in multiple reports for promoting women-led MSMEs and inclusive entrepreneurship

Limitations and Challenges

• Job Quality Concerns: Most enterprises supported remain low-scale or informal with limited job creation potential

• Underperformance in Tarun Loans: Higher loan categories (₹5–₹20 lakh) still account for a small share

• Dependence on Government Push: High reliance on public sector banks; low NBFC/MFI penetration in remote areas

• Risk of Over-indebtedness: Credit push without corresponding financial literacy may increase default risks in some regions

• Lack of Exit Strategy: Limited handholding or upskilling support post-credit disbursement hampers sustainability

Way Forward

• Focus on Enterprise Formalisation: Link PMMY with GST registration, e-commerce onboarding, and UDYAM portal

• Enhance Credit Monitoring: Real-time data integration and fraud detection to prevent ghost accounts

• Skill and Market Linkages: Integrate with Skill India and PM Vishwakarma for capacity building

• Encourage Private Players: Incentivise NBFCs and MFIs to deepen last-mile delivery in aspirational districts

• Promote Tarun Category Growth: Offer credit guarantee and interest subvention for scaling businesses

Conclusion:

In a decade, PMMY has democratized credit, enabling the transition from job-seekers to job-creators. It uplifted women, marginalised groups, and rural youth through accessible finance. Moving ahead, deeper structural reforms and credit support strategies are essential to maximise its transformational potential.

• Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (UPSC-2023)