Pradhan Mantri MUDRA Yojana (PMMY)—How Does It Help SMEs?

Numerous loans and schemes are available from the government, banks, NBFCs, and other lending institutions, each targeting small and medium-sized businesses across various sectors. Among them, the Pradhan Mantri MUDRA Yojana (MUDRA Loan) stands out as the most popular.

Budget 2025 Update: 

MUDRA loans will be provided for homestays to facilitate employment-led growth in tourism.

What is MUDRA?

MUDRA (Micro Units Development and Refinance Agency Limited) is a non-banking finance company (NBFC) that promotes micro and small enterprises. It provides refinancing to banks, NBFCs, and microfinance institutions (MFIs) to help them support these enterprises under the Pradhan Mantri MUDRA Yojana.

What is a MUDRA Loan?

Pradhan Mantri MUDRA Yojana (PMMY), launched on 8 April 2015, provides loans up to Rs.10 lakh to non-farm, non-corporate micro and small businesses. The scheme encourages youth entrepreneurship by offering financial support to these enterprises.

The programme is segregated into three different schemes: 

1. Shishu: The programme offers loans of up to Rs.50,000. 
2. Kishor: The programme provides loans between Rs.50,000 and Rs.5 lakh. 
3. Tarun: This scheme offers loans between Rs.5 lakh and Rs.10 lakh.

The MUDRA schemes—Shishu, Kishor, and Tarun—cater to different growth stages and funding needs of enterprises, with a focus on the Shishu scheme initially. They emphasize both the sector and business activities. Borrowers can apply for MUDRA loans at local bank branches, NBFCs, MFIs, or online through the Udyamimitra portal (www.udyamimitra.in). Be cautious of scams, as the scheme does not involve agents or intermediaries.

What is the purpose of a MUDRA Loan?

MUDRA loans aim to generate income and offer employment opportunities to the needy. Besides, the loans are provided for the following purposes:

• Working capital through MUDRA cards
• Business loan for shopkeepers, vendors, traders, and others
• Financing for equipment purchase for micro-units
• Loans to purchase travel vehicles for commercial use
• Financing for agriculture-allied non-farm income-generating activities, such as bee-keeping, pisciculture, and poultry farming
• Loans to purchase tractors, tillers, and two-wheeler vehicles used for commercial purposes only

Here are a few more examples of activities that one can do with the financed funds, segregated based on the sectors:

• Food Products: Under PMMY, one can secure funding for activities, such as preparing pickles, papad, jam/jelly; preserving agricultural produce; setting up sweet shops, small food stalls, catering/canteen services, cold storages, ice-making units, ice cream making units, and more.
• Textile Sector: Funds will be provided for activities related to garment products, such as handloom, powerloom, khadi, chikan work, zari and zardozi work, handwork and embroidery, apparel designing, traditional dyeing and printing, knitting, cotton ginning, stitching as well as for non-garment products, such as furnishing accessories, bags, and vehicle accessories.
• Community, Social, and Personal Services: Activities, such as setting up salons, beauty parlours, boutiques, tailoring shops, dry cleaning, gymnasiums, cycle and motorcycle repair shops, medicine shops, photocopying and DTP shops, and courier agencies, are eligible for receiving funding. 

What is a MUDRA Card?

A MUDRA card is a debit card issued to beneficiaries of MUDRA loans, allowing access to loan amounts. It enables multiple withdrawals and credits to manage working capital and minimize interest. The card also digitizes transactions, helping track the borrower's credit history. It is valid nationwide for cash withdrawals at ATMs/micro ATMs and payments at point-of-sale machines.

How is it connected with the Make in India campaign?

What does the future roadmap look like?

There are many challenges that non-corporate small businesses face apart from credit constraints. A few such problems are:

• Knowledge gaps
• Skill development gaps
• Information asymmetry
• Financial/business literacy
• Lack of growth orientation

MUDRA is planning to take up an initiative to offer developmental and support services to the target audience in future. MUDRA looks forward to becoming a market maker and builds a society with capacities to deliver efficient and sustainable results.