The scheme was launched by Prime Minister Narendra Modi on 8th April 2015 to grant loans up to Rs. 10 lakhs to the non-farm small/micro enterprises, non-corporate. Under the schemes, the loans are designated as MUDRA loans under Pradhan Mantri Mudra Yojna PMMY. These loans are sanctioned by Regional Rural Banks, Commercial Banks, Microfinance Institutions, Small Finance Banks, and Non-Banking Financial Companies.
To utilize the benefits of the Pradhan Mantri Mudra Yojna (PMMY Scheme,) the individual concerned should be a citizen of India. The loans are mostly designed for people who hold business plans in a Non-Agricultural Sector with the following ways of income generation.
- Manufacturing and Production
- Processing and Development
- Trade and Commerce
- Or any other arena where the demand for credit is less than ₹10 lakhs.
Any Indian Citizen willing to avail of MUDRA Loans under the Scheme has to register themselves with either a Commercial Bank, MFI, or NBFCs. MUDRA under the PMMY scheme is not lent directly to individuals or micro-entrepreneurs.
The Mudra scheme has been designed in three parts- Shishu’, ‘Kishore’ and ‘Tarun’ based on the stage of development and financial needs of the concerned beneficiary micro-unit.
- Shishu- Under this part, a sum of up to Rs.50,00 is covered under the loan
- Kishore- A sum of Rs.50,000 to 5 lakh is guaranteed under “Kishore”
- Tarun- This guarantees loan amounts ranging between Rs. 5lakhs to 10 lakhs.
In this context, it also needs to be mentioned that the loans sanctioned under the PMMY are collateral-free loans.
Land Transport- Loans sanction for assisting in the purchase of vehicles for transport. The vehicles chosen could be used for both goods distribution or personal transport. Loans under this sector can be granted for purchasing E- rickshaws, Auto-rickshaws, taxis or Passenger cars, three-wheelers, good transporting vehicles, etc.
Service- Community, social or personal services comes under this category. Beauty salons, dry cleaning services, tailoring services, medical shops, Gyms, Garage, Automobile repairing shops, courier services, photocopying businesses, etc can be considered to constitute under this sector.
Food Production Sector- Loans are sanctioned under this category to strengthen and develop the small-scale food production industry in the country. Papads, pickles, jams/jellies manufacturing industries and agricultural production and preservation sector, sweet shops, service food centers, canteens, catering services, food cold chain industry, ice cream factories, bakeries, etc. -all come under this sector.
Textiles- The aim of granting loans under this sector is to support the numerous small-scale textile industry across the country, that produces garment and non-garment products as well to support the Handloom and power loom industry. Traditional embroidery handwork industries like knitting, dyeing, chikan work, mechanized garment and non-garment industries, small-scale accessories, and apparel industries fall under this sector.
Objectives of PMMY
- Funding the Potentials– To grant loans up to rupees 10 Lakhs to individuals who have a working business plan aimed at generating income mainly from a non-agricultural activity like processing, manufacturing, trading, or service sector related, but lacks the starting capital for the planned venture.
- Reducing Unemployment– PMMY offers great opportunities to help create newer sources of employment in the country, thereby increasing the overall GDP of India in the long run, by providing small-scale, micro-enterprises with initial credit facilities.
- Regulating and Surveilling the Microfinance institutions (MFI) – The formation of the MUDRA bank envisioned under this scheme, will greatly help to manage the network of microfinance institutions by constant regulations. The new registrations that will be done under this scheme will further strengthen the country’s banking institutions.
- Integrating the Informal economy into the Formal Economy – By offering new ventures of business, the scheme will on the one hand employ millions and on the other will broaden India’s overall tax base, because till today the informal economy of India remains untaxed and rarely monitored.
- Promotion of financial inclusion – PMMY creates a further step in fulfilling the vision of financial inclusivity in India. It aims to reach its credit delivery mechanism to the micro-businesses and industry even at the remotest corner of the country, with the help of information technology.
Impact and Achievements
In line with the scheme’s goal of financial inclusivity in India, loans have been disseminated to the disadvantaged and marginalized sections of society such as SC/ST/OBC borrowers. The scheme was also able to reach out to a wide range of small-scale women entrepreneurs. PMMY has also equally lent its focus on the new young entrepreneurs.
A survey supervised by the Ministry of Labour and Employment revealed that PMMY has helped in creating 1.12 crore net additional employment in the country, from 2015 to 2018. Out of those estimated 1.12 crore of increased employment, in the very positive development of outcomes, women accounted for 69 lakh (62%) of the net total.
PMMY, Ministry of Finance, Government of India
About the Author.
Anondeeta Chakraborty is Researcher at IMPRI. She has graduated with a Bachelor’s degree in Political Science from St.Xavier’s College (Autonomous), Kolkata, and is currently pursuing her Masters Degree in Politics with Specialization in International Studies from Jawaharlal Nehru University, New Delhi.