The Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme launched by the Government of India on 8th April 2015, with the vision of “Funding the Unfunded.”
It aims to empower micro and small entrepreneurs who often struggle to get financial support from traditional banking systems due to lack of collateral.
Under this initiative, loans of up to ₹20 lakh are provided to non-corporate and non-farm small enterprises engaged in manufacturing, trading, services, and allied agricultural activities. These loans are provided through banks, microfinance institutions (MFIs), and non-banking financial companies (NBFCs).
The scheme has been instrumental in promoting financial inclusion, entrepreneurship, and employment generation, particularly in rural and semi-urban India.
Why was PMMY Launched?
Before PMMY, many small business owners and self-employed individuals found it difficult to access formal credit. They had to rely on moneylenders, often at high interest rates.
Recognizing this gap, the government introduced the Pradhan Mantri Mudra Yojana to provide collateral-free micro-credit to small entrepreneurs, helping them grow their businesses and contribute to India’s economy.
- Providing institutional credit to small businesses lacking access to formal financial systems.
- Promoting self-employment and reducing dependence on informal lending sources.
- Encouraging inclusive growth by focusing on women, SC/ST, and OBC entrepreneurs.
- Formalizing the informal sector by integrating small enterprises into the banking network.
What is MUDRA and its Role in PMMY?
The term MUDRA stands for Micro Units Development and Refinance Agency Ltd. It is a financial institution set up under the Ministry of Finance and functions as a subsidiary of SIDBI (Small Industries Development Bank of India).
MUDRA does not directly lend to entrepreneurs. Instead, it refinances the loans extended by banks, MFIs, and NBFCs to micro and small businesses.
This ensures that lending institutions have adequate funds to continue extending loans at affordable interest rates.
- Refinance Support: Provides refinance to banks and financial institutions for on-lending to micro units.
- Credit Facilitation: Encourages collateral-free lending under the PMMY framework.
- Development Support: Offers capacity building, financial literacy, and training programs.
- Monitoring and Supervision: Ensures proper implementation and credit flow through MUDRA Nodal Officers in banks.
- Credit Guarantee: Works with the Credit Guarantee Fund for Micro Units (CGFMU) to protect lenders from default risks.
As of 2025, Shri S. Ramann, the Chairman of SIDBI, also heads MUDRA Ltd.
Check Out: Complete List of Important Schemes for NABARD Grade A Exam
What are the Categories of MUDRA Loans?
To cater to different business needs and growth stages, PMMY loans are divided into four categories:
| Category | Loan Amount | Purpose | Stage of Business |
| Shishu | Up to ₹50,000 | For start-ups or new ventures needing initial capital | Early stage |
| Kishore | ₹50,001 – ₹5 lakh | For existing businesses seeking expansion or working capital | Growth stage |
| Tarun | ₹5 lakh – ₹10 lakh | For well-established enterprises aiming to scale up operations | Established stage |
| Tarun Plus (New Category – 2024) | ₹10 lakh – ₹20 lakh | For enterprises that have successfully repaid Tarun loans and seek higher capital | Advanced stage |
Who can Apply for MUDRA Loans?
The eligibility criteria under PMMY are broad to ensure inclusion.
Any Indian citizen engaged in income-generating non-farm activities can apply. This includes:
- Small business owners
- Shopkeepers and traders
- Artisans and craftsmen
- Food processors and small-scale manufacturers
- Service providers such as transport operators, repair shops, or salons
- Agriculture-allied businesses, such as dairy, poultry, and fisheries
Eligible Borrower Types
- Individuals
- Proprietorship firms
- Partnership firms
- Private and Public Limited Companies
- Other legally registered entities
Applicants must have a viable business plan demonstrating the intended use of funds for income generation.
Get ready to crack government job exams with leading educators
What is a MUDRA Card?
The MUDRA Card is a RuPay debit card issued to borrowers after loan approval. It allows easy access to working capital and digital transactions.
Key Features of MUDRA Card
- Functions like an ATM-cum-debit card.
- Enables cash withdrawal and Point of Sale (POS) transactions.
- Comes with an overdraft facility, allowing flexible repayment based on business income.
- Promotes cashless business operations, aligning with the Digital India initiative.
What are the Key Features of the PMMY Scheme?
The Pradhan Mantri Mudra Yojana stands out due to several unique and beneficial features:
- Collateral-Free Loans: No security or guarantor is required.
- Low Interest Rates: Interest is linked to the Marginal Cost of Lending Rate (MCLR) as per RBI guidelines.
- No Processing Fees: Especially for Shishu category loans.
- Credit Guarantee Coverage: Provided under the CGFMU to protect lenders.
- No Minimum Loan Limit: Entrepreneurs can borrow even small amounts.
- Inclusive Financing: Prioritizes women, SC/ST, OBC, and minority entrepreneurs.
- Digital Integration: Online application and disbursal mechanisms through portals and mobile apps.
What Steps have been Taken to Improve Scheme Implementation?
Over the years, several initiatives have been introduced to enhance efficiency and reach of PMMY:
- Online Application Platforms like Udyamimitra and PSB Loans in 59 Minutes simplify loan processing.
- MUDRA Mitra App provides information and helps applicants find suitable lenders.
- Simplified Forms: Reduced documentation and streamlined procedures.
- Nodal Officers: Dedicated officers in banks to monitor PMMY operations.
- Interest Subvention: A 2% interest rebate for prompt repayment of Shishu loans.
- Public Awareness Campaigns: Nationwide initiatives to promote the scheme among rural entrepreneurs.
What are the Achievements of the PMMY Scheme?
As of 2025, PMMY has become one of the most successful government financial inclusion programs.
- Over 52 crore loans sanctioned, worth ₹32.61 lakh crore since inception.
- Average loan size increased from ₹38,000 in FY16 to ₹1.02 lakh in FY25.
- 68% of beneficiaries are women, promoting gender equality.
- 51% of loans have gone to SC/ST/OBC entrepreneurs.
- Shishu loans dominate, supporting first-time entrepreneurs.
- NPA rate reduced from 4.77% in FY21 to 3.4% in FY24.
- Top-performing states: Tamil Nadu, Uttar Pradesh, Karnataka, West Bengal, Bihar, and Maharashtra.
This scheme has led to the creation of over 8 crore new entrepreneurs, significantly contributing to India’s MSME ecosystem and job creation.
Also Check: List of Government Schemes of India
What is the Future Vision MUDRA 2.0?
Building on the success of MUDRA 1.0, the government envisions MUDRA 2.0, with the following enhancements:
- Expanded Scope: Wider outreach, especially in rural and aspirational districts.
- Enhanced Credit Guarantee: A stronger Enhanced Credit Guarantee Scheme (ECGS) to minimize lender risk.
- Financial Literacy Programs: Promoting budgeting, credit management, and digital literacy.
- Mentorship and Support: Providing guidance and market linkage to entrepreneurs.
- Monitoring & Evaluation: Real-time tracking of loan disbursement, utilization, and repayment through digital dashboards.
- Impact Assessment: Regular socio-economic evaluations to assess the scheme’s effectiveness.
MUDRA 2.0 aims to strengthen the entrepreneurial ecosystem and support India’s transition to a self-reliant, employment-driven economy.
How has PMMY Impacted India’s Economy?
The PMMY has had a transformative impact on India’s micro-enterprise landscape:
- Empowered marginalized communities through easy credit access.
- Boosted rural self-employment, reducing migration to cities.
- Strengthened the MSME sector, which is a major contributor to GDP and job creation.
- Encouraged women entrepreneurship, contributing to inclusive growth.
- Formalized informal businesses, expanding the taxpayer base.
Key Takeaways
| Aspect | Details |
| Scheme Name | Pradhan Mantri Mudra Yojana (PMMY) |
| Launch Year | 2015 |
| Launched By | Prime Minister Narendra Modi |
| Implementing Body | Ministry of Finance |
| Nodal Institution | MUDRA Ltd. (Subsidiary of SIDBI) |
| Loan Limit | Up to ₹20 lakh (with Tarun Plus) |
| Loan Categories | Shishu, Kishore, Tarun, Tarun Plus |
| Eligible Beneficiaries | Small and micro enterprises in non-farm sectors |
| Collateral Requirement | None |
| Credit Guarantee | CGFMU |
| Major Beneficiaries | Women, SC/ST/OBC, Small Traders |
| Loan Disbursed (till 2025) | ₹32.61 lakh crore |
| Primary Objective | Funding the unfunded and promoting entrepreneurship |
Questions Based on PMMY
- When was the Pradhan Mantri Mudra Yojana launched?
a) 2014
b) 2015
c) 2016
d) 2017
e) 2018 - What is the full form of MUDRA?
a) Micro Units Development and Refinance Agency
b) Micro Urban Development and Rural Agency
c) Mutual Development and Refinance Agency
d) Managed Unit for Development and Refinance
e) None of the above - Which institution manages MUDRA Ltd.?
a) NABARD
b) RBI
c) SIDBI
d) NITI Aayog
e) Ministry of MSME - What is the loan limit under the Shishu category?
a) ₹10,000
b) ₹25,000
c) ₹50,000
d) ₹75,000
e) ₹1 lakh - The newly introduced ‘Tarun Plus’ category offers loans up to:
a) ₹10 lakh
b) ₹15 lakh
c) ₹20 lakh
d) ₹25 lakh
e) ₹30 lakh - What is the interest subvention for prompt repayment of Shishu loans?
a) 1%
b) 2%
c) 3%
d) 4%
e) None - What is the main objective of PMMY?
a) Subsidizing large industries
b) Providing housing loans
c) Funding the unfunded
d) Financing agriculture only
e) Reducing imports - Which of the following is NOT a feature of PMMY?
a) Collateral-free loans
b) Loans up to ₹20 lakh
c) Loans to micro enterprises
d) Mandatory collateral security
e) Credit Guarantee under CGFMU - What percentage of PMMY loan accounts are held by women?
a) 50%
b) 55%
c) 60%
d) 68–69%
e) 70% - Which states have received the highest Mudra loan disbursements?
a) Delhi and Punjab
b) Gujarat and Odisha
c) Tamil Nadu, UP, Karnataka, West Bengal, Bihar, Maharashtra
d) Rajasthan and Assam
e) Kerala and Haryana
Also Read:
Answer Key:
| Question No. | Correct Answer |
| 1 | 2015 |
| 2 | Micro Units Development and Refinance Agency |
| 3 | SIDBI |
| 4 | ₹50,000 |
| 5 | ₹20 lakh |
| 6 | 2% |
| 7 | Funding the unfunded |
| 8 | Mandatory collateral security |
| 9 | 68–69% |
| 10 | Tamil Nadu, UP, Karnataka, West Bengal, Bihar, Maharashtra |
- MISHTI Scheme, India’s Initiative to Restore Mangrove Ecosystems
- National Green Hydrogen Mission Features, Objectives, and Benefits
- Paramparagat Krishi Vikas Yojana, Transforming India’s Organic Farming
- Mission on Integrated Development of Horticulture NHM and HMNEH
- Swachh Bharat Mission, India’s Journey Towards Cleanliness and Hygiene
- SAGY, A Step Towards Holistic Development of Indian Villages
Priti Palit, is an accomplished edtech writer with 4+ years of experience in Regulatory Exams and other multiple government exams. With a passion for education and a keen eye for detail, she has contributed significantly to the field of online learning. Priti’s expertise and dedication continue to empower aspiring individuals in their pursuit of success in government examinations.