8 Years of PMMY: Know how it's Bridging the Credit Gap for Small Businesses

NEW DELHI- The Pradhan Mantri MUDRA Yojana (PMMY) was launched on 8th April 2015 by Prime Minister Shri Narendra Modi with the aim to facilitate easy collateral-free micro-credit of up to Rs.10 lakh to non-corporate, non-farm small and micro-entrepreneurs for income generating activities. The loans under PMMY are provided by Member Lending Institutions (MLIs), i.e., Banks, Non-Banking Financial Companies (NBFCs), Micro-Finance Institutions (MFIs) and other financial intermediaries.

Upon marking the successful 8th anniversary of the PMMY, Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman said, “Brought under the visionary leadership of Prime Minister Shri Narendra Modi, the scheme has enabled easy and hassle-free access to credit to micro-enterprises and has helped a large number of young entrepreneurs establish their businesses."

In reference to the PMMY data, Smt. Sitharaman said, “Since the launch of the scheme, as of 24.03.2023, about Rs.23.2 lakh crore has been sanctioned in 40.82 crore loan accounts. About 68% of accounts under the scheme belong to women entrepreneurs and 51% of accounts belong to entrepreneurs of SC/ST and OBC categories. This demonstrates that easy availability of credit to the budding entrepreneurs of the country has led to innovation and sustained increase in per capita income.”

Highlighting indigenous growth through MSMEs, the Finance Minister said, “The growth of MSMEs has contributed massively to the “Make in India” programme as strong domestic MSMEs lead to increased indigenous production both for domestic markets as well as for exports. The PMMY scheme has helped in the generation of large-scale employment opportunities at the grassroots level and also has proved to be a game changer while boosting the Indian economy.”

On the occasion, Union Minister of State (MoS) for Finance Dr Bhagwat Kisanrao Karad said, “The PMMY scheme aims to provide collateral-free access to credit in a seamless manner to micro-enterprises in the country. It has brought the unserved and under-served sections of society within the framework of institutional credit. The government policy of promoting MUDRA has led millions of MSME enterprises in the formal economy and has helped them to get out of the clutches of money-lenders offering very high-cost funds.”

As we celebrate the 8th anniversary of providing financial inclusion through the pillars of Pradhan Mantri MUDRA Yojana (PMMY), let us glance through some of the major features and achievements of the Scheme:

The implementation of financial inclusion programme in the country is based on three pillars, namely,

• Banking the Unbanked
• Securing the Unsecured and
• Funding the Unfunded

These aforesaid three objectives are being achieved through leveraging technology and adopting multi-stakeholders’ collaborative approach, while serving the unserved and underserved as well.

One of the three pillars of FI - Funding the Unfunded, is reflected in the Financial Inclusion ecosystem through PMMY, which is being implemented with the objective to provide access to credit for small entrepreneurs.

Features

• The loans have been divided into three categories based on the need for finance and stage in maturity of the business.  These are Shishu (loans up to Rs.50,000/-), Kishore (loans above Rs.50,000/- and up to Rs. 5 lakh), and Tarun (loans above Rs.5 lakh and up to Rs.10 lakh). 
• Loans under PMMY are provided to meet both term loan and working capital components of financing for income generating activities in manufacturing, trading and service sectors, including activities allied to agriculture such as poultry, dairy, beekeeping, etc. 
• The rate of interest is decided by lending institutions in terms of RBI guidelines.  In case of working capital facility, interest is charged only on money held overnight by borrower.
• Achievements under Pradhan Mantri Mudra Yojana (PMMY) as on 24.03.2023
• More than 40.82 crore loans amounting to Rs.23.2 lakh crore have been sanctioned since launch of the Scheme.  Approximately 21% of the total loans have been sanctioned to New Entrepreneurs.
• Approximate 69% loans of the total number of loans have been sanctioned to Women Entrepreneurs & 51% loans have been sanctioned to SC/ST/OBC categories of borrowers.

Interest Subvention of 2% on prompt repayment of Shishu loans extended under PMMY for a period of 12 months to all eligible borrowers’

Announced by the Finance Minister on 14.05.2020 under Aatma Nirbhar Bharat Abhiyan. The Scheme was formulated as a specific response to an unprecedented situation and aimed to alleviate financial stress for borrowers at the ‘bottom of the pyramid’ by reducing their cost of credit.
The Scheme was operational till 31.08.2021.
Rs.636.89 crore have been disbursed by SIDBI to MLIs for onward credit of subvention amount into accounts of borrowers.
Credit Guarantee Fund for Micro Units (CGFMU)

Credit Guarantee Fund for Micro Units was set up in January 2016 under the aegis of the National Credit Guarantee Trustee Company Ltd. (NCGTC), a wholly-owned company of Government of India, to provide guarantee to:
Loans extended to eligible micro units under Pradhan Mantri Mudra Yojana (PMMY) up to Rs.10 lakh, by Banks/ Non-Banking Financial Companies (NBFCs)/ Micro Finance Institutions (MFIs)/ other financial intermediaries;
Overdraft loan amount of Rs. 5,000 (enhanced to Rs.10,000 in Sep, 2018) sanctioned under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts; and Self Help Group (SHG) portfolio between Rs.10 lakh to Rs. 20 lakh (w.e.f. 01.04.2020).

About Pradhan Mantri Mudra Yojana

Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of Government of India. The scheme facilitates micro credit/Loan up to Rs. 10 lakh to income-generating micro-enterprises engaged in the non farm sector in manufacturing, processing, trading or service sector. MUDRA supports Financial Intermediaries to extend loans to the non-corporate, non-farm sector income generating activities of micro and small entities.

These Micro and small entities comprises of millions of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban

The loans under MUDRA scheme can be availed only through banks and lending institutions which include:

• Public Sector Banks
• Private Sector Banks
• State operated cooperative banks
• Rural banks from regional sector
• Institutions offering micro finance
• Financial companies other than banks

Benefits-
The benefits under the scheme has been classified under three categories as 
'SHISHU', 'KISHOR' and 'TARUN' to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur.