At an event organised as part of India's 75th Republic Day celebrations, I met an entrepreneur who shared how she had spent years stitching clothes on an old machine, earning just enough to get by, and with a small 'MUDRA Shishu' loan, how she upgraded her home-based activity into a small tailoring unit and began taking larger orders. Today, she runs a formal micro enterprise and employs three other women.
Another entrepreneur, who is from the north eastern region, spoke about candle-making. She used a 'Kishore' loan to invest in better material and designs. She has expanded her business and today even supplies raw materials to various units, ensuring quality and affordable supply among all these entrepreneurs, resulting in additional income for the business.
These anecdotal examples demonstrate the importance and impact of the 'Pradhan Mantri MUDRA Yojana' (PMMY), one of the largest credit outreach programmes for the micro enterprises across the world.
Also Read: Lenders provide loans worth Rs 34 lakh cr under Mudra Yojana: MoS Finance
PMMY is a flagship financial inclusion scheme launched by the prime minister on April 8, 2015. The aim of the scheme was to provide institutional collateral free credit to micro enterprises that had traditionally remained outside the formal banking ecosystem.
The scheme was designed to bridge a critical gap in India's financial ecosystem-the lack of institutional credit for micro enterprises, including small traders, artisans and self-employed individuals, which often operate in the informal sector. They form the backbone of India's economy, contributing significantly to employment and local economic activity. PMMY has been ensuring that even the smallest entrepreneur can access credit to start, grow and expand the enterprise.
MUDRA loans were initially structured into three categories-Shishu (up to ₹50,000), Kishore (₹50,000 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh).
Union Budget 2024-25 introduced the 'Tarun Plus' category, which extended the maximum loan limit under PMMY to Rs 20 lakh for those who had previously availed and successfully repaid Tarun loans. This enhancement rewards responsible borrowers, bridging the gap between micro-enterprises and the small enterprise segment, ensuring a continuum of credit availability.
MUDRA loans are collateral-free, thereby removing a significant barrier for credit access faced by most micro entrepreneurs. Backed by a credit guarantee scheme, the structure encourages lenders to extend credit without excessive fear of default.
Since its inception, the scheme has sanctioned over 57.62 crore loans totalling to ₹39.87 lakh crore and disbursed loans worth ₹ 38.97 lakh crore. Notably, around 66% of these loans are to women, empowering female entrepreneurship, while 49% of the loans have been sanctioned to SC/ST and OBC entrepreneurs.
Research from various institutions, including NITI Aayog, shows that many borrowers have reported increased income levels, business expansion, and enhanced employment generation, particularly in rural and semi-urban areas, while gradually moving away from informal sources of borrowing.
By bringing borrowers into the formal financial system, the scheme helps build credit histories and encourages financial discipline.
A notable recent development is the digital delivery of MUDRA loans which has significantly reduced turnaround time, improved transparency and enabled cash flow-based lending. By removing the need for formal physical documents, lenders can now analyse a borrower's financial requirements based on their digital footprints, such as UPI transactions, bank account statements, etc.
Also Read: Around 50% of Mudra accounts belong to SC, ST and OBCs; boosting financial independence: SBI Report
The average loan size has nearly doubled over time, with a significant rise in the loans sanctioned under the Kishor and Tarun categories, which together account for around 68% of the total sanctioned amount. This shift has helped to bridge the 'missing middle' gap, supporting enterprise growth by providing higher loan limits. As the scheme matures, its next phase will focus on enhancing the quality and sustainability of outcomes. This involves shifting from mere credit access to credit effectiveness, integrating loans with skill development and mentorship, leveraging digital data for better credit appraisal and creating a clear graduation pathway for enterprises to scale up.
Addressing credit quality concerns through intelligent monitoring systems, enhancing financial literacy, strengthening post-disbursement support and leveraging technology to reach deeper into underserved geographies will be the cornerstone of the next phase of PMMY. Linking credit with market access platforms and focus on emerging sectors such as green and digital enterprises will also be key to ensuring that MUDRA evolves into a robust and future-ready entrepreneurial ecosystem.
PM MUDRA Yojana today stands as one of India's most impactful financial inclusion initiatives. The scale of outreach, the strong participation of women, and the tangible improvements in income and employment underscore the significant progress achieved over the past eleven years. With the added momentum of digital credit delivery and ecosystem support, PMMY is well-positioned to deepen its impact. Building on its achievements, PMMY will continue to germinate and develop India's micro-enterprises and play a pivotal role in enabling an inclusive growth of the economy on our trajectory towards a Viksit Bharat 2047.
The author is secretary, Department of Financial Services, Government of India
Another entrepreneur, who is from the north eastern region, spoke about candle-making. She used a 'Kishore' loan to invest in better material and designs. She has expanded her business and today even supplies raw materials to various units, ensuring quality and affordable supply among all these entrepreneurs, resulting in additional income for the business.
These anecdotal examples demonstrate the importance and impact of the 'Pradhan Mantri MUDRA Yojana' (PMMY), one of the largest credit outreach programmes for the micro enterprises across the world.
Also Read: Lenders provide loans worth Rs 34 lakh cr under Mudra Yojana: MoS Finance
PMMY is a flagship financial inclusion scheme launched by the prime minister on April 8, 2015. The aim of the scheme was to provide institutional collateral free credit to micro enterprises that had traditionally remained outside the formal banking ecosystem.
The scheme was designed to bridge a critical gap in India's financial ecosystem-the lack of institutional credit for micro enterprises, including small traders, artisans and self-employed individuals, which often operate in the informal sector. They form the backbone of India's economy, contributing significantly to employment and local economic activity. PMMY has been ensuring that even the smallest entrepreneur can access credit to start, grow and expand the enterprise.
MUDRA loans were initially structured into three categories-Shishu (up to ₹50,000), Kishore (₹50,000 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh).
Union Budget 2024-25 introduced the 'Tarun Plus' category, which extended the maximum loan limit under PMMY to Rs 20 lakh for those who had previously availed and successfully repaid Tarun loans. This enhancement rewards responsible borrowers, bridging the gap between micro-enterprises and the small enterprise segment, ensuring a continuum of credit availability.
MUDRA loans are collateral-free, thereby removing a significant barrier for credit access faced by most micro entrepreneurs. Backed by a credit guarantee scheme, the structure encourages lenders to extend credit without excessive fear of default.
Since its inception, the scheme has sanctioned over 57.62 crore loans totalling to ₹39.87 lakh crore and disbursed loans worth ₹ 38.97 lakh crore. Notably, around 66% of these loans are to women, empowering female entrepreneurship, while 49% of the loans have been sanctioned to SC/ST and OBC entrepreneurs.
Research from various institutions, including NITI Aayog, shows that many borrowers have reported increased income levels, business expansion, and enhanced employment generation, particularly in rural and semi-urban areas, while gradually moving away from informal sources of borrowing.
By bringing borrowers into the formal financial system, the scheme helps build credit histories and encourages financial discipline.
A notable recent development is the digital delivery of MUDRA loans which has significantly reduced turnaround time, improved transparency and enabled cash flow-based lending. By removing the need for formal physical documents, lenders can now analyse a borrower's financial requirements based on their digital footprints, such as UPI transactions, bank account statements, etc.
Also Read: Around 50% of Mudra accounts belong to SC, ST and OBCs; boosting financial independence: SBI Report
The average loan size has nearly doubled over time, with a significant rise in the loans sanctioned under the Kishor and Tarun categories, which together account for around 68% of the total sanctioned amount. This shift has helped to bridge the 'missing middle' gap, supporting enterprise growth by providing higher loan limits. As the scheme matures, its next phase will focus on enhancing the quality and sustainability of outcomes. This involves shifting from mere credit access to credit effectiveness, integrating loans with skill development and mentorship, leveraging digital data for better credit appraisal and creating a clear graduation pathway for enterprises to scale up.
Addressing credit quality concerns through intelligent monitoring systems, enhancing financial literacy, strengthening post-disbursement support and leveraging technology to reach deeper into underserved geographies will be the cornerstone of the next phase of PMMY. Linking credit with market access platforms and focus on emerging sectors such as green and digital enterprises will also be key to ensuring that MUDRA evolves into a robust and future-ready entrepreneurial ecosystem.
PM MUDRA Yojana today stands as one of India's most impactful financial inclusion initiatives. The scale of outreach, the strong participation of women, and the tangible improvements in income and employment underscore the significant progress achieved over the past eleven years. With the added momentum of digital credit delivery and ecosystem support, PMMY is well-positioned to deepen its impact. Building on its achievements, PMMY will continue to germinate and develop India's micro-enterprises and play a pivotal role in enabling an inclusive growth of the economy on our trajectory towards a Viksit Bharat 2047.
The author is secretary, Department of Financial Services, Government of India
