Pradhan Mantri Mudra Yojana : Analysis – USPC GS2

The government launched it in 2015 for providing loans up to Rs.10 lakh to the non-corporate, non-farm small/micro-enterprises.

It provides funding to the non-corporate small business sector through various last-mile financial institutions like Banks, Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs).

MUDRA, which stands for Micro Units Development & Refinance Agency Ltd., is a government’s financial institution. It does not lend directly to micro-entrepreneurs/individuals.

MUDRA has created three products, i.e. ‘Shishu’, ‘Kishore’ and ‘Tarun’, as per the growth and funding needs of the beneficiary micro-units.

Over 32.53 crore loans involving a sanctioned amount of Rs. 17.32 lakh crore have been extended under PMMY since its inception in April 2015.

Loans have been given to disadvantaged sections of society such as women entrepreneurs, SC/ST/OBC borrowers, Minority community borrowers, etc. The focus has also been on new entrepreneurs.

As per a survey conducted by the Ministry of Labour and Employment, PMMY helped in generating 1.12 crore net additional employment from 2015 to 2018.

Out of the 1.12 crore of estimated increase in employment, women accounted for 69 lakh (62%).

Provision for online applications.

Some Public Sector Banks (PSBs) have put end-to-end digital lending for automated sanctions under PMMY.

Intensive publicity campaigns by PSBs and Mudra Ltd. for increased visibility of the scheme amongst the stakeholders.

Nomination of Mudra Nodal Officers in PSBs.

Periodic monitoring of the performance of PSBs concerning PMMY etc

Given that these are small loans up to ₹10 lakh each, with the borrowers mostly from the informal sector, banks have to monitor them very closely.

It is debatable whether banks have the resources and manpower to do this when they are chasing the bigger borrowers for business and, increasingly these days, recoveries.

The risk is that these small-ticket loans will drop under the radar and build into a large credit issue in course of time. The same logic holds true for crop loans made through Kisan Credit Cards.

Mudra credit, which is basically small-ticket loans granted to micro and small enterprises;

lending to farmers through Kisan Credit Cards; and

contingent liabilities under the Credit Guarantee Scheme for MSMEs, run by the Small Industries Development Bank of India.