PM Mudra Yojana

Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Honourable Prime Minister on April 8, 2015. The motive of the scheme is to provide loans up to 10 lakh to non-corporate, non-farm small/ micro enterprises. 

The word MUDRA stands for Micro Units Development & Refinance Agency Ltd. It is a one-of-a-kind flagship scheme of the Government of India to facilitate affordable credit to micro and small enterprises. These schemes are designed to lend a helping hand to small upcoming business initiatives and bring them into the formal financial system. The catchy phrase used by the MUDRA is “fund the unfunded”. In the article, the information of PM Mudra Yojana is shared, check the complete article to know about the scheme.

PM Mudra Yojana

PM mudra loan scheme covers noncorporate or non-farm micro or small enterprises engaged in income generation through manufacturing, trading, and services. Usually, the Commercial Banks, RRBs, Small Finance Banks, MFIs, and NBFCs generally offer Mudra loans. Under the scheme, the MUDRA loans are categorized into 3 stages and these are as follows:

  • ‘Shishu’, which assists at the stage of growth or development limited to an amount of Rs 50 thousand.
  • ‘Kishore’ is aimed at funding the needs of small or upcoming entrepreneurs. The loan amount in this category ranges from Rs. 50 thousand to Rs. 5 lakhs. 
  • ‘Tarun’ caters to the needs of businesses during the graduation/growth phase. The lending amount is between Rs. 5 lakhs to Rs. 10 lakhs.

Must Read: The PM Vishwakarma Yojana

Objectives of PM Mudra Yojana

The following are the main objectives of Pradhan Mantri Mudra Yojana: 

  • To meet small and medium-sized enterprises’ financial requirements, promoting income generation and employment.
  • Assisting people from the lower strata (SC/ST or downtrodden) or lower income groups in shaping and expanding their business.
  • Create easy access to finance for the unbanked, this helps in reducing the financial cost.
  • Streamlining all Microfinance Institutions that deal with trade, manufacture, and service.
  • Laying down policy guidelines for financing small/ micro enterprises.
  • Getting all the Microfinance Institutions and related entities registered and then regulating the same.
  • Promote women, who comprise 50% of the population, to contribute to the nation’s socio-economic fabric.
  • Promote skill development that results in entrepreneurship, enhanced job creation, economic development, and self-employment opportunities.                                                                                             

Distinct Features of MUDRA Yojana

The following are the features of Mudra Yojana:

  • Eligibility

There is no restriction on the type of borrowers eligible to get the Mudra Loan. The borrower could be anyone – from an Individual to a Proprietary concern or a firm. It could also be a Partnership Firm or a private/public company. The only noteworthy condition is that the applicant should not be a defaulter to any bank or a lending institution and should have satisfactory creditworthiness. 

The individual borrowers may be required to possess the necessary skills/ experience/ knowledge to undertake the proposed activity. The need for educational qualification, if any, must be assessed based on the nature and requirements of the proposed activity.

  • Purpose or Nature of Assistance

The Mudra Yojana is primarily a need-based term loan. And, it can be avail for multiple reasons such as increasing the Overdraft limit, getting a composite loan for capital assets, marketing requirements and needing liquid cash for additional working capital.

The amount of the loan is decided based on the proposed business plan and investment in the manufacturing, process, service or trading. MUDRA has also launched a new product called the “MUDRA Card” which is similar to a Debit card issued on the RuPay platform. It is flexible and provides hassle-free credit.

  • Interest Rate

Interest rates are to be charged as per the bank’s policy decision. However, the interest rate charged to borrowers must be reasonable. Scheduled Commercial Banks, RRBs, and Cooperative Banks wishing to re-finance from MUDRA will have to check the interest rates, as advised by Mudra Ltd., from time to time.

  • Security and Processing Charges

Banks can consider charging an upfront fee as per their internal guidelines. The upfront fee, also known as processing charges, is waived by most banks for Shishu loans. The banks are offered flexibility and advised to be reasonable regarding the first charge on all assets created out of the loan extended to the borrower for which credit has been extended. 

Submission of Demand Promissory Note to avail credit is not mandatory. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) functions as Credit Guarantor for loans through PMMY. Further, for sanction of loans up to 10 lakhs, banks are directed not to accept collateral security for loans up to 10 lakhs.

  • Mode of Repayment and Tenure of Assistance

The borrower can pay the loan amount in convenient instalments with a suitable moratorium period as per the business’s cash flow. Renewal and Annual Review charges are levied as per the Bank’s internal guidelines based on the economic life of the assets created, the rate of depreciation, and the cash flow generated. Mudra’s refinance assistance will be for a maximum duration of 36 months, which will also be aligned to the terms of allotment of Mudra funds by RBI from time to time.

Role of PMMY in Rural, Agricultural and Women Empowerment

The role of Mudra Yojana is to fund micro and small entrepreneurs to create an entrepreneurial culture and robust economic growth in collaboration with financial institutions. It acts as one of the subsidiaries of SIDBI.

Mudra provides financial support to foster women entrepreneurs and helps them establish beauty parlours, etc. It provides funds to women artisans, weavers, and women engaged in micro agri allied activities without collateral security to facilitate women’s empowerment and socio-economic development and help make India self-reliant. Overall, Mudra Yojana acts as a “last mile financier” for small businesses and helps improve the status of women and other backward classes. 

Women borrowers can apply for a loan on the Udyamimitra portal. As per the report of a recent survey, female participants are 63% and 68.8% in rural and urban areas, respectively. To boost the participation of women in the entrepreneurship ecosystem, PMMY is the best microfinance opportunity for all women-led small-scale industrial units in rural and urban areas.

Application Process To Get Mudra Loan From SBI

Before commencing an application process to obtain a Mudra loan, one needs to have basic documents such as passport-size photographs, traditional KYC documents such as a Passport, Voter ID, ADHAAR card, driver’s license, utility bills such as electricity/ water, PAN Card, business establishment certificate, bank statement of past financial year or Income Tax Returns/Form 16.

Interested individuals can apply for a Mudra loan through the SBI website. One needs to fill in the application form with the requisite details, attach relevant documents and submit the application form online at the official bank’s website to get a reference ID or number. A SBI representative will connect with you to continue with the loan formalities. After the loan application form and attached documents are processed and verified, the loan amount shall be approved and further disbursed by the bank to your bank account.


The Prime Minister’s Mudra Yojana is evidence of the government’s commitment to the development of free enterprise, financial insertion, and economic advancement. This scheme is a boon for individuals engaged in small-scale industries. It has dramatically changed the financial contribution of SMSE to the nation’s GDP. A lot of awareness is created among the youth as an alternative to job creation.

By Manish

Manish Kumar is a seasoned Digital Marketing Expert with a passion for driving online success. With a wealth of experience in the dynamic field of digital marketing, he possesses expertise in SEO, SMO, PPC, and YouTube marketing, guiding numerous online businesses to achieve outstanding results.

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