Pradhan Mantri Mudra Yojana (PMMY) – Steps towards financial freedom


There are approximately 42.50 million SMEs and MSMEs spread all across the nation, involved in manufacturing, infrastructure, food, packaging, IT, and several other types of industries. Together, they contribute to almost 24.63% of India’s service sector GDP and 6.11% of her manufacturing GDP and witness steady growth at over 10% annually.

The Government of India has various schemes in place to help the micro, small, and medium scale enterprises obtain financial freedom and business stability. One such policy is Pradhan Mantri Mudra Yojana (PMMY), which offers loans of up to Rs. 10 Lakh to eligible individuals like non-corporate and non-farm enterprises. Entrepreneurs can use the amount as seed money or utilize it as a working capital loan to fund business operations.

Statistical highlights as of FY 2018-19

Individuals employed by SMEs – 106 million

Cumulative fixed assets of SMEs – Rs. 1,471,912 Crore

Total number of loans availed under PMMY – 12.9 Crore

Average loan amount under PMMY – Rs. 45,034

What is Mudra Yojana?

MUDRA or Micro Unit Development and Refinance Agency is tasked to provide financial assistance to micro and small scale enterprises. Its primary aim is to promote the growth of the non-corporate small business sector across India. More than 10 Crore Indians are employed in this informal sector, making it one of the largest employers of workforce after agriculture.

PMMY is an initiative to extend the reach of credit to the informal sector and to create a stable flow of finance for the working individuals. Any Indian citizen with a business plan for a non-farming sector (manufacturing, processing, trading, and the service sector) and a credit requirement smaller than Rs. 10 Lakh can approach NBFCs like Bajaj Finserv for a Business Loan.

They also offer credits as business loans at affordable interest rates and borrower-friendly features like pre-approved offers. These offers are available on unsecured credits like business loan, personal loan, and secured credits like home loans, and other financial products. Such offers make availing loans hassle-free and quick. You can check your pre-approved offer by sharing only your name and contact details.

Individuals with an existing business, private limited companies, proprietary firms, or any other legal business entity can also apply for assistance from this government business loan scheme in India.

PM Mudra Yojana has three different categories under which the loan is disbursed. An applicant can apply for a credit of up to Rs. 50,000, from Rs. 50,001 to Rs. 5 Lakh, and for more than Rs. 5 Lakh and up to Rs. 10 Lakh. The money is disbursed strictly as a business loan and cannot be used for personal requirements. The MUDRA loan aims to offer financial independence to micro and small businesses by boosting their working capital, creating financial habits to manage business growth and to provide money for various other purposes like marketing, research, advertisement, etc.

Types of PMMY offerings

Pradhan Mantri Mudra Yojana details include several schemes ideal for different organizational purposes. These include

Microcredit scheme – It offers financial support through Micro Financial Institutions (MFI) to individuals, as well as joint liability groups and self-help groups. The total sum of these loans can reach up to Rs. 1 Lakh.

  • Mahila Uddayami Yojana – MUY is specifically targeted towards women entrepreneurs who require financial assistance. It is designed to assist women’s joint liability groups, self-help groups, individual entrepreneurs, and several other entrepreneurship attempts. This policy offers a special concession under which a borrower can get a further reduction of 0.25% of their loan’s interest rate.
  • Mudra Card – Mudra Card offers a revolving line of credit to small business owners. It can be utilized like a credit card with an overdraft limit as well as a debit card to withdraw cash from ATMs. The cash-credit system is designed to offer more flexibility to the cardholders and offer them advances whenever required.
  • Refinance scheme – Individuals can also benefit from a refinance scheme from financial institutions under MUDRA policy. Lenders including co-operatives, rural, and commercial financial institutions can refinance loan amounts of up to Rs. 10 Lakh per unit under this policy. It allows a business owner to enjoy the benefits of an MSME loan like an overdraft facility.
  • Credit Guarantee Fund – Managed by the National Credit Guarantee Trustee Company Ltd., Credit Guarantee Fund for Micro units allows creating and using a special fund similar to a portfolio credit guarantee. It ensures that eligible entries receive microloans without any hassle.
  • Equipment financing scheme – This scheme provides financial assistance to small and micro manufacturing units to allow procurement or upgrade of high-quality machinery for business purpose. A significant number of small scale enterprises in India suffer from the lack of monetary support to purchase necessary manufacturing equipment. Equipment financing scheme aims to address that with subsidized credit.

Interest rates

Loans under MUDRA schemes are offered against minimum interest rates that vary depending on the category of sanctioned credit. Let’s take a look at everything one needs to know about Pradhan Mantri Mudra Yojana interest rate –

For loans up to Rs. 50,000, the interest rate can start from 1% per month, totaling to 12% annually.

Interest rates for loans above Rs. 50,000 and up to Rs. 10 Lakh can vary depending on the financial institution that sanctions the credit as well as the borrower’s creditworthiness. In all cases, the maximum repayment tenure of these credits can extend to up to 5 years.

Pradhan Mantri Mudra Yojana aims to alleviate the financial burden faced by SMEs and MSMEs across the country and help them boost their growth and revenue. It is supporting development by creating a robust infrastructure for last-mile credit delivery.

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