The Pradhan Mantri MUDRA Yojana (PMMY) is a flagship Central Sector scheme of the Government of India, launched on April 8, 2015, with the objective of "Funding the Unfunded". The scheme was created to solve the problem of non-corporate, non-farm micro and small enterprises (MSEs) being excluded from formal institutional finance due to a lack of collateral, credit history, or documentation. PMMY provides collateral-free credit for income-generating activities in the manufacturing, trading, services, and allied agriculture sectors.
The scheme works by extending loans through Member Lending Institutions (MLIs), which include Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs). The loans are structured into four progressive categories based on the funding needs of the micro unit:
- Shishu: covering loans up to ₹50,000.
- Kishore: covering loans above ₹50,000 and up to ₹5 lakh.
- Tarun: covering loans above ₹5 lakh and up to ₹10 lakh.
- Tarun Plus: covering loans above ₹10 lakh and up to ₹20 lakh.
PMMY connects to the Micro Units Development and Refinance Agency Ltd. (MUDRA), which is a financial institution set up by the government to provide refinance support to the MLIs for loans extended under the scheme. The loans are guaranteed under the Credit Guarantee Fund for Micro Units (CGFMU), which reduces the risk for the lending institutions.
The scheme has changed recently: the maximum loan limit was increased from ₹10 lakh to ₹20 lakh. This change was announced by the Finance Minister on July 23, 2024, during the Union Budget 2024-25, and took effect on October 24, 2024. The new limit of up to ₹20 lakh is available under the new Tarun Plus category, specifically for entrepreneurs who have successfully repaid previous loans under the Tarun category.