Launched by the Hon’ble Prime Minister in April 2015, the Micro Units Development & Refinance Agency Ltd. (MUDRA) serves as a specialized financial institution dedicated to the development and refinancing of micro-enterprises across India. Launched in April 2015, MUDRA addresses the primary bottleneck facing the Non-Corporate Small Business Sector (NCSBS). By providing funding through Last Mile Financial Institutions—including Banks, NBFCs, and MFIs—MUDRA brings the informal sector into the financial mainstream. This formal financial support is the cornerstone of the Pradhan Mantri Mudra Yojana (PMMY), designed to bridge the credit gap, empower grassroots entrepreneurs, and drive sustainable economic growth.
This initiative was designed to give micro and small businesses access to collateral-free institutional credit of up to INR 2 million (20 lakh) through Member Lending Institutions (MLIs)—a level of formal financial backing that was previously unavailable to them. These loans support income-generating activities across the manufacturing, trading, services, or allied agricultural sectors. The credit is structured into four progressive categories:
- Shishu: Loans up to INR 50,000.
- Kishor: Loans between INR. 50,000 and INR 500,000 (5 lakh).
- Tarun: Loans between INR 500,000 (5 lakh) and INR 1 million (10 lakh).
- Tarun Plus: Loans up to INR 2 million (20 lakh) for entrepreneurs who have successfully repaid previous loans under the 'Tarun' category
The PMMY Scheme has become a cornerstone of the country’s growth story. By providing financial stability and opportunities for growth, the Scheme enables beneficiaries to improve their living standards and create a better future for themselves and their families. Any individual, who is otherwise eligible to take a loan and has a business plan can avail loan under the scheme.
To improve benefit delivery, the scheme provides the MUDRA Card, an innovative RuPay debit card that offers a flexible working capital overdraft facility usable at ATMs, Business Correspondents, and Point of Sale (POS) machines, enabling borrowers to reduce interest costs by repaying whenever surplus cash is available. To drive digitalization and accessibility, the government launched the "MUDRA MITRA" mobile application to guide loan seekers in approaching a Banker in availing MUDRA loan under PMMY, while also provide access to necessary loan informational materials.
Mudra loans represent a transformative shift in the Indian banking system by reinforcing micro and small enterprises (MSEs). The scheme has significantly encouraged entrepreneurship, creating new job opportunities and providing livelihood support for young entrepreneurs, making entrepreneurship accessible to everyone, regardless of their socio-economic background. Furthermore, PMMY plays a crucial role in promoting domestic economic self-reliance, with beneficiaries utilising the loans to produce goods and services that cater to local markets.
Specific vulnerable groups reached by the Scheme:
- Women and Marginalized Communities: The scheme places a strong structural focus on social inclusion and economic empowerment. A significant majority of PMMY beneficiaries are women and individuals from marginalized communities. Notably, 67% of the loans have been granted to women entrepreneurs, while 50% have been allocated to borrowers from Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC), ensuring that the financial intervention directly reaches the most vulnerable segments of the economy.
As of August 2025, the scheme has successfully sanctioned over 544.3 million (54.43 crore) loans since its inception.
The targets under the Scheme have always been met except for FY 2020-21 and FY 2024-25.
As of August 2025, the PMMY has mobilised INR 35.8 trillion (35.80 lakh crore) in formal credit for micro and small enterprises.
It is important to note that this figure represents the total volume of private and public bank capital lent out, rather than direct government expenditure. The primary financial cost to the government involves the capitalisation of the Credit Guarantee Fund, which de-risks these collateral-free loans, alongside interest subventions and administrative overheads. Under the Credit Guarantee Fund for Micro Units (CGFMU) managed by the National Credit Guarantee Trustee Company (NCGTC), PMMY loans are backed by a government guarantee of up to 75% of the defaulted amount for a tenure of up to 5 years.
To ensure effective governance and timely implementation, the scheme employs a decentralised, multi-tier administrative structure spanning the central, state, and district levels. This structure facilitates regular monitoring, multi-sectoral coordination, and the resolution of challenges across the Central State and local administrative districts, ensuring the active involvement of local authorities.
The programme's robust monitoring framework relies on regular weekly, monthly, and quarterly data reporting by Member Lending Institutions (MLIs) through the dedicated Mudra Portal, where overall progress and implementation statistics are also made publicly accessible (https://www.mudra.org.in). This enables monthly monitoring at the top government level about the implementation of the scheme
Impact Assessment of Pradhan Mantri Mudra Yojana (PMMY) (KPMG, 2023):
To evaluate the programme's impact on micro-credit access, this study employs a comprehensive mixed-methods approach that triangulates primary and secondary data. The secondary analysis integrates systematic literature reviews, meta-analyses, and past scheme evaluations from both domestic and international contexts. The primary research utilises purposive sampling to conduct in-depth interviews with key institutional stakeholders to validate the secondary findings, assess the scheme's overall contribution, and identify critical operational gaps and systemic challenges.
Since its inception in 2015, the Pradhan Mantri Mudra Yojana (PMMY) has achieved unprecedented scale in financial inclusion, reaching 349.3 million borrower accounts. By formally integrating millions of previously unbanked micro-entrepreneurs into the institutional financial sector, the programme has significantly bolstered India's broader economic framework. This sustained influx of accessible credit has demonstrably enhanced the Micro, Small and Medium Enterprises (MSME) sector's contribution to the national Gross Value Added (GVA), which reached 34 per cent by FY 2019. Furthermore, the scheme has proven highly effective at targeting historically marginalised demographics with women consistently comprising the majority of beneficiaries, whilst individuals from Scheduled Castes, Scheduled Tribes, and Other Backward Classes constitute the vast majority of entry-level beneficiaries.
Crucially, portfolio data over the programme's lifecycle indicates the programme is successfully transitioning from its initial phase of merely seeding new micro-businesses towards actively scaling and sustaining existing enterprises. While entry-level 'Shishu' loans still account for the majority of individual accounts, their overall share has declined from nearly 93 per cent at launch to approximately 77 per cent. This space has been filled by the rapid growth of mid-tier 'Kishore' loans, which surged from under 6 per cent to over 20 per cent of accounts, ultimately surpassing the Shishu category in total disbursed value for the first time in FY 2021. Although the proportion of total loans going to first-time borrowers dropped from 36 per cent at launch to 12 per cent in FY 2022, the actual monetary value sanctioned to them increased, with a quarter now accessing higher-tier loans.
References:
KPMG. (2023). Assessment of Pradhan Mantri Mudra Yojana (PMMY). NITI Aayog, Government of India.
Some lessons learned with the implementation of the PMMY:
- The provision of adequate digital and physical banking infrastructure, particularly in rural areas, is crucial for the scheme's success.
- Integrating financial literacy programmes with access to tailored financial products enhances the effectiveness of the programme.
- The inclusion of vulnerable groups, such as women and the elderly, must be actively facilitated by simplifying documentation requirements and providing targeted, community-based support mechanisms.
- Effective, multi-sectoral coordination among government bodies, member lending institutions (banks), and other key stakeholders is essential to avoid delays and inefficiencies.
In India:
- Reserve Bank of India (RBl)
- National Bank for Agriculture and Rural Development (NABARD)
- Small Industries Development Bank of India (SIDBI)
- Institute for Development and Research in Banking Technology (IDBRT)
- Indian Institute of Banking and Finance (IIBF)
- NITI Aayog
- Schedule Commercial Banks (SCBs)
- Micro Finance Institutions (MFIs)
- Non-Banking Financial Companies (NBFCs)
International:
SDG 1: No Poverty
- Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance
SDG 8: Decent Work and Economic Growth
- Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services
- Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all
SDG 9: Industry, Innovation and Infrastructure
- Target 9.3 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
SDG 1: No Poverty
- Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance
SDG 8: Decent Work and Economic Growth
- Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services
- Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all
SDG 9: Industry, Innovation and Infrastructure
- Target 9.3 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
Launched by the Hon’ble Prime Minister in April 2015, the Micro Units Development & Refinance Agency Ltd. (MUDRA) serves as a specialized financial institution dedicated to the development and refinancing of micro-enterprises across India. Launched in April 2015, MUDRA addresses the primary bottleneck facing the Non-Corporate Small Business Sector (NCSBS). By providing funding through Last Mile Financial Institutions—including Banks, NBFCs, and MFIs—MUDRA brings the informal sector into the financial mainstream. This formal financial support is the cornerstone of the Pradhan Mantri Mudra Yojana (PMMY), designed to bridge the credit gap, empower grassroots entrepreneurs, and drive sustainable economic growth.
This initiative was designed to give micro and small businesses access to collateral-free institutional credit of up to INR 2 million (20 lakh) through Member Lending Institutions (MLIs)—a level of formal financial backing that was previously unavailable to them. These loans support income-generating activities across the manufacturing, trading, services, or allied agricultural sectors. The credit is structured into four progressive categories:
- Shishu: Loans up to INR 50,000.
- Kishor: Loans between INR. 50,000 and INR 500,000 (5 lakh).
- Tarun: Loans between INR 500,000 (5 lakh) and INR 1 million (10 lakh).
- Tarun Plus: Loans up to INR 2 million (20 lakh) for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category
The PMMY Scheme has become a cornerstone of the country’s growth story. By providing financial stability and opportunities for growth, the Scheme enables beneficiaries to improve their living standards and create a better future for themselves and their families. Any individual, who is otherwise eligible to take a loan and has a business plan can avail loan under the scheme.
To improve benefit delivery, the scheme provides the MUDRA Card, an innovative RuPay debit card that offers a flexible working capital overdraft facility usable at ATMs, Business Correspondents, and Point of Sale (POS) machines, enabling borrowers to reduce interest costs by repaying whenever surplus cash is available. To drive digitalization and accessibility, the government launched the “MUDRA MITRA” mobile application to guide loan seekers in approaching a Banker in availing MUDRA loan under PMMY, while also provide access to necessary loan informational materials.
Mudra loans represent a transformative shift in the Indian banking system by reinforcing micro and small enterprises (MSEs). The scheme has significantly encouraged entrepreneurship, creating new job opportunities and providing livelihood support for young entrepreneurs, making entrepreneurship accessible to everyone, regardless of their socio-economic background. Furthermore, PMMY plays a crucial role in promoting domestic economic self-reliance, with beneficiaries utilising the loans to produce goods and services that cater to local markets.
Specific vulnerable groups reached by the Scheme:
- Women and Marginalized Communities: The scheme places a strong structural focus on social inclusion and economic empowerment. A significant majority of PMMY beneficiaries are women and individuals from marginalized communities. Notably, 67% of the loans have been granted to women entrepreneurs, while 50% have been allocated to borrowers from Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC), ensuring that the financial intervention directly reaches the most vulnerable segments of the economy.
Some lessons learned with the implementation of the PMMY:
- The provision of adequate digital and physical banking infrastructure, particularly in rural areas, is crucial for the scheme’s success.
- Integrating financial literacy programmes with access to tailored financial products enhances the effectiveness of the programme.
- The inclusion of vulnerable groups, such as women and the elderly, must be actively facilitated by simplifying documentation requirements and providing targeted, community-based support mechanisms.
- Effective, multi-sectoral coordination among government bodies, member lending institutions (banks), and other key stakeholders is essential to avoid delays and inefficiencies.
Integrated programmes for economic inclusion; Multilevel governance
In India:
- Reserve Bank of India (RBl)
- National Bank for Agriculture and Rural Development (NABARD)
- Small Industries Development Bank of India (SIDBI)
- Institute for Development and Research in Banking Technology (IDBRT)
- Indian Institute of Banking and Finance (IIBF)
- NITI Aayog
- Schedule Commercial Banks (SCBs)
- Micro Finance Institutions (MFIs)
- Non-Banking Financial Companies (NBFCs)
International:
To ensure effective governance and timely implementation, the scheme employs a decentralised, multi-tier administrative structure spanning the central, state, and district levels. This structure facilitates regular monitoring, multi-sectoral coordination, and the resolution of challenges across the Central State and local administrative districts, ensuring the active involvement of local authorities.
As of August 2025, the scheme has successfully sanctioned over 544.3 million (54.43 crore) loans since its inception.
The targets under the Scheme have always been met except for FY 2020-21 and FY 2024-25.
As of August 2025, the PMMY has mobilised INR 35.8 trillion (35.80 lakh crore) in formal credit for micro and small enterprises.
It is important to note that this figure represents the total volume of private and public bank capital lent out, rather than direct government expenditure. The primary financial cost to the government involves the capitalisation of the Credit Guarantee Fund, which de-risks these collateral-free loans, alongside interest subventions and administrative overheads. Under the Credit Guarantee Fund for Micro Units (CGFMU) managed by the National Credit Guarantee Trustee Company (NCGTC), PMMY loans are backed by a government guarantee of up to 75% of the defaulted amount for a tenure of up to 5 years.
The programme’s robust monitoring framework relies on regular weekly, monthly, and quarterly data reporting by Member Lending Institutions (MLIs) through the dedicated Mudra Portal, where overall progress and implementation statistics are also made publicly accessible (https://www.mudra.org.in). This enables monthly monitoring at the top government level about the implementation of the scheme