Pradhan Mantri Mudra Yojana

It was launched in 2015 with the objective of increasing the entrepreneurial activity of existing small business and encouraging first generation entrepreneurs. It does so by providing loans to small entrepreneurs.

Features: 3 types of loans are offered under MUDRA yojana-

MUDRA Agency

  • MUDRA (Micro Units Development & Refinance Agency) Ltd. was set up by the Government of India as a wholly owned subsidiary of Small Industries Development Bank of India (SIDBI).
  • This Agency would be responsible for developing and refinancing all Micro-enterprises sector by
  • supporting the finance Institutions which are in the business of lending to micro / small business entities engaged in manufacturing, trading and service activities.
  • MUDRA would partner with Banks, MFIs and other lending institutions at state level / regional level to provide micro finance support to the micro enterprise sector in the country.
  1. SHISHU Loan – Offering financial support of up to INR 50,000
  2. KISHOR Loan – Offering financial support of amount ranging between INR 50,000 and INR 5,00,000
  3. TARUN Loan – Offering financial support of amount ranging between INR 5,00,000 and INR 10,00,000
  • All loans under MUDRA are provided without any collateral i.e. the borrowers who could not apply for a loan due to an absence of collateral can now avail financial services with the help of Pradhan Mantri MUDRA Yojana.
  • MUDRA loan is provided through MUDRA card which can be used as a regular debit card. The loan is sanctioned against this card.

Performance Analysis (Issues and Challenges)

  • The basic objective of the scheme was to promote small scale enterprise, which are labour intensive, thereby generating more employment. But there is no data to project the quantity of employment produced under MUDRA.
  • NPAs under MUDRA (4%) though are less than PSBs (10%) but RBI has staged a red flag against possible rise in the number of NPAs in future.
  • Loan amount disbursed under the scheme can only help in solving the teething problems of initial phase of enterprise but it cannot help it to grow or expand further as the amount allotted is too less.
  • Already refinancing agencies exist like NABARD, which looks after the credit support and services to the rural and farming segment of the country. Establishment of MUDRA has led to administrative conflicts.

Solutions

  • Periodic data on employment must be produced to check the impact of MUDRA on labour market. It will make the scheme more effective.
  • Careful and cautious disbursal of loans under MUDRA must be ensured. If an enterprise is failing, it must be supported to ensure full payment of loan.
  • Enhancing the loan amount to bring in the enterprises in the tertiary stage of establishment under its ambit.
  • Schemes like MUDRA yojana or financing the small and medium enterprises are needed to ensure equal distribution and availability of funds. These enterprises are mostly labour-intensive which helps to augment employment in the country and hence must be promoted.

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