In the 2019-20 Budget presented in the Lok Sabha, it was announced that the Government of India has sanctioned above 15 Lakh loans under its Mudra loan scheme. With the total loans disbursed amounting up to Rs. 7.23 Lakh Crore till date with a majority of woman beneficiaries.

Thus, this scheme, introduced to promote the country’s Micro, Small and Medium Enterprises (MSME) sector in 2015, has managed to financially alleviate several of these MSMEs into successful businesses in the last few years.

The benefits offered under this scheme have considerably reduced the challenge of gathering working capital, purchasing assets and fulfilling other financial obligations of this sector.

What are the Mudra loan and its features?

Mudra loan is a scheme introduced by the Micro Units Development and Refinance Agency Ltd. (MUDRA) to fund the business activities of various micro and small enterprises with credit amounts of up to Rs. 10 Lakh.

Also known as the Pradhan Mantri Mudra Yojana or PMMY, the scheme offers advances ranging between Rs. 50,000 and Rs. 1 Lakh to help finance expansion and operational needs of these small businesses.

To provide financing for PMMY, MUDRA has partnered with several state and regional financial institutions, through which small businesses can apply to avail the advance.

The loan is collateral-free and offers finances in three categories –

Sishu category –


This category of PMMY loan offers credits of up to Rs. 50,000. This product is targeted to boost small start-ups and businesses requiring small funding to achieve their financial goals. However, to avail this advance, borrowers must present a comprehensive business plan have their application approved.

Kishor category –


This category of PMMY loan is targeted towards helping small businesses realise their goals of establishing the same as a viable enterprise. Under this category, beneficiaries can avail a loan amount value ranging between Rs. 50,000 and Rs. 5 Lakh.

To apply for an advance under this category, individuals must fill the relevant application form and supply the requisite documents showcasing the current position of their business.

Tarun category –


This category of the PMMY loan scheme caters to the requirements of businesses that have already been established but need capital for further expansion. Under the Tarun category, beneficiaries can avail credits of up to Rs. 10 Lakh.

Benefits of the PMMY loan

Businesses eligible to avail of this advance can enjoy the following benefits –

● It is an unsecured loan offered against easy-to-meet Mudra loan eligibility criteria, the advantage of borrowing without any risk to their personal or business assets.

● This advance can be utilised to set up a business, supply working capital and even expand an already existing organisation.

● It comes with a tenor extending to 7 years, where borrowers can repay their loans according to their convenience.

● It provides an additional overdraft facility amounting to Rs. 5000.

● Borrowers can also avail the facility of a Mudra debit card which allows them to access funds without any hassle.

● Women entrepreneurs can avail the added advantage of lower interest rates under this scheme, making it one of the best business loans for women.

Responsibilities of the PMMY loan

This loan is one of the key components of the government’s aim to realise the goal of “funding the unfunded.” Following are the responsibilities of this scheme –

● It enables small businesses to access institutional finance instead of relying on informal sources for capital.

● It helps in the accreditation of Micro Finance Institutions.

● It assists new entrepreneurs to finance their businesses.

Apart from these responsibilities through the PMMY loan, Mudra also helps to formulate MSME policies, regulate financial institutions in the process of lending Mudra loans, etc.

However, for those businesses looking for an advance of more than the stipulated Rs. 10 Lakh under PMMY, the easy availability of business loans from various financial institutions like Bajaj Finserv has made it much simpler to access a high loan amount value of up to Rs. 30 Lakh.

Thus, the availability of the Mudra loan, along with other business loans has made it much easier for small businesses in the country to accumulate business capital. The scheme is one of the most important contributing criteria for boosting the sector’s growth in the last few years.

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