Pradhan Mantri Mudra Yojana was launched by the Government of India in April 2015 as a flagship initiative for financial inclusion and creating self-help groups with the objective of promoting employment and entrepreneurial abilities among people within the country. PMMY assisted millions of borrowers to access credit against collateral.
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MUDRA and PMMY
Micro Units Development and Refinance Agency (MUDRA) is a financial institution that provides funding to small businesses and was established by the Government of India under the Pradhan Mantri Mudra Yojana. PMMY was fashioned to offer cheaper credit to the non-corporate, non-agriculture small or micro-enterprises. Loans available under this scheme are up to Rs 10 lakhs and are disbursed by public, private banks, cooperative banks, regional rural banks, micro finance institutions, and Non-Banking Financial Companies.
The three-tiered categories of the scheme are :
1. Shishu: Loans of up to Rs 50,000 for prospective entrepreneurs to initiate small enterprises.
2. Kishor: Loans from Rs 50,001 to Rs 5 lakh for those businesses that have already begun and require more finance.
3. Tarun: Loans between Rs 5 lakh and Rs 10 lakh for well-established businesses that seek expansion of their business operations.
Who can Apply?
This facility is open to any Indian citizen having a non-agricultural business plan. Under Mudra, loan facilities are made available to small units of manufacturing units, service sectors, traders, artisans, and self-employed people.
Features
This scheme is of high priority to women entrepreneurs and all those belonging to the SC/ST/OBC categories. The details of the important features of the PMMY are:
1. Collateral-Free Loans: The borrower need not provide any asset as security, so this scheme is extremely accessible to borrowers who lack financial assets. The feature has diminished the barriers of entry for first-time borrowers who might have otherwise been hard-pressed to get funding.
2. Reasonable Interest Rates: The interest rates set by the lending institutions are competitive and very affordable. The interest rates are lower than a borrower would have to pay at a bank for unsecured personal loans. For the Sishu category of loan, the annual interest varies from 1 per cent to 12 per cent; for Kishor, the interest rate is 8.60 per cent per year; the annual interest rate ranges from 11.15 to 20 per cent for Tarun.
3. Flexible Repayment Tenure: The tenure of repayment is flexible and changes with the requirement of the borrower as well as the amount borrowed. It ranges from 12 months to 5 years. This provides the entrepreneurs with enough time to repay the amount without too much financial strain.
4. Processing fee-free: Most banks don't take any kind of processing fees on Mudra loans. Hence, it helps in reducing all the initial expenses through the borrower regarding the loan amount from the lending institute.
5. Support for Various Activities: Mudra loans are tied up with many types of business activities. These might involve trade, manufacturing, transportation, and several service-related functions. For instance, loans are given for equipping the firms with machinery and upgrading the existing infrastructure or meeting the working capital.
Applying for PMMY
It is very simple to apply for enrolment under Pradhan Mantri Mudra Yojana. Here is how people may apply:
1. Select the Loan Category: Based on the requirement for the amount and the age of the business, choose the type, that is, Shishu, Kishor, or Tarun.
2. Select a Lending Institution: Any bank, micro finance institution, or even NBFC provides Mudra loans. Public sector banks as well as regional rural banks are where Mudra loans are offered.
3. Application: Fill up an online and offline available Mudra loan application form.
4. Required Documents: Basic documents, which include: Identity proof, which can be in the form of an Aadhaar card, PAN card, etc, address proof, business proof in the form of business registration or trade license, bank statements, and a business plan which explains the usage of funds.
5. Sanction and Disbursement: Once the application and documents are verified, the loan is sanctioned and disbursed directly into the applicant's bank account.
Why PMMY Matters
The Mudra Yojana was started as part of the overall employment generation and promotion of entrepreneurship. It falls in line with the government's "Make in India" and "Digital India" initiatives through the promotion of self-employment and micro-enterprise development.
As per the data given by the Government, above 41 crore loans sanctioned under PMMY since its inception have been disbursed with more than 23 lakhs crore till March 2023. Moreover, approximately 68 per cent of these loans have reached women entrepreneurs which, in itself proves the overall impact of gender empowerment through the scheme.
Problems Faced by Borrowers
While PMMY has achieved significant milestones, borrowers still face challenges such as a lack of awareness about the scheme in rural areas, sometimes difficulty in navigating the application process, and variability in loan approval timeframes across financial institutions.
The government has taken various measures to enhance awareness and access. The schemes are now coming with financial literacy programs, workshops, and simplification of the application procedure to take the scheme to the last lap of the country.
The Mudra loans are also now a part of the Jan Dhan, Aadhaar and Mobile (JAM) trinity which is a direct and transparent transfer of funds to the beneficiary. The schemes, such as PMMY, play a critical role in the upliftment of small-scale enterprises and employment generation.
By focusing on issues of financial inclusion and entrepreneurship, this scheme has opened avenues to the economies for people from all walks of life. The Pradhan Mantri Mudra Yojana is an opportunity for aspiring entrepreneurs to get their business ideas into reality, making growth possible from the grassroots level.
