PM SVANIDHI SCHEME: SIGNIFICANCE, CHALLENGES, WAY FORWARD

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Picture Courtesy:  INDIAN EXPRESS

Context

The Union Cabinet restructured and extended the PM SVANidhi loan scheme for street vendors until March 31, 2030.

What is PM SVANidhi scheme?

The PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) is a micro-credit facility launched by the Ministry of Housing and Urban Affairs (MoHUA) in 2020.

Objectives: This Central Sector Scheme aims to integrate vendors into the formal banking system to reduce their dependency on informal credit sources and align with the vision of financial inclusion and Atmanirbhar Bharat.

Key Provisions of the Scheme (Including Recent Updates)

Loan Structure and Repayment: Initially, offered first loan of up to ₹10,000, repayable in monthly instalments within a year. Upon timely repayment, vendors become eligible for subsequent loans of ₹20,000 and ₹50,000.

• No collateral or security is required for these loans.
• Scheme allows for early repayment without any penalty.

Interest Subsidy: Beneficiaries receive an interest subsidy of 7% per annum on timely or early repayment.

Recent Update (August 2025): First tranche increased to ₹15,000 (from ₹10,000), and the second tranche to ₹25,000 (from ₹20,000), third tranche remains at ₹50,000.

• UPI-linked RuPay Credit Card: Beneficiaries who repay their second loan will receive a UPI-linked RuPay Credit Card.
• Digital Cashback Incentives: Vendors can earn up to Rs 1,600 cashback for retail and wholesale digital transactions.

As of July 2025, the government provided loans of Rs 13,797 crore to 68 lakh street vendors. (Source: PIB)

Eligibility Criteria

Street vendors vending in urban areas on or before March 24, 2020 (lockdown announced), are eligible.

• Recent Update (August 2025): Coverage expanded beyond statutory towns to census towns and peri-urban areas in a graded manner.

Eligibility verification occurs through a Street Vendor Certificate or Identity Card issued by Urban Local Bodies (ULBs). Vendors identified in surveys without such cards receive a Provisional Certificate.

Vendors left out of ULB surveys or those who started vending after the survey can also apply with a Letter of Recommendation (LoR) from the ULB/Town Vending Committee (TVC).

Implementation and Support

Lending Agencies: Microfinance Institutions, Non-Banking Financial Companies (NBFCs), Self-Help Groups (SHGs), Scheduled Commercial Banks, Regional Rural Banks, and Cooperative Banks are authorised to provide loans.

Implementation Partner: Small Industries Development Bank of India (SIDBI) serves as the implementation partner.

Socio-Economic Impact of the PM SVANidhi Yojana  

Enhanced Financial Stability: Collateral-free micro-loans, reduce vendors' reliance on high-interest informal moneylenders and improve their profit margins.

• Encourages financial discipline and helps them build a credit history, which can lead to higher loan amounts and access to other financial services.
• A study in Indore revealed that mean income after the scheme increased to ₹10,907 from ₹8,896, and mean savings increased to ₹3,064 from ₹2,032. (Source: Journal of Marketing & Social Research) 

Business Growth: Empowers vendors to restart or expand their businesses by investing in better infrastructure, diversified products, and digital payment systems, which increases their customer base and revenue.

• Business expansion increased from 45% to 95% among beneficiaries in Indore. (Source: Journal of Marketing & Social Research) 
• By aiding vendors in obtaining bank credit, the scheme strengthens the unorganised sector's contribution to economic growth and employment generation.

Digital Empowerment: Encourages adoption of digital transactions through incentives like cashback, enhances financial inclusion and digital literacy.

• As of July 2025, nearly 47 lakh digitally active beneficiaries conducted over 557 crore digital transactions of value ₹6.09 lakh crore, earning ₹241 crore in cashback. (Source: PIB)

Social Inclusion: Promotes financial inclusion of marginalized communities, including women and backward classes, ensuring equitable economic opportunities.

• As of March 2025, 45% of beneficiaries were women, and 44% belonged to the OBC category, with 22% from Scheduled Castes and Tribes. (Source: Impact and Policy Research Institute)

Other Major Steps Taken by Government to Support Street Vendors

‘SVANidhi se Samriddhi’: Socio-economic profiling of PM SVANidhi beneficiaries and their families, links eligible beneficiaries to various central government welfare schemes, including Pradhan Mantri Jeevan Jyoti Bima Yojana, PM Suraksha Bima Yojana,   Pradhan Mantri Matru Vandana Yojana (PMMVY).

Deendayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM): Centrally sponsored scheme includes a component for Urban Street Vendors (USV) to support setting up/upgrading vending infrastructure, organising vendors into Self-Help Groups (SHGs), and facilitating access to credit and social security schemes.

Skill Development Initiatives: Skill training, capacity building, vocational education, and market-relevant skills to enhance employability under the Skill India Mission, PM Kaushal Vikas Yojana (PMKVY), and PM Vishwakarma Yojana.

• For street food vendors, specific hygiene and safety training are conducted in partnership with FSSAI.

Legal Framework for Street Vendors

Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014

• Legalises street vending rights, safeguards and regulates street vending in urban areas.
• States/UTs implement the Act by framing their own rules, schemes, bye-laws, and plans for street vending.
• Establishes a participatory governance framework through Town Vending Committees (TVCs) at the municipal level.
  • These committees are responsible for identifying vending zones, issuing Vending Certificates (VCs), and addressing grievances.
  • Street vendor representatives must constitute 40% of the members, with a sub-representation of 33% for women street vendors.
• States/ULBs conduct surveys to identify street vendors at least once every five years.

Key challenges under the PM SVANidhi scheme

Low Coverage: Limited awareness among eligible street vendors about the scheme's provisions, eligibility criteria, and application procedures.  

Difficulty in Eligibility Barriers: Vendors face difficulty in completing documentation requirements.

• Requirement of having a vendor certificate or registration with local authorities restricts many eligible vendors, especially those who work informally/ without proper documentation/ started vending after the survey cutoff date (March 24, 2020, for initial eligibility).

Lengthy Processes: Street vendors face procedural delays, lengthy verification processes, and reluctance from financial institutions to process loans for informal sector workers. In many cases, banks hesitant due to high risk of default.  

Limited Digital Literacy: Scheme promotes digital transactions through cashback incentives, but many vendors struggle with limited digital literacy and do not possess smartphones or bank accounts.

• Customers in many small towns and rural areas prefer cash payments, limiting the effectiveness of digital adoption incentives.

Challenges of Irregular Income: Street vendors face loan repayment difficulties due to fluctuating and irregular income patterns.

Inadequate Loan Amount: Initial loan amount of ₹10,000 is not sufficient working capital for many vendors to expand or restart their businesses. While successive loans of ₹20,000 and ₹50,000 are available upon timely repayment, but take long time to access.

Urban-Centric Focus: Limited outreach and benefits for vendors in semi-urban and rural areas can increase rural-to-urban migration for street vending, which can strain urban resources.

Way Forward to enhance the effectiveness of the PM SVANidhi scheme

Enhance Accessibility: Targeted awareness campaigns to inform eligible street vendors. Collaborate with local bodies, and Civil Society organisations for effective outreach.

Improve Financial Inclusion: Introduce training programs (eg. Pradhan Mantri Kaushal Vikas Yojana) to help vendors utilise digital payment systems and manage their finances efficiently.

• Promote financial literacy, microcredit access, and digitized Direct Benefit Transfer (DBT) mechanisms through existing platforms like PM Jan Dhan Yojana and UPI, and explore SHG-based lending models.

Streamline Loan Process: Simplify the loan application process and documentation requirements to reduce bureaucratic hurdles.

• Address procedural delays, lengthy verification processes, and reluctance from financial institutions to process loans for informal sector workers.
• Increase loan amount limits, to provide sufficient working capital for vendors.

Integrate Social Security and Welfare Benefits: Integrate social security benefits such as insurance and pension schemes (e.g., Atal Pension Yojana) into the program to enhance the overall socio-economic security of street vendors.

• Provide additional benefits like maternity allowances, accident relief, and education support for children's higher studies.

Strengthen Implementation: Regular monitoring and feedback mechanisms to assess challenges faced by vendors and make necessary policy adjustments.

• Empower state governments to define targeted beneficiaries and criteria for entitlement to avoid overlapping between central and state schemes.

Improve Vending Spaces: Prevent harassment and arbitrary evictions to ensure that street vendors not face seizure of goods or unfair fines, protecting their right to livelihood under Article 21.

• Supreme Court established the right to livelihood as an integral part of the right to life under Article 21 in Olga Tellis vs Bombay Municipal Corporation (1985). 
• Reinforce city structures by designating specific vending locations and improving trash management to balance urban development and control the influx of vendors due to rural-to-urban migration.

Source: INDIAN EXPRESS