Pradhan Mantri Mudra Yojana:

22nd July, 2021 Economy

Context:

Under Pradhan Mantri Mudra Yojana (PMMY) over 11.29 crore loans amounting to Rs. 6.41 lakh crore have been disbursed across the country during FY 2019-20 and FY 2020-21

The Union Government launched the Pradhan Mantri MUDRA Yojana (PMMY) on April 8, 2015, to provide loans up to Rs. 10 lakhs to non-farm small/microenterprises and non-corporate.
All banks, including Public Sector Banks, Private Sector Banks, Regional Rural Banks (RRBs), State Co-operative Banks, Urban Co-operative Banks, Foreign Banks, and Non Banking Finance Companies (NBFCs)/Micro Finance Institutions (MFIs), are required to lend to non-farm sector income-generating activities with a value of less than Rs.10 lakh under the PMMY.
These loans are categorized as MUDRA loans under

The government has established a new institution called MUDRA (Micro Units Growth & Refinance Agency Ltd.) to carry out the Scheme's development and refinancing activities, as well as serve as a regulator for the microfinance sector in general.
PMMY's mission is to provide grants to small businesses that are not corporations. Loan offerings under PMMY

Shishu: covering loans up to Rs. 50,000/- given with no collateral, at 1% rate of interest/month repayable over a period of 5 years.
Kishor: cover loans above Rs. 50,000/- and up to Rs. 5 lakh.
Tarun: cover loans beyond Rs. 5 lakh to Rs. 10 lakh.

Enterprises in the smallest segment must receive at least 60% of the funding. MUDRA Bank's partner intermediaries must strive to adhere to the following general framework:
First-time entrepreneurs, young entrepreneurs (those under 30 years old), and women entrepreneurs will be welcomed, with special schemes being planned for them.
Cash flow-based lending would be prioritized over security-based lending. Collateral securities, among other things, must be avoided.
Repayment commitments shall be flexible and framed in light of the entrepreneur's company cash flows.

The Micro Units Development Refinance Agency (MUDRA) Bank is a microfinance refinancing institution. of SIDBI and renamed as MUDRA (SIDBI) Bank.
The MUDRA Bank is primarily responsible for –
- Developing policy guidelines for the micro/small enterprise financing industry, as well as registering and regulating MFI organizations.
- MFI organizations are accredited and rated.
- Establishing responsible lending policies to avoid indebtedness and to ensure proper client security principles and recovery methods.
- Creating a standardized set of covenants for last-mile lending to micro and small businesses.
- Promoting appropriate technological strategies for the final mile.
- Creating and implementing a Credit Guarantee System to provide loan guarantees to micro-enterprises.
Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana.
MUDRA Bank operates through regional level financing institutions who in turn connects with last-mile lenders like Micro Finance Institutions (MFIs), Small Banks, Primary Credit Cooperative Societies, Self Help Groups (SHGs), NBFC (other than MFI) and such other lending institutions.
In lending, MUDRA gives priority to enterprises set up by the under-privileged sections of the society particularly those from the scheduled caste/tribe (SC/ST) groups, first-generation entrepreneurs and existing small businesses.