Micro, small and medium enterprises (MSMEs) are the backbone of the Indian economy. India has 63.4 million MSME units spread across the vast expanse of our country. However, this sector has always been kept outside the gambit of organised business. This has resulted in deprivation of the MSME sector in getting formal banking support. With this thought in mind, the PMMY scheme was introduced on April 8, 2015, with the objective of financial inclusion for MSMEs.

Objectives of Pradhan Mantri Mudra Yojana:

Since MSME units existed outside the formal banking system, they were deprived of the benefits available for units that existed within the organised financial system of the country. Thus, the Pradhan Mantri Mudra Yojana was introduced by the Honourable Prime Minister on April 8, 2015 to bring the thriving MSME sector under the umbrella of banking.

The slogan of the program was ‘fund the unfunded’. The Pradhan Mantri Mudra Yojana (PMMY) scheme enables the extension of loans under affordable terms to this sector from public sector banks, regional rural banks, and non-banking financial companies (NBFCs), microfinance institutions and foreign banks.

The PMMY Scheme Outline:

The 3 categories of loans available under the PMMY scheme are:

Scheme NamePermissible Loan Amount (INR)
ShishuUp to INR 50,000
KishoreINR 50,000 to INR 5 lakhs
TarunINR 5 lakhs to INR 10 lakhs

The 3 options mentioned above are meant for different levels of fund requirements. Also, as and when your requirement for additional funds grows, you may apply for the next higher slab.

Pradhan Mantri Mudra Yojana Eligibility Criteria

Here are some conditions to fulfil to have the Pradhan Mantri Mudra Yojana eligibility:

  • The applicant has to be an Indian citizen and an entrepreneur who may be a proprietor or has a small partnership firm.
  • The minimum age of the applicant has to be 18 years and the maximum age limit is 65 years.
  • The requirement of loans must be for non-farm related business activities.
  • The preferred segments of business are trading, manufacturing and services.
  • The maximum permissible loan under the PMMY scheme is INR 10 lakhs, so the requirement needs to be less than or equal to INR 10 lakhs.

Top 5 Benefits Of Pradhan Mantri Mudra Yojana:

Here are the 5 main Pradhan Mantri Mudra Yojana benefits:

1.    Reasonably high loan amount

The PMMY scheme offers upto INR 10 lakhs to a business enterprise. The terms of the loan are designed in a manner to encourage the growth of MSMEs, startups and small units. The maximum amount of loan is INR 10 lakhs, which is a reasonably good sum to meet the requirement of a small unit.

2.  No collateral

PMMY scheme provides unsecured loans, so no collateral is required when applying for the loan.

3.  Easy process of loan disbursal

Lending institutions like banks, NBFCs or micro-finance companies have been directed to ensure easy and hassle-free loan disbursement. Most of the small units do not have documents to satisfy a bank. The simplified process of Mudra scheme takes care of the problem that was always faced by the small units of not having satisfactory documentary evidence to prove creditworthiness.

4.  Favours small firms

The PMMY Scheme has been introduced as a tool to empower startups and small entrepreneurs to grow profitably. The Government stands in as the guarantor which works as a comfort factor for the banks. In case of default, the responsibility is taken over by the government. This feature greatly favours the incumbent applicants who can invest the borrowed funds for their growth.

5.  Funds may be used for multiple purposes

One may use the borrowed funds for various business needs like procurement of equipment and machinery to be used in business. The PMMY loan may also be used for purposes like the geographical expansion of business or brand promotion.

Document Checklist to avail of Mudra Yojana Benefits:

If you are keen to avail of Mudra Loan Scheme benefits, you need to furnish the following documents to the lending institution:

  • Identity proof: Self-attested copy of Voter’s ID, Aadhaar Card, Passport, etc.
  • Address proof: Same as the documents mentioned above along with a copy of the electricity bill.
  • 2 copies of passport-sized photographs.
  • Proforma invoice of the materials that are to be purchased with the loan.
  • Proof of categories (e.g. SC, ST, OBC), if applicable.
  • Proof of identity of the business enterprise: Copy of Trade Licence, Registration Certificate etc.

Closing thoughts

An entrepreneur may feel the need for additional funds during the course of running the business. The Scheme offers an excellent opportunity for the same. Major lending institutions such as Tata Capital Limited provide loans under the PMMY Scheme. The Mudra Yojana benefits can be enjoyed from Tata Capital under easy terms. However, one should keep the repayment track record clean to establish creditworthiness for the future requirements.

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