Pradhan Mantri Mudra Yojana (PMMY): Empowering Small Entrepreneurs in India

The Pradhan Mantri Mudra Yojana (PMMY) , launched on April 8, 2015, by Prime Minister Narendra Modi, is a flagship scheme to empower small and micro entrepreneurs across the country. PMMBY provides collateral-free loans of up to ₹20 lakh to help non-corporate, non-farm businesses with micro, small, and medium enterprise (MSME) and self-employment requirements, in the areas of manufacturing, trading, services, and allied agricultural activities.

 This flagship scheme has achieved remarkable success in enabling financial inclusion of millions of small entrepreneurs into the formal financial system while promoting self-employment and economic growth through support for entrepreneurship. The Mudra scheme, as of 2025, has sanctioned over 28.68 crore loans with a loan amount of ₹14.96 lakh crore, providing a positive influence to millions of people in rural areas and diverse marginalized groups.

What is Pradhan Mantri Mudra Yojana (PMMY)?

The Pradhan Mantri Mudra Yojana envisions to finance the unfunded and fund micro and small enterprises through the Micro Units Development and Refinance Agency Ltd. (MUDRA). MUDRA acts as a non-banking financial company (NBFC). A refinance institution for banks, microfinance institutions (MFIs) and NBFCs that subsequently lend to eligible borrowers. The scheme is meant for individuals and businesses that have plans to generate income but do not have easy access to funds, with a credit delivery mechanism that ensures credit at affordable terms without collateral.

PMMY categorizes loans into four segments: Shishu, Kishore, Tarun, and the newly introduced Tarun Plus, each tailored to different stages of business growth. The scheme has been instrumental in empowering women and marginalized groups, with 69% of loan accounts held by women and 51% by SC/ST/OBC entrepreneurs as of December 2024.

PMMY groups the loans into four categories: Shishu, Kishore, Tarun, and Tarun Plus (the most recent), which covers different stages of business growth. The Loans have been effective in supporting women and marginalized groups, as of December 2024 69% of all loan accounts were held by women 51% by SC/ST/OBC entrepreneurs. 

Categories of PMMY Loans

The Pradhan Mantri Mudra Yojana offers loans under four categories to meet diverse funding needs:

Table: PMMY Loan Categories and Their Purposes

The Tarun Plus category launched in 2024-25 will offer up to ₹20 lakh as a collateral-free loan provided entrepreneurs have successfully repaid their earlier loans under the Tarun category. The sanctioning authorities of banks have sanctioned ₹4,930 crore to 34,697 accounts in Tarun Plus category as of June 2025. The Tarun Plus category has clearly gained tremendous traction in the short time since its introduction.

Objectives of PMMY

The Pradhan Mantri Mudra Yojana was launched with the following objectives:

• Financial Inclusion: To get small entrepreneurs into formal financial channels.
•  Employment Generation: The Ministry of Labour and Employment‘s (2015 -2018) survey found PMMY generated 1.12 crore net additional employment.
•  Empowerment of Marginalised Groups: To promote gender equality & social equity with substantial participation of SC/ST/OBC entrepreneurs and women.
• Support to Micro Enterprises: To provide affordable credit to non-corporate small businesses for growth and self-reliance.

PMMY has facilitated self-employment and small business development, with specific emphasis on rural and semi-urban geographies which has enhanced India‘s economy.

Eligibility for Pradhan Mantri Mudra Yojana

Applicants for PMMY loans must be eligible under the following conditions:

• Be an Indian citizen.
• Be a non-corporate, non-farm small or micro enterprise in manufacturing, trading, services, and/or allied agricultural sector (i.e., dairy, fishing, food processing, etc.)
• Have a business plan with a credit demand of up to ₹20 lakh.
• If applying for Tarun Plus, you must have successfully repaid a Tarun loan.

Eligible borrowers can apply to commercial banks, RRBs, small finance banks, MFIs, or NBFCs.

Interest Rates and Repayment Terms

The interest rates for loans under PMMY will depend on the lender‘s policies and the borrower‘s creditworthiness but will usually range somewhere from 8% to 12% per annum. For example, the State Bank of India (SBI) disburses PMMY loans at 3.25%, above the External Benchmark Lending Rate (EBLR), which, for February 15, 2025, works out to an effective rate of 12.15%.

Repayment terms can be flexible:

• Loans up to ₹5 lakh: Maximum 5 years with a moratorium period of maximum 6 months.
• Loans from ₹5 lakh to 20 lakh: Maximum 7 years with a moratorium period of maximum 12 months.

In addition, there is a 2% interest subsidy available for timely repayment of Shishu loans for 12 months which helps ease the load for new entrepreneurs.

How to Apply for Pradhan Mantri Mudra Yojana

Applying for a Pradhan Mantri Mudra Yojana loan is straightforward, with both offline and online options available:

Offline Application Process

• Visit the Lender: Go to any bank, NBFC or MFI in the area that gives your PMMY loans.
• Submit the documents: Submit KYC Documents (Aadhaar, PAN etc), proof of business, and your business plan.
• Loan Processing: The lender will appraise your application, and if you are eligible will sanction the loan.

Online Application Process (Pradhan Mantri Mudra Yojana Online Apply)

• Visit the  Udyamimitra portal (www.udyamimitra.in) (www.udyamimitra.in) , or JanSamarth portal (www.jansamarth.in) (www.jansamarth.in). 
• Complete the Pradhan Mantri Mudra Yojana applications online. 
• Upload the prescribed documents and submit the application for digital approval. 
• Check the application status online. 

MUDRA Card is a RuPay debit card, with the overdraft limit provision to facilitate working capital effectively, the borrower can withdraw cash from an ATM and can make payment from a POS machine.

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Documents Required for PMMY Application

To complete the Pradhan Mantri Mudra Yojana application form, applicants need:

• Identity Proof: Aadhaar, PAN, Voter ID, or Passport.
• Address Proof: Utility bills, Aadhaar, or rental agreement.
• Business Proof: Shop license, registration certificate, or GST certificate.
• Financial Documents: Bank statements, income proof, or ITR (if applicable).
• Photographs: Recent passport-sized photos.

No collateral is required for loans up to ₹10 lakh, and all PMMY loans are covered under the Credit Guarantee Fund for Micro Units (CGFMU), with the premium borne by the borrower.

Achievements of PMMY (As of 2025)

The Pradhan Mantri Mudra Yojana has achieved remarkable milestones in its 10-year journey:

• Loan Disbursements: Over 3.20 crore loans worth ₹3,02,967.03 crore sanctioned as of December 2024.
• Empowering Women: 69% of loan accounts belong to women entrepreneurs.
• Social Inclusion: 51% of loans support SC/ST/OBC entrepreneurs.
• Rural Impact: Significant growth in lending exposure, from ₹3.3 lakh crore in FY22 to over ₹5 lakh crore in FY24.

In Rajasthan alone, over 52 lakh of 81 lakh loans were disbursed to women entrepreneurs in the last three financial years, showcasing PMMY’s role in gender empowerment.

Challenges and the Way Forward

Despite its success, PMMY faces challenges:

• Low Penetration in Remote Areas: Limited NBFC/MFI reach hinders access in rural regions.
• Risk of Over-Indebtedness: Lack of financial literacy may lead to defaults.
• Underperformance in Higher Loan Categories: Tarun and Tarun Plus loans constitute a smaller share of disbursements.

To address these, the government is focusing on:

• Enhancing outreach through campaigns like the three-month financial inclusion drive (July–September 2025).
• Promoting digital literacy and financial education to reduce default risks.
• Expanding the role of private lenders to improve access in underserved areas.

Impact on Financial Inclusion

The Pradhan Mantri Mudra Yojana has been a landmark initiative for financial inclusion. Through its integration with the Pradhan Mantri Jan Dhan Yojana and other schemes, PMMY has opened up banking services to unbanked households. 56% of PMJDY accounts currently belong to women (January 2025), increasing their financial independence. The scheme‘s emphasis on rural and marginalized communities has minimized the urban-rural divide, leading to truly inclusive growth.

Conclusion

The Pradhan Mantri Mudra Yojana (PMMY) is a viable option for small entrepreneurs in India. The scheme provides collateral-free loans, flexible repayment terms, and the ability to apply online, allowing individuals to pursue their entrepreneurship goals. PMMY is much more than a financial scheme, as it allows women and disadvantaged groups to not only create wealth, but to also make significant social and economic contributions.

For individuals who want to open or expand their business, the application process is simple with the Pradhan Mantri Mudra Yojana online apply and Udyamimitra website and mobile application.