MUDRA Bank: To fund the unfunded

Micro Unit Development and Refinance Agency (MUDRA) was proposed in Union Budget 2015-16 to fund the unfunded entrepreneur. Prime Minister Narendra Modi launched MUDRA bank on April 8, 2015. MUDRA Bank will be set up through an enactment of law and it will take some time. To begin with, the same is being operationalised as a subsidiary of Small Industries Development Bank of India (SIDBI).



Driving Force

According to NSSO survey 2013, there are 57.7 million micro manufacturing, trading and services businesses operated by small entrepreneurs. While big industrial houses provide jobs to only 1.25 crore people, small entrepreneurs have given employment to nearly 12 crore people. 62% of these small entreprises are owned by SC, ST or OBC who have meagre access to formal credit. These small businesses accounts for mere 4% of institutional funding.


The MUDRA bank has corpus of Rs. 20,000 crore and credit guarantee corpus of Rs. 3000 crore.


It would be responsible for developing and refinancing through a Pradhan Mantri MUDRA Yojana, all Micro-finance Institutions (MFIs) which are in the business of lending to micro / small business entities engaged in manufacturing, trading and service activities. The roles proposed on MUDRA will be:

  • Laying down policy guidelines for micro enterprise financing business
  • Registration of MFI entities
  • Accreditation /rating of MFI entities
  • Laying down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery
  • Development of standardised set of covenants governing last mile lending to micro enterprises
  • Promoting right technology solutions for the last mile
  • Formulating and running  a Credit Guarantee scheme for providing guarantees to the loans/portfolios which are being extended to micro enterprises
  • Support development & promotional activities in the sector
  • Creating a good architecture of Last Mile Credit Delivery to micro  businesses under the scheme of Pradhan Mantri MUDRA Yojana

Who are the beneficiaries

The small manufacturing units, shopkeepers, fruits / vegetable vendors, truck & taxi operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, street vendors and many others. The MUDRA will be targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs.


The beneficiaries can get assistance from Rs. 50,000 to Rs. 10 lakh. According to the stage of growth/development, the funding needs of entrepreneur are classified into three categories:

  • Shishu: covering loans upto Rs. 50,000/-
  • Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
  • Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh

PMMY Updates

The government has said that more than Rs 10 lakh crore have been disbursed under the Pradhan Mantri Mudra Yojana till November 1, 2019.

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