Context:
The 11th anniversary of the Pradhan Mantri MUDRA Yojana (PMMY) marks a decade of formalizing the “informal” economy. Since its launch in 2015, the scheme has acted as a bridge between high aspirations and the lack of traditional collateral, significantly impacting India’s socio-economic fabric.
THE REFINANCING MODEL
MUDRA (Micro Units Development & Refinance Agency Ltd.) does not lend directly to individuals. Instead, it acts as a refinancing body.
- Last-Mile Financiers: MUDRA provides funds to Commercial Banks, RRBs, Small Finance Banks, MFIs, and NBFCs.
- Lending: These institutions then lend to the micro-enterprises under the PMMY framework.
- Guarantee: Credit guarantee for these loans is provided through the National Credit Guarantee Trustee Company (NCGTC), which is why banks can offer them without collateral.
EVOLUTION OF LOAN CATEGORIES
The scheme recognizes that a “one size fits all” approach doesn’t work for business growth. The introduction of Tarun Plus in 2024 was a strategic move to support high-performing micro-enterprises.
| Category | Amount Range | Business Stage |
| Shishu | Up to ₹50,000 | For start-ups and initial seed capital. |
| Kishore | ₹50,000 to ₹5 Lakh | For established units needing expansion. |
| Tarun | ₹5 Lakh to ₹10 Lakh | For scaling and diversification. |
| Tarun Plus | ₹10 Lakh to ₹20 Lakh | Exclusive for those who have successfully repaid Tarun loans. |
BACKGROUND CONCEPTS
Q: Why is the MUDRA Card significant?
A: The MUDRA Card is a RuPay debit card that provides a working capital facility as an overdraft. It allows the entrepreneur to withdraw funds as and when needed, reducing the interest burden as they only pay for the amount utilized, not the entire sanctioned limit.
Q: Does PMMY cover agriculture?
A: No. PMMY is specifically for non-farm income-generating activities in manufacturing, trading, and services. However, activities allied to agriculture, such as poultry, dairy, and beekeeping, are covered.
Q: What is the “National Credit Guarantee Trustee Company” (NCGTC)?
A: It is the entity that provides the “guarantee” to the bank. If a MUDRA borrower defaults, the NCGTC covers a portion of the bank’s loss. This is the “magic” that allows the loans to be collateral-free.
CONCEPTUAL MCQs
Q1. The “Tarun Plus” category under PMMY allows for loans up to what amount?
A) ₹5 Lakh
B) ₹10 Lakh
C) ₹15 Lakh
D) ₹20 Lakh
Q2. Which of the following sectors is EXCLUDED from the scope of MUDRA loans?
A) Small manufacturing units
B) Shopkeepers and vendors
C) Direct crop-based farming
D) Truck and taxi operators
Q3. What percentage of MUDRA loan accounts are held by women as per recent trends?
A) 25%
B) 40%
C) 68%
D) 90%
Q4. MUDRA functions as a ________ agency for banks and MFIs.
A) Direct lending
B) Regulatory
C) Refinancing
D) Insurance
Q5. In which year was the Pradhan Mantri MUDRA Yojana launched?
A) 2014
B) 2015
C) 2016
D) 2017
ANSWERS & EXPLANATIONS
| Question | Answer | Explanation |
| Q1 | D | Tarun Plus was introduced to support graduates of the Tarun category up to ₹20 Lakh. |
| Q2 | C | PMMY is for non-farm activities; direct farming is covered under KCC. |
| Q3 | C | The scheme has been highly successful in driving women’s entrepreneurship (Nari Shakti). |
| Q4 | C | It provides funds to banks so they can lend further to micro-units. |
| Q5 | B | It was launched on April 8, 2015. |
EXAM RELEVANCE
| Exam | Focus Area | Relevance Level |
| RBI Grade B | ESI (Social Justice & Financial Inclusion) | Critical |
| Banking (PO) | General Awareness (Government Schemes) | High |
