MUDRA 2.0
The Pradhan Mantri MUDRA Yojana (PMMY) was launched in 2015 to support entrepreneurship by providing collateral-free micro-loans. The scheme was initially designed to offer loans up to ₹10 lakh to small and micro-enterprises. The Union Budget 2024 has increased the loan limit for the Tarun category to ₹20 lakh, signaling an upgrade to MUDRA 2.0.
ABOUT PMMY
Overview:
- Initiative: Pradhan Mantri Mudra Yojana (PMMY) is a flagship program by the Government of India.
- Launch Year: 2015.
- Aim: To provide affordable credit to micro and small enterprises.
- Objective: To integrate underserved enterprises into the formal financial system by offering easy access to credit.
Key Features:
- Goal: “Fund the unfunded” by enabling small borrowers to secure loans from various financial institutions.
- Financial Institutions: Public Sector Banks (PSBs), Regional Rural Banks (RRBs), Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions (MFIs), Non-Banking Financial Companies (NBFCs).
LOAN DETAILS
- Loan Amount: Up to ₹10 lakh for non-farm income-generating activities.
- Sectors: Manufacturing, processing, trading, and services.
- Eligibility: Any Indian citizen with a viable business plan for a non-farm sector income-generating activity requiring credit below ₹10 lakh can apply.
CATEGORIES OF LOANS
- Shishu:
- Loan Amount: Up to ₹50,000.
- Target: New and micro enterprises.
- Kishore:
- Loan Amount: ₹50,000 to ₹5 lakh.
- Target: Businesses in the growth phase.
- Tarun:
- Loan Amount: ₹5 lakh to ₹10 lakh.
- Target: Businesses looking to expand further.
ACHIEVEMENTS OF MUDRA 1.0
- Loan Disbursement: Over ₹27.75 lakh crore disbursed to 47 crore small and new entrepreneurs.
- Inclusivity: About 69% of loan accounts are held by women, and 51% are from SC/ST and OBC
- Job Creation: Significant impact on the grassroots economy, promoting self-employment and small business development.
CHALLENGES
- Unequal Distribution: Disbursement concentrated in a few districts, with the top 10 districts receiving over ₹26,000 crore, while the bottom 318 districts received the same amount in FY 2021-22.
- Non-Performing Assets (NPAs): NPAs decreased from 61% in FY21 to 2.1% in FY24. Highest NPAs observed in Kishore (₹50,001 to ₹5 lakh) and Shishu (up to ₹50,000) categories.
- Financial Literacy: Only 27% of the population is financially literate, contributing to loan defaults and mismanagement.
- Monitoring and Implementation: Inadequate oversight led to misuse of funds and inconsistent credit distribution.
KEY PROPOSALS IN MUDRA 2.0
- Focused Outreach and Empowerment Zones: Establish centres in rural and semi-urban areas providing financial literacy programs, mentorship, and business support.
- Financial Literacy Programs: Nationwide initiatives to educate on budgeting, savings, credit management, investment strategies, and digital literacy. Aim to reduce default rates and improve the financial health of entrepreneurs.
- Enhanced Credit Guarantee Scheme (ECGS): Introduce ECGS to encourage banks to lend more by providing credit guarantees, thereby reducing the risk for financial institutions.
- Robust Monitoring and Evaluation Framework (RMEF): Implement technology-driven systems to track loan disbursements, utilization, and repayments in real-time. Include beneficiary impact assessments to measure socio-economic outcomes and guide policy improvements.
- Data Analytics and Beneficiary Tracking: Utilize data analytics to identify and support enterprises in need of assistance. Improve targeting and allocation of resources based on data-driven insights.
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