Microfinance Story of India

What is MUDRA Scheme?


From UPSC perspective, the following things are important :

Prelims level: MUDRA Scheme

Mains level: Read the attached story


PM hit out at people ridiculing the Pradhan Mantri Mudra Yojana (PMMY) and said those who gave loans to big businessmen “over phone” never understood the power of microfinance.

MUDRA Scheme

  • MUDRA (Micro Units Development and Refinance Agency) Scheme is a financial initiative launched by the Government of India in April 2015 to provide financial support to micro-enterprises in India.
  • The scheme is designed to cater to the financial needs of the non-corporate, non-farm sector enterprises in the country.
  • The objective of the scheme is to promote entrepreneurship, employment generation, and to provide access to finance to small and micro-businesses in India.

Range of loans

  • The MUDRA scheme provides loans ranging from Rs. 50,000 to Rs. 10 lakhs to small and micro-businesses.
  • These loans are provided through various financial institutions such as banks, microfinance institutions, and non-banking financial companies (NBFCs).
  • The scheme also offers refinance support to these institutions.
Category Loan Amount
Shishu Up to Rs. 50,000
Kishore Rs. 50,001 to Rs. 5 lakhs
Tarun Rs. 5 lakhs to Rs. 10 lakhs

Key features of the MUDRA scheme

  • Refinance support: The scheme offers refinance support to various financial institutions, such as banks, microfinance institutions, and non-banking financial companies (NBFCs), to provide loans to small and micro-businesses.
  • Employment generation: The scheme aims to promote entrepreneurship and employment generation in the country.
  • Digitalization of financial transactions: The scheme has helped in promoting the digitalization of financial transactions.
  • Focus on underprivileged and marginalized sections: The scheme aims to provide financial assistance to underprivileged and marginalized sections of the society, especially those belonging to the non-corporate, non-farm sector enterprises in the country.
  • Simplified loan processing: The loan processing under the scheme is simplified and requires minimal documentation.
  • No collateral requirement: The loans provided under the scheme do not require any collateral or security.
  • Competitive Interest rate: The interest rate for the loans provided under the scheme is competitive and affordable.


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