The PMMY is a flagship scheme of the Government of India announced in 2015 during Union Budget FY-2016 to extend affordable credit to micro and small enterprises (MSMEs).
Objective: To fund the unfunded by bringing MSMEs to the formal financial system and extending affordable credit to them.

Key Features of the scheme

Type: Central Sector Scheme.
Loans through Member Lending Institution (MLIs): Public Sector Banks, Private Sector Bank, State operated cooperative banks, Regional Rural banks, Micro Finance Institution (MFI), Non-Banking Finance Company (NBFC), Small Finance Banks (SFBs) etc.
- MUDRA (Micro Units Development & Refinance Agency Ltd.) is responsible for refinancing MLIs.
- MUDRA does not lend directly to the micro entrepreneurs/individuals.
- Loans are provided to meet both term loan and working capital components of financing.
Eligible borrowers: Non–Corporate Small Business Segment (NCSB) consisting of Individuals, Proprietary concern, Partnership Firm, Private Ltd. Company, Public Company and Any other legal forms.
Credit Guarantee: To eligible micro units through Credit Guarantee Fund for Micro Units (CGFMU).
- CGFMU was established in 2015 for guaranteeing loans sanctioned under PMMY.
Other benefits:
- No need to pay processing charges or offer collateral, improved access to affordable credit, and flexible repayment options.
- MUDRA Card: Debit card issued against the MUDRA loan account, for working capital portion of the loan.

Key Achievements highlighted in the report

Credit Support to MSMEs: Since 2015, the scheme has reached out to ~35 crore Micro and Small Entrepreneur Accounts and provided credit support amounting to ~ ₹18.39 lakh crore.
- Average loan size has gradually increased for almost all the banks over the years.
Financial Inclusion:
- Women entrepreneurs have the major share of PMMY loans, with around 71.4 % of the total number of accounts (FY 2022).
- The sanctioned amount for New entrepreneurs has increased from INR 61,650 Crore to INR 72,685 Crore.
Encourages small businesses: Majority loan accounts (~80%) are in the Shishu category (FY 2021), followed by Kishore at 18.70 %.
- People belonging to SC, ST, OBCs have more number of Shishu accounts (83.92 %, 83.53 %, 78.68% respectively for FY 2022).
Performance of Aspirational Districts: Increase in the number of loan accounts and amount sanctioned to these districts Under PMMY with a YoY change of 12 % and 14.7 % respectively.

Regional Variation: The Cumulative number of accounts and the amount sanctioned for the Northeast region (2015 – 2022) is not only the lowest at ~4% but is also decreasing year after year post FY-2018.
Rising NPAs: NPA accounts & amount have been increasing year after year with a compound annual growth rate (CAGR) of 22.51 % & 36.61 % respectively from FY17 to FY22.
- Public sector banks have the highest NPA of 22.6 % and NBFCs have the lowest NPA of 1.3 %.
- Kishore accounts have the highest NPA while Shishu accounts have the lowest NPA amount.
Issues in Scheme Design:
- Ceiling of 15% on pay out under CGFMU (maximum amount the CGFMU is willing to cover for a defaulted loan) restricts the benefits of the banks.
- Complex (XML format, errors not easily rectifiable, high upload time to upload), and lengthy claim settlement process under CGFMU.
- Other issues: High Guarantee fee; high refinancing rates; security risk due to Lack of collateral etc.
Issues in Institutional Mechanism:
- Lack of centralized database for collecting information.
- Poor credit penetration to weaker sections and deficient areas.
- Lack of digitized platform for quick addressal of queries on issues pertaining to guarantee covers or other operational/ technical guidelines.

Using Traditional Advertising (Mass promotion using television/newspapers/radio, displaying posters and banners in regional languages) and Online Advertising (through social media platforms, Facebook ads, google ads etc.) to inform, persuade and reinforce the benefits of the scheme.
Digitization of the Lending Process to make it more transparent and hassle free for the potential beneficiaries.
Digital Portal enabling real-time upload of beneficiary data to enhance the overall efficiency and transparency of the scheme with better data management.
Feedback/Query Redressal Portal and Chatbots for query redressal to benefit the MLIs as well as the beneficiaries or borrowers of the scheme.
Recognition Mechanism to incentivize well performing MLIs to perform better.

Integration of MUDRA scheme with the “Loans in 59 minutes” scheme by Central Bank of India, IDBI, ICICI, Yes Banks etc. wherein people can apply for credit on their portal.
MUDRA Day by UCO bank, every month, to promote, improve availability and accessibility through campaigns and personal interactions.
Group based lending system by Bandhan and IndusInd Bank wherein individuals are grouped and informed about the scheme has helped them reduce NPA to a significant level.