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The share of commercial banks in MUDRA loans has increased, indicating that more and more micro units are getting support from mainstream formal credit institutions
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SREENIVASA MURTHY V
Micro Units Development and Refinance Agency (MUDRA) Ltd and Pradhan Mantri Mudra Yojana (PMMY) complete 10 years on April 8, 2025. A flagship programme of the Government, it has brought a revolutionary change in funding micro enterprises. The NSSO report of 2013 reveals that there were 57.7 million micro units in the country, of which, more than 90 per cent were own account enterprises or proprietary concerns, owned mostly by the weaker sections of the society. The major issue pointed out by the report was that only 5-6 per cent of these enterprises had formal credit support. This was the trigger for the new initiative.
Now, how has MUDRA performed in the last 10 years? The overall credit flow to these informal enterprises has increased several folds. The total credit flow from banking system for micro units was around ₹57,000 crore in 2013. With the launch of MUDRA, it was ₹1.32 lakh crore in 2014-15 which climbed to ₹5.41 lakh crore in nine years. The units supported increased from 3.48 crore to 6.67 crore in the same period.
Around 30 per cent of units financed under MUDRA were new or fresh to financing. Another feature of MUDRA was it brought many women borrowers into formal credit through Shishu loans. About 70 per cent of the borrowers were women in the first year.
A welcome change over the last 10 years is that the share of commercial banks in MUDRA loans increased, indicating that more and more micro units are getting support from mainstream formal credit institutions.
There were credit programmes for poor in the past too. What is that MUDRA brought new? It allowed financial institutions to continue with their existing credit schemes. It did not stipulate any new norms but provided an enabling environment around it, like refinance, through MUDRA Ltd, and Credit Guarantee Scheme, CGFMU.
Budget 2015-16 mentioned about formation of a MUDRA Bank. The bank was to extend refinance and regulate microfinance sector. But later on, after detailed consultations and deliberations, it was decided that MUDRA Ltd will provide refinance and be the policy and monitoring body. The credit was to be extended through the existing mechanism of lending. A parallel monitoring mechanism was also created in the form of Mission MUDRA at the government level. Closer monitoring and follow-up, along with an enabling environment, made the difference in the approach of lenders in financing for MUDRA loans.
Loan categories
There are around six crore micro units getting funded every year, with 63 per cent of them under the Shishu category, where the loan is up to ₹50,000. Another 35 per cent are under Kishore, where the loan limit ranges from ₹50,000 to ₹5 lakh. The remaining 2 per cent loan accounts are under Tarun, where the loan limit is up to ₹10 lakh.
Over the years, the structure of MUDRA lending is also changing. Initially more than 90 per cent used to be Shishu loan which has come down. Whereas, Kishore loans have increased five-fold, recording 35 per cent in 2023-24, from a mere 7 per cent in the first year. It increased further in the last financial year, touching 40 per cent. It is evident that the beneficiary units have grown over the years, thanks to MUDRA. In Budget 2025-26, a new category of Tarun-plus loan, up to ₹20 lakh, has been introduced, which will further grow the units.
MUDRA has thus changed the lending perspective with more and more lenders willing to finance them. Incidentally, the NPA in these loans are around 2.2 per cent which is good by any standards. MUDRA has, thus, opened up a new way of lending in our country
The writer is the the first CEO of MUDRA Ltd and presently ED and CEO of Sa-Dhan
Published on April 8, 2025
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