Pradhan Mantri Mudra Yojana (PMMY) was announced by Finance Minister Arun Jaitley while presenting the Union Budget for financial year 2016. It is an institution that would support the small entrepreneurs of India in the biggest possible way to help the Indian economy grow and prosper as per the PM's speech wile launching the scheme on April 8, 2015. PM Modi said that while large industries enjoy many facilities, there is an urgent need to focus on some 5.75 crore self-employed people who use funds of around Rs 11 lakh crore, and have an average debt of merely Rs 17,000 but they end up employing 12 crore people.
Loans extended under the PMMY during 2016-17 have crossed the target of Rs 1.8 lakh crore. Government awaits final data from some of the minor non-banking lenders. The banks disbursed loans of Rs 1.23 lakh crore while non banking financial institutions lent around Rs 57 thousand crore. The estimated number of borrowers in this fiscal were more than four crore. The encouraging fact that comes out of the numbers is that of these four crore plus borrowers over 70 per cent were women. Some 20 per cent of the borrowers were from the Scheduled Caste Category, about 5 per cent from the Scheduled Tribes, while OBCs numbered for almost 35 per cent of the borrowers.
The demand for credit exists and is often hampered by lengthy paper work and documents. The way this scheme led to strong growth in institutional loans to the hitherto unfunded or under-funded segments of the society indicates that this category of small borrowers can emerge as a key driver of demand for credit.
For the fiscal 2017-18 the Union Budget has announced a target of Rs 2.44 lakh crore for Mudra Loans. These loans are made available for non-agricultural activities for upto Rs 10 lakh. They are also extended for allied-agricultural activities like dairy and poultry farming, Apiary or bee keeping etc.
Government studies have shown that banks, both public and private sectors have acted proactively in identifying and extending loans to small and marginal borrowers, including first time borrowers, thereby laying a foundation from weaning them away from money lenders and ensuring their protection from financial exploitation and distress.
The Mudra Card feature encourages an user to access his cash via ATMs etc which should provide a fillip for digital transactions and most of the borrowers have said that they were encouraged by the simple and quick documentation procedure and the lender's not insisting on guarantors or collaterals.