Opinion | 11 Years Of PM Mudra Yojana: A Historical Leap In Financial Inclusion

Financial inclusion has been at the forefront of the agenda of the Narendra Modi government. In the last decade, India witnessed a silent transformation where millions of ordinary citizens stepped into entrepreneurship with newfound confidence and agency. At its heart lies an initiative launched on April 8, 2016, by the prime minister, the Pradhan Mantri Mudra Yojana (PMMY), which, by design, focused on “funding the unfunded”.

Eleven years later, it has been instrumental in reshaping the credit landscape for MSMEs in the country. PMMY, through Member Lending Institutions, provides collateral-free, formal, institutional credit to non-farm, non-corporate enterprises and entrepreneurs for income-generating activities in agriculture-allied, manufacturing,

trading and services sectors.

These were those entrepreneurs—small shopkeepers, street vendors, artisans, weavers, SHG workers, small service providers, aspiring manufacturers—who were hitherto excluded from the formal banking system. With this initiative, entrepreneurship has become truly democratised by removing the entry barriers to credit.

Scale of Transformation

As the nomenclature reveals, a life-cycle approach has been taken to channelise enterprise graduation from micro to small to medium scale. For nascent ventures, the ‘Shishu’ category extends loans of up to Rs 50,000; for growing and mid-range enterprises, the ‘Kishor’ category loans range between Rs 50,000 to Rs 5,00,000; while the ‘Tarun’ and ‘Tarun Plus’ category loans range from Rs 5,00,000 to Rs 10,00,000 and Rs 10,0000 to Rs 20,00,000 respectively. The last category was announced by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25, exclusively for the existing borrowers of the Tarun category “who have demonstrated financial discipline”.

The scheme has also been robust in widening the net of beneficiaries. For instance, in 2016-17, agriculture-allied activities were brought within its purview, and from 2017-18, small farmers and agripreneurs could avail loans to purchase tractors and power tillers. From 2018-19, gig workers and small-scale transport enterprises could avail themselves of the scheme for purchasing commercial-oriented two-wheelers. In the Union Budget 2025-26, the finance minister further announced homestays as an eligible category, integrating it with PM Janjantiya Unnat Gram Abhiyan (that aims to develop 1,000 tribal homestays).

Cumulatively, more than 57.79 crore loans have been sanctioned, amounting to Rs 40.07 lakh crore of disbursement. Two-thirds of the loans have been sanctioned to women entrepreneurs, accounting for 42 per cent of the sanctioned money, amounting to Rs 16.38 lakh crores. Of the loans given to date, 42 per cent were extended to SC/ST/OBC borrowers, while 9 per cent to Minorities. Approximately one-fifth of all the loans were extended to first-time entrepreneurs/borrowers. In sheer magnitude, this translates to 12.15 crore loans with an amount of Rs 12 lakh crore extended to new entrepreneurs. Thus, the Yojana empowers entrepreneurs, especially women and nascent entrepreneurs, to become active participants in the India growth story by helping them attain economic independence.

A Decade of Unleashing Potential

The scheme’s impact extends well beyond figures. A NITI Aayog assessment, published in 2024, notes that by March 2025, the scheme had cumulatively generated over 11.10 crore jobs, with 47 per cent benefiting individuals from SC, ST and OBC communities. Acknowledging PMMY’s contribution to India’s financial inclusion agenda, the IMF, in its 2024 assessment, praised the scheme’s collateral-free architecture, its integration with Jan Dhan and Aadhaar infrastructure, and noted that India is amongst the world’s fastest-growing markets for women-led micro enterprises.

State-level data present an equally compelling picture. Uttar Pradesh leads all states with cumulative disbursals of Rs 3.92 lakh crore since the scheme’s launch, followed closely by Tamil Nadu at Rs 3.82 lakh crore and Karnataka at Rs 3.51 lakh crore. Bihar and West Bengal have also registered significant offtake at Rs 3.46 lakh crore and Rs 3.42 lakh crore respectively. Among Union Territories, Jammu and Kashmir leads with Rs 55,132 crore disbursed across 25.43 lakh accounts—a notable sign of economic resurgence in the region.

Across India—from Uttar Pradesh’s markets to the Andaman Islands—a quiet entrepreneurial revolution is unfolding, driven by individuals transforming modest beginnings into sustainable enterprises. Stories like Phulwari Devi’s grocery shop (Rajla Chatti, Bihar), Vishal Kumar’s stationery business (Tanda, UP), and Ratna Deb’s bakery (Moranhat Town, Assam) highlight growing self-reliance, while ventures by Keya Sarkar and Kshama Deb (West Bengal), Rajkumar Bangkimchandra (Manipur), Danaram Prajapat and Nirmala Lakhara (Rajasthan), and a weavers’ collective (Palani, Tamil Nadu) reflect widespread grassroots innovation. This shift is further exemplified by Ruby Devi’s milk centre (Manikpur, Bihar), Lavkush Mehra’s expanding enterprise (Bhopal), and Manisha Rawat’s chocolate business (Rae Bareli). Entrepreneurs like Suresh Acchavar (Silvassa) and Saraswathi (Tamil Nadu) have scaled small loans into job-creating ventures, illustrating how MUDRA is enabling Indians to become job creators and strengthening inclusive economic growth.

Changing Landscape

Despite valid concerns about a potential build-up of stressed assets in the banking system, given that the system faced a shock from a huge jump in NPAs (accumulated during the reckless years of the UPA government) post the Asset Quality Review, we can now say, with the benefit of hindsight, that those concerns have been largely misplaced. While the NPA percentage against the outstanding amount stood at an overall 10.5, it has been at 2.32 per cent against the amount disbursed as of September 2025.

In a low-trust society, risk-weighted perceptions entail that those at the bottom of the pyramid are also at the bargaining end of formal, institutionalised credit. However, the Indian experience notes that, on the contrary, the dividends accrued on account of exponential efforts in the space of financial inclusion have been colossal, in that this scheme has been instrumental in generating jobs, upskilling entrepreneurs, fostering aspirations, unleashing the animal spirits and strengthening the market forces in the hinterlands and beyond.

After 11 years, while we look at the road travelled thus far in ways this scheme has transformed the non-farm, non-corporate sector, it is time we broaden the scope. To propel the growth engine, the MSME sector needs to be agile in the changing landscape to become active players in the global game. As we prepare for an uncertain world, with realigning global value chains and unpredictable weather, the need for and the scope of micro-finance evolve. And it is time our enterprises punch beyond their weight.

Conclusion

To bank the unbanked, to fund the unfunded, to secure the unsecured, and consequently, to include the excluded, have been at the heart of the developmental policies unleashed via Modinomics. When nations across the seas are racing to win the AI race, we cannot have a population that remains developmentally underserved and operates sub-optimally. As the prime minister noted, this is an India that has the benefit of a dual AI: Artificial Intelligence and Aspirational India. These forces would unleash the possibilities and push the capability frontier of the nation. A critical link for this is being provided by the Mudra Yojana, ensuring access to credit is no longer a binding constraint for first-time entrepreneurs, for those in rural areas and from the remote corners of the country, and for those coming from the marginalised communities. It reaffirms the government’s commitment to empowering communities to achieve the mission of Viksit Bharat by 2047.

PMMY was built on a revolutionary idea that the Indian state could trust its most marginalised citizens with credit, when the formal banking system hesitated. Eleven years and Rs 40.07 lakh crore later, that bet has paid off—imperfectly but unmistakably. The task now is to protect that wager by building the institutional scaffolding that makes it sustainable for the next fifty-seven crore borrowers.

(The author is National Spokesperson of the Bharatiya Janata Party. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.)