PMMY or, the Pradhan Mantri MUDRA Yojana

PMMY or, the Pradhan Mantri MUDRA Yojana

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On April 8, 2015, the Pradhan Mantri MUDRA Yojana (PMMY) was launched by the Union Government to provide loans of up to Rs.10 lakhs to non-corporate small and microenterprises. Under the PMMY, all banks, including Public Sector Banks, Private Sector Banks, Regional Rural Banks (RRBs), State Co-operative Banks, Urban Co-operative Banks, Foreign Banks, and Non-Banking Finance Companies (NBFCs)/Micro Finance Institutions (MFIs), must lend to income-generating activities outside of the agricultural sector with a value of less than Rs. 10 lakhs.

Under the Institutional Mechanism heading, these loans are categorized as MUDRA loans. Within this, the government has established a brand-new organization known as MUDRA (Micro Units Growth & Refinance Agency Ltd.) to oversee the development and refinancing of the Scheme and the microfinance industry as a whole. The purpose of PMMY is to award grants to non-corporate small businesses. Offerings of loans under the Pradhan Mantri MUDRA Yojana (PMMY)

1. Shishu: Loans of up to Rs.50,000 rupees given without collateral, with a five-year repayment term of 1% interest per month.

2. Kishor: loans in excess of Rs.50, 000 and as much as Rs.5 lakh.

3. Tarun: loans higher than Rs. 5 lakh to10 lakh.

Approach of PMMY

Undertakings in the littlest section should get somewhere around 60% of the financing.The partner intermediaries of MUDRA Bank must make an effort to adhere to particular frameworks.Special programs are being planned for women entrepreneurs, young entrepreneurs (those under 30), and first-time business owners.Security-based lending would take precedence over cash flow-based lending.Among other things, collateral securities should be avoided.The entrepreneur's company's cash flows should be taken into consideration when formulating repayment commitments.

A microfinance refinancing institution is the Micro Units Development Refinance Agency (MUDRA) Bank. MUDRA (SIDBI) Bank replaced SIDBI as its name. The MUDRA Bank primarily bears responsibility for registering and regulating MFI organizations, as well as developing policy guidelines for:

1. The micro/small enterprise financing industry.

2. Accreditation and rating are given to MFI firms.

3. Establishing responsible lending policies to avoid debt, ensure client security, and ensure appropriate recovery strategies.

4. Establishing a standard set of covenants for micro and small business last-mile lending.

5. Promoting suitable technological strategies for the last mile.

6. Developing and putting into action a Credit Guarantee System to offer loan guarantees to microbusinesses.

7. Implementing the Pradhan Mantri Mudra Yojana's good Last Mile Credit Delivery architecture for small businesses.

MUDRA Bank connects with last-mile lenders like Micro Finance Institutions (MFIs), Small Banks, Primary Credit Cooperative Societies, Self Help Groups (SHGs), NBFCs (other than MFIs), and such other lending institutions through regional level financing institutions. When it comes to lending, MUDRA gives first-generation entrepreneurs, small businesses that are already in operation, and businesses owned by people from underprivileged castes and tribes (SC/ST) preference.