Maarg Manthan · Topic 8.6

MUDRA Yojana (Micro Units Development and Refinance Agency)

Current Affairs & Government Schemes › Financial Inclusion and Insurance Schemes · Topic 8.6

The Pradhan Mantri MUDRA Yojana (PMMY) is a loan scheme of the Ministry of Finance, launched on 8 April 2015, that gives collateral-free loans of up to Rs 10 lakh to non-corporate, non-farm micro and small enterprises. MUDRA stands for Micro Units Development and Refinance Agency, which is a subsidiary of the Small Industries Development Bank of India and refinances banks, non-banking finance companies and micro finance institutions that lend. Loans fall in three tiers: Shishu up to Rs 50,000, Kishore above Rs 50,000 to Rs 5 lakh and Tarun above Rs 5 lakh to Rs 10 lakh. Over 57 crore loans and about Rs 40 lakh crore were reported as disbursed by March 2026.

5 min read · UPSC Prelims · Current Affairs & Government Schemes · Financial Inclusion and Insurance Schemes

At a Glance

Ministry Finance
Launched 8 April 2015
Limit Up to Rs 10 lakh, collateral free
Tiers Shishu, Kishore, Tarun (and Tarun Plus)
Parent MUDRA, a SIDBI subsidiary
Exam link UPSC Prelims, Current Affairs and Government Schemes: Financial Inclusion and Insurance Schemes

Where Does It Fit?

This is the sixth topic of the macro on financial inclusion and insurance. It is the main credit scheme for micro enterprises and sits next to the Stand-Up India page, which covers larger loans for SC, ST and women. Previous topic: Stand Up India Scheme. Next topic: Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

What Are the Tiers and Rules of MUDRA Loans?

Tier	Loan size and use
Shishu	Loans up to Rs 50,000 for the smallest units and first-time borrowers, such as vendors, small shops and artisans
Kishore	Loans above Rs 50,000 and up to Rs 5 lakh for units that need to grow
Tarun	Loans above Rs 5 lakh and up to Rs 10 lakh for established micro units
Tarun Plus	Loans above Rs 10 lakh and up to Rs 20 lakh for borrowers who have repaid an earlier Tarun loan, announced in the Union Budget of 2024-25
Eligible activity	Non-farm income-generating activities in manufacturing, trading and services, and allied agriculture activities outside crop production, such as poultry, dairy and bee-keeping
Lenders	Scheduled commercial banks, regional rural banks, small finance banks, co-operative banks, micro finance institutions and non-banking finance companies
Collateral	No collateral security is needed, and loans are given as term loans, working capital and through a MUDRA Card, which is a RuPay debit card for working capital

What Are the Results and Concerns?

Ten years: At the ten-year mark in April 2025, over 52 crore loans were reported as sanctioned, worth about Rs 32.6 to 33 lakh crore depending on the source
Latest: The anniversary release of April 2026 reported about 57.79 crore loans and about Rs 40.07 lakh crore disbursed up to 27 March 2026. Disbursed and sanctioned values differ, so name which one you use
Shift in tiers: The share of Shishu loans by number has fallen over time from a very high level, while Kishore and Tarun loans have grown, as reported
Beneficiaries: Women and SC, ST and OBC borrowers account for a large share of accounts, as reported by the Ministry
Compared with Stand-Up India: Loans for the larger SC, ST and women projects, as in Stand Up India Scheme
Guarantee: Many MUDRA loans are covered by a credit guarantee fund, as in Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

What Else Should You Remember?

Meaning of MUDRA: Micro Units Development and Refinance Agency, set up in 2015 as a non-banking finance company of SIDBI with a corpus from the Government
Role: MUDRA does not lend to borrowers directly. It refinances lenders and develops the micro finance sector
Registration: A micro enterprise can apply through a bank branch or the Udyamimitra portal, with simple documents
Interest: Interest rates are set by lenders under the Reserve Bank framework, and the scheme has no interest subsidy except for specific linked schemes
Loan accounts: Most loans are small, so the average loan size is low, which shows the reach of the scheme but also the thin finance of many borrowers
Non-performing assets: The Reserve Bank and parliamentary committees have flagged stress in some MUDRA portfolios, and the Government has used guarantee cover
Evaluation: Some studies link MUDRA with new employment, but an official count of the net jobs created is not available
Compared with PMEGP: MUDRA gives credit without subsidy, while the PMEGP gives credit with a margin money subsidy and is run by the MSME ministry
Exam trap: MUDRA is a refinance agency and not a bank, and the Pradhan Mantri MUDRA Yojana (PMMY) is the scheme name
Concerns: Loans for consumption, evergreening of loans, poor tracking of enterprise outcomes and double counting
Way forward: Track enterprise survival, strengthen guarantee cover and link loans to training and digital payments

Why Does It Matter for the Exam?

Date and ministry: 8 April 2015, Ministry of Finance
Full form: Micro Units Development and Refinance Agency
Tiers: Shishu, Kishore, Tarun and Tarun Plus
Parent: SIDBI subsidiary, refinance agency
Common errors: Saying MUDRA lends directly or that it gives subsidy

As an analytical point, MUDRA widened formal credit for tiny units, but the size of a loan says little about its effect. Better measures are survival of the enterprise, repeat borrowing and job creation, which need routine tracking.

Why Is This Topic Important?

Full form MUDRA
Tiers Loan ranges
Compare PMEGP and Stand-Up India

What Came Next?

The next topic covers the credit guarantee body that backs collateral-free loans to micro and small enterprises. Next topic: Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Key People and Terms

MUDRA Refinance agency for micro units
Shishu Up to Rs 50,000
Kishore Up to Rs 5 lakh
Tarun Up to Rs 10 lakh
Refinance Funds given to lenders for onward lending

Exam Corner

Points to Remember

Launched: 8 April 2015.
Limit: Rs 10 lakh.
Tiers: Shishu, Kishore, Tarun.
Tarun Plus: up to Rs 20 lakh.
Parent: SIDBI.

Do Not Confuse With

MUDRA and PMEGP Collateral-free credit without subsidy versus credit with subsidy
MUDRA and Stand-Up India Small loans for all micro units versus larger loans for SC, ST and women
MUDRA and Start-up India Micro loans versus recognition and tax benefits for start-ups

Memory Hook

Shishu small, Kishore middle, Tarun large, and no collateral for any of them.

Mains Angle

Questions ask about the impact of micro credit on jobs and inclusion. These points give a balanced frame.

Strengths Scale, no collateral and women reach
Weaknesses Small loans, stress in portfolios and weak outcome data
Way forward Outcome tracking, guarantee cover and larger share for growth loans

A Question You May Face

An original practice question, not a past paper question.

“Assess the contribution of the Pradhan Mantri MUDRA Yojana to the growth of micro enterprises and to financial inclusion, and discuss its concerns.”

How to Answer

Introduce Scheme, tiers and refinance role.
Contribution Credit access and women reach.
Concerns Stress, small loans, outcome data.
Way Tracking, guarantee, growth loans.

GS Relevance

Prelims: launch, tiers, full form of MUDRA, parent body, collateral rule. GS Paper 3: MSME finance, financial inclusion, inclusive growth. GS Paper 2: government schemes for small enterprises.

Frequently Asked Questions

What is the Pradhan Mantri MUDRA Yojana?

PMMY is a scheme of the Ministry of Finance launched on 8 April 2015 that gives collateral-free loans up to Rs 10 lakh to non-corporate, non-farm micro and small enterprises through banks, non-banking finance companies and micro finance institutions. MUDRA is a refinance agency under SIDBI and does not lend directly.

What does MUDRA stand for?

MUDRA stands for Micro Units Development and Refinance Agency. It was set up in 2015 as a non-banking finance company, a subsidiary of the Small Industries Development Bank of India, to refinance lenders and to support the micro finance sector, while the loans are given by banks and other lenders.

What are Shishu, Kishore and Tarun loans?

They are the three loan tiers of MUDRA. Shishu covers loans up to Rs 50,000, Kishore covers loans above Rs 50,000 and up to Rs 5 lakh, and Tarun covers loans above Rs 5 lakh and up to Rs 10 lakh. Tarun Plus covers Rs 10 lakh to Rs 20 lakh for repeat borrowers.

Who is eligible for a MUDRA loan?

Any Indian citizen with a business plan for a non-farm income-generating activity in manufacturing, processing, trading or services, or an allied agricultural activity, can apply for a loan below Rs 10 lakh. No collateral is needed. Borrowers apply at banks, non-banking finance companies or micro finance institutions.

What is the latest status of MUDRA?

The anniversary release of April 2026 reported about 57.79 crore loans and about Rs 40.07 lakh crore disbursed up to 27 March 2026. Earlier, at ten years in April 2025, over 52 crore loans worth about Rs 33 lakh crore were reported as sanctioned. These are reported figures and the basis differs.

PYQ Practice — Statement Analysis

1 MUDRA stands for Micro Units Development and Refinance Agency.

True

It is a subsidiary of SIDBI.

2 MUDRA gives loans directly to borrowers.

False

It refinances banks and other lenders.

3 Tarun loans are above Rs 5 lakh and up to Rs 10 lakh.