---
title: "Pradhan Mantri MUDRA Yojana (PMMY): Scheme | Model Diplomat"
description: "Pradhan Mantri MUDRA Yojana offers collateral-free loans up to ₹10 lakh to micro-enterprises, crucial for financial inclusion in India."
url: "https://modeldiplomat.com/learn/glossary/mudra-yojana"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Pradhan Mantri MUDRA Yojana is an Indian government scheme launched in 2015 that provides collateral-free institutional credit up to ₹10 lakh to non-corporate, non-farm micro and small enterprises.
- What are the three loan categories under PMMY?
- Does MUDRA lend money directly to borrowers?
- How is PMMY different from Stand-Up India?
- What collateral is required for a MUDRA loan?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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## Positions at a glance

### Supporters

PMMY must be distinguished from adjacent credit-support instruments. It differs from the Stand-Up India scheme, also launched in 2015, which targets bank loans between ₹10 lakh and ₹1 crore specifically for at least one Scheduled Caste/Scheduled Tribe and one woman borrower per bank branch for greenfield enterprises. It is separate from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which guarantees a different loan band. Unlike the Pradhan Mantri Employment Generation Programme (PMEGP), which provides a capital subsidy through KVIC, MUDRA offers no upfront subsidy — it is purely a credit and refinance facility. The CGFMU guarantee that backs MUDRA loans is also distinct from CGTMSE coverage in its fund structure and ceiling.

### Opponents

The scheme has attracted substantive policy scrutiny. The Reserve Bank of India and several analysts have flagged the risk of rising non-performing assets in the MUDRA portfolio, particularly within the Shishu tier where ticket sizes are small but volumes are enormous, raising concerns that aggressive disbursement targets could compromise credit appraisal. Critics have questioned whether MUDRA loans translate into durable employment or merely refinance existing informal debt. Defenders point to the formalization of micro-credit and the documented expansion to first-time borrowers. The enhancement of limits in 2024 and the integration with the Jan Dhan–Aadhaar–Mobile (JAM) trinity for delivery represent ongoing efforts to balance reach against asset quality.

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Example

In Union Budget 2024–25, Finance Minister Nirmala Sitharaman announced the enhancement of the MUDRA Tarun loan ceiling to ₹20 lakh for entrepreneurs who had successfully repaid previous Tarun-category loans.

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