The structural transformation of the Indian economy over the past decade has been anchored by a fundamental shift in the credit architecture, moving away from a historically top-heavy banking model toward a decentralized, inclusion-driven framework. At the vanguard of this revolution is the Pradhan Mantri Mudra Yojana (PMMY), launched in 2015 with the strategic mission of “funding the unfunded”. For an economy where micro, small, and medium enterprises (MSMEs) form the backbone – employing over 25 crore people and contributing nearly 30 per cent of GDP – the availability of formal, collateral-free credit has transitioned from a policy aspiration to a vital economic reality.
As of late March 2026, the PMMY has facilitated the flow of Rs 39.18 lakh crore across 57 crore loan accounts, marking one of the most ambitious microfinance interventions in global history. The PMMY’s design recognized that the “bottom of the pyramid” was historically credit-starved not due to a lack of entrepreneurial energy, but due to institutional rigidities and the absence of collateral. By removing the requirement for security-free credit and providing refinancing support through MUDRA, the government effectively lowered the barrier to entry for millions of micro-entrepreneurs.
Analysis of disbursement trends reveals a significant “graduation effect” over the scheme’s decadal journey. In its nascent years, the Shishu category (up to Rs 50,000) dominated the portfolio. However, data from 2025 indicates a robust upward shift. The share of Kishor loans (Rs 50,000 to Rs 5 lakh) grew from 5.9 per cent in FY16 to 44.7 per cent in FY25. This trend indicates that micro-units are not merely surviving but are successfully scaling their operations, requiring larger capital infusions to sustain growth. The scheme has demonstrated remarkable policy dynamism. In the Union Budget 2024-25, the loan limit was doubled to Rs 20 lakh with the introduction of the ‘Tarun Plus’ category for borrowers with strong repayment records.
This strategic move rewards credit discipline and addresses the “missing middle” problem, where firms often struggle to transition from small to medium entities due to a lack of incremental capital. One of the most profound impacts of the PMMY has been the restructuring of India’s social credit fabric. According to SBI Research, the Social Fabric Index – representing the participation of marginalized groups in formal banking – jumped 3.2 times in the five-year period ended FY22. Currently, over 50 per cent of Mudra accounts are held by Scheduled Caste (SC), Scheduled Tribe (ST), and Other Backward Class (OBC) entrepreneurs.
Women have emerged as the most significant beneficiaries, accounting for 68 per cent of all loan accounts. By providing collateral-free loans to women – who often lack title to property – the scheme has bypassed persistent barriers to gender parity. Between FY16 and FY25, the per-woman disbursement amount grew at a CAGR of 13 per cent, while incremental deposits by women grew at 14 per cent. This dual growth in borrowing and saving indicates a deepening of financial literacy and the creation of household-level safety nets. A primary criticism of economic growth has often been its “jobless” nature. PMMY has directly addressed this by funding the labour-intensive micro-sector.
A sample survey by the Ministry of Labour and Employment established that the PMMY helped generate 1.12 crore net additional jobs in just its first three years. The survey highlighted that 51 lakh beneficiaries were self-employed business owners, while 60 lakh were hired workers, demonstrating a shift from job seekers to job providers. Furthermore, PMMY has acted as a catalyst for economic formalization. The Udyam Registration Portal now boasts 5.93 crore registered MSMEs, with the vast majority being micro-enterprises. This digital integration allows units to access Priority Sector Lending and participate in government procurement.
The impact is visible in banking data: MSME credit surged from Rs 8.51 lakh crore in FY14 to Rs 27.25 lakh crore in FY24. Concerns regarding asset quality in collateral-free lending have been mitigated by improved monitoring. As of FY24, the Mudra loan NPA rate for public sector banks dropped to 3.4 per cent, while private sector banks maintained a low of 0.95 per cent. The scheme is now expanding into high-potential sectors like tourism. The introduction of Mudra loans for homestays in the 2025-26 Budget, integrated with the ‘Pradhan Mantri Janjatiya Unnat Gram Abhiyan,’ aims to develop 1,000 tribal homestays. This initiative enables local families to transform their homes into income-generating assets, driving employment-led growth in rural regions.
The Pradhan Mantri Mudra Yojana has transcended its identity as a credit scheme to become apilla of India’s economic transformation. By systematically addressing the structural credit gap, it has empowered 57 crore entrepreneurs and shifted the labour narrative toward self-reliance. As India seeks to become the world’s third-largest economy, sustaining this grassroots momentum will be indispensable. By “funding the unfunded,” the scheme ensures that the promise of the Indian economy is the privilege of the many, not the few.
(The writer is National Spokesperson, Bharatiya Janata Party.)