Some facts related to Pradhan Mantri Mudra Yojaja (PMMY)

FCS Deepak Pratap Singh , Last updated: 14 February 2022
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Dear Friends,

Micro Finance sector consisting of a verity of players that includes Non-governmental organisations,cooperatives, self help groups, Non-Banking Finance Institutions,some depending on donor funds and external borrowings and some other operating with savings, donor resources and external debts. These micro finance institutions are on driving seat in development of Indian economy.

The Government of India has launched the Micro Units Development and Refinance Agency Limited( MUDRA) Bank in April,2015 with principal objectives of regulating the lender and the borrower of Micro Finance and to extend finance and Credit support to Micro Finance Institutions and agencies that lend money to small businesses, retailers,self help groups and individuals. The Corpus of MUDRA Limited was of Rs. 20,000 Crores and Credit Guarantee Corpus of Rs. 3,000 Crores.

At the same time the Government has launched Pradhan Mantri Mudra Yojana for unorganised and micro sector.

PMMY was launched on 8^th April, 2015 with the motto to "fund the unfounded"by bringing such enterprises to the formal financial system and extending affordable credit to them.

Some facts related to Pradhan Mantri Mudra Yojaja (PMMY)

According to survey of NSSO( National Sample Survey Organisation) estimated about 5.77 crores small of micro units engaged in manufacturing, trading, and service sector, exist in the country and a great majority of them are outside the formal banking channels and are unable to sustain or grow due o lack of finance and expertise or relying on informal channels, which are very expensive and coercive. The banking channels consisting of commercial banks, NBFCs, RRBs and Cor-operative Banks,will play an important role to advance credit or finance to these small unorganised micro units spread all over India. The government is on mission to bring these units into main stream and to provide those,who deserve small finance for their development.

Eligible Loans under Scheme consist of All "Non-farm enterprises"under "Micro Enterprises"and "Small Enterprises"segment under MSME and engaged in "income generating activities "in "manufacturing, trading and services"and whose "Credit needs are up to Rs. 10.00 Lakhs".

The targeted group are petty shop keepers, self employed persons undertaking various services such as fabricators, tailors, all service providers,etc. small borrowers, small road transport operators. These segments of borrowers are mostly in unorganised segment and funded for their credit needs from Money Lenders, NBFCs, Unorganised Private Financiers,etc.

The aim of scheme is to target these segments of the people in Banking Financial System. The Scheme and Guidelines prohibits obtaining any form of collateral security.

These loans are generally known as "MUDRA LOANS"under PMMY. The Overdraft amount of Rs. 5,000 sanctioned under PMJY would be classified as MUDRA Loans under PMMY. Banks were further advised to classify all advances granted on or after 8^th April, 2015 as MUDRA loans under PMMY.

All such loans could covered under refinance and /or Credit Enhancement producers of MUDRA Limited. As per existing RBI Guidelines,Loans to Micro andSmall Enterprise borrowers are to be considered on Collateral Free basis up to Rs. 10.00 Lakhs.CGTMSE (Credit Guarantee Fund trust for Micro & Small Enterprises ) covers collateral free loan up to Rs. 100.00 lakhs extended to MSME entrepreneurs under Manufacturing and service segment but excluding "Retail Trade". Accordingly, MUDRA loans other than Retail Trade are to be covered under CGTMSE scheme. Since the Bank is sharing 50% of the guarantee fee in case of all eligible loan accounts enjoying credit limits up to Rs. 50.00 Lakhs, the same guidelines apply for MUDRA loans also.

DETAILS OF MUDRA LOAN SCHEME ARE GIVEN BELOW

Scheme	MUDRA LOAN under Pradhan Mantri Mudra Yojana
Nature of facility	As per prevailing Bank rate for Micro and Small Enterprises
Purpose	Working Capital Requirements Financing Capital Expenditure
Limit	Maximum Rs. 10.00 Lakhs
Eligibility	All Non-farm enterprises under Micro and Small Segment under MSME and engaged income generating activities in manufacturing, trading and services and whose credit need are up to Rs. 10.00 Lakhs. The Overdraft amount of Rs. 5,000 sanctioned under PMJDY may also be classified as MUDRA Loans under PMMY.
Margin	As per Bank Guidelines
Period	Term/demand loan: Maximum up to 84 months with suitable moratorium subject to Annual Review. Working Capital for 12 months subject to Annual Review.
Security/Documents	DP Note as appropriate to group/SHG; Comprehensive Agreement Hypothecation of Stocks, Book debts, Plant & Machinery; Comprehensive Insurance cover with Bank's Clause as per Bank Guidelines; Letter of instalment with acceleration clause (in case of loan); 5. Other usual documents and undertaking as per Bak Guidelines.
Processing /Documentation Charges	As per Bank's norms.
Other Charges	As per Bank's Norms.
Other Terms & Conditions	The borrower should have all approvals for the activity requirement. Inspection to be carried out as per extant guidelines and inspection report to be kept on record. Stock Statement to be obtained quarterly and as agreed by bank. Land & Building Financed for the activity should be in the name of borrower and will be treated as primary security. No collateral security to be obtained and all eligible accounts are to be covered under CGTMSE( Credit Guarantee Fund trust for Micro & Small Enterprises ). End use of funds to be ensured. KYC norms to be complied with. 8. All other General terms & conditions for working capital/term to be complied with.