About:

• Pradhan Mantri Mudra Yojana is a scheme launched by the government in 2015 for providing loans up to Rs. 10 lakh to the non-corporate, non-farm small/micro-enterprises.
• MUDRA (Micro Units Development & Refinance Agency ) Ltd., is a financial institution set up by the Government to provide funding to the non-corporate small business sector through various last-mile financial institutions like Banks, Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs).
• MUDRA is a refinancing Institution i.e, it  does not lend directly to micro entrepreneurs / individuals.

Types of loans provided

• Shishu : covering loans upto 50,000/-
• Kishor : covering loans above 50,000/- and upto 5 lakh
• Tarun : covering loans above 5 lakh and upto 10 lakh

Why in News?

The government has approved a scheme for interest subvention of 2%  for a period of 12 months, to all Shishu loan accounts under Pradhan Mantri Mudra Yojana to eligible borrowers.

Background:

• This Scheme is for implementation of one of the measures relating to MSMEs, announced under the Atma Nirbhar Bharat Abhiyan.

• Refer Pulse #2 edition for details on Atmanirbhar Bharat Abhiyan.

• The ongoing Covid-19 crisis and the consequent lockdown has led to severe disruption of business and had a severe impact on their cash flows, jeopardizing their ability to service their loans.

Implementation:

• The Scheme will be implemented through the Small Industries Development Bank of India and will be in operation for 12 months.

Positive Impact of the scheme

• The Scheme has been formulated as a specific response to an unprecedented situation due to Covid-19 and aims to alleviate financial stress for borrowers.
• The Scheme is expected to provide much-needed relief to the MSME sector, thereby enabling small businesses to continue functioning without laying off employees due to lack of funds.
• By supporting small businesses to continue functioning during these times of crisis, the Scheme is expected to have a positive impact on the economy and support its revival, which is necessary for employment generation in future.