IBPS PO Interview Material

IBPS PO V Interview Material

Pradhan Mantri MUDRA Yojana (PMMY)
The Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Union Government on April 8,
2015 for providing loans upto Rs. 10 lakh (around US$15,000) to the non-corporate, non-farm small/micro
enterprises.
Under PMMY, all banks viz. Public Sector banks, Private Sector Banks, Regional Rural Banks (RRBs), State
Co-operative Banks, Urban Co-operative Banks, Foreign Banks and Non-Banking Finance Companies
(NBFCs)/Micro Finance Institutions (MFIs) - are required to lend to non-farm sector income generating
activities below Rs.10 lakh.
These loans are classified as MUDRA loans under PMMY.
For implementing the Scheme, government has set up a new institution named, MUDRA (Micro Units
Development & Refinance Agency Ltd.), for development and refinancing activities relating to micro units,
in addition to acting as a regulator for the micro finance sector, in general. MUDRA provides refinance to
all banks seeking refinancing of small business loans given under PMMY.
Thus, MUDRA refinances all Last Mile Financiers - Non-Banking Finance Companies of various types
engaged in financing of small business, Societies, Trusts, Section 8 Companies [formerly section 25], Cooperative Societies, Small Banks, Scheduled Commercial Banks and Regional Rural Banks - which are in
the business of lending to Micro/Small business entities engaged in manufacturing, trading and services
activities.
PMMY was announced through Union Budget 2015-16, which proposed to create MUDRA bank with a
corpus of Rs. 20,000 crore made available from the shortfalls of priority sector lending, to refinance
Micro-Finance Institutions through Pradhan Mantri Mudra Yojana. Further, budget supported a credit
guarantee corpus of Rs.3,000 crore for guaranteeing loans being provided to the micro enterprises.

Target Beneficiaries
The purpose of PMMY is to provide funding to the non-corporate small business sector. Non- Corporate
Small Business Segment (NCSBS) consists of millions of proprietorship/ partnership firms running as small
manufacturing units, service sector units, shopkeepers, fruits/ vegetable vendors, truck operators, foodservice units, repair shops, machine operators, small industries, artisans, food processors and others, in
rural and urban areas.One of the biggest hurdles to the growth of entrepreneurship in the Non-Corporate
Small Business Sector (NCSBS) is lack of financial support to this sector and a vast majority belonging to
this sector do not have access to formal sources of finance. According to the NSSO Survey of 2013, there
are 5.77 crore small business units, mostly proprietorship, which run small manufacturing, trading or
service activities.

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IBPS PO Interview Material

Loan offerings under PMMY

Under the aegis of PMMY, the MUDRA has already created its initial set of products/ schemes. The
interventions have been named Shishu (meaning infant), Kishor (meaning child) and Tarun (meaning
adolescent) to signify the state of growth/development and funding needs of the beneficiary micro
unit/entrepreneur and also provide a reference point for the next phase of graduation / growth to look
forward to:
a. Shishu: covering loans upto Rs. 50,000/- provided with no collateral, @1% rate of interest/month
repayable over a period of 5 years
b. Kishor: covering loans above Rs.50,000/- and upto Rs. 5 lakh
c. Tarun: covering loans above Rs. 5 lakh to Rs. 10 lakh

How to avail of PMMY?

The borrower who wishes to avail of loan under PMMY may approach any of the Public/Private Sector
Commercial Bank, RRB or Co-operative Bank branches in his/her area with a proper business idea and loan
application. After due processing of loan application, the lending institution will sanction the loan. The
borrower has to execute loan documents and complete other formalities as per the requirement of the
lending institution. Thereafter, the loan will be released to undertake small business activities/micro
enterprises.
To begin with, MUDRA has enrolled 27 Public Sector Banks, 17 private sector banks, 27 Regional Rural
banks and 25 Micro Finance Institutions as partner institutions for channelizing assistance to the ultimate
borrower. MUDRA has identified 97 Nodal officers at various Small Indusries Development Bank of India
(SIDBI) Regional offices/Branch offices to act as first contact persons for MUDRA.

Approach of PMMY
A minimum of 60% of support would flow to enterprises in the smallest segment. Partner intermediaries
of MUDRA Bank have to endeavor to adhere to the following broad framework :

First time entrepreneurs, youth entrepreneurs (i.e. entrepreneurs aged upto 30 years) and
women entrepreneurs shall be encouraged and special schemes shall be designed for such
entrepreneurs.
Emphasis shall be on cash flow based lending and not security based lending. Collateral securities,
etc. shall be avoided.
Repayment obligations shall be flexible and shall be framed keeping in view the business cash
flows of the entrepreneur.

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IBPS PO Interview Material

Bank Eligibility
SCHEDULED COMMERCIAL BANKS
All scheduled commercial Banks in public and private sector with 3 years of continuous profit track record,
net NPAs not exceeding 3%, minimum net worth of Rs.100 cr. and not less than 9% CRAR.
REGIONAL RURAL BANKS
All restructured RRBs having net NPA within 3% ( relaxable in deserving cases), having profitable
operations and not carrying any accumulated losses and CRAR >9%.
MFI / SMALL BUSINESS FINANCE COMPANIES/NBFC
a. Been in lending to Own Account Enterprises, i.e. micro units with loan size upto Rs.10 lakh for
atleast 3 years and/or the promoters / management having experience of atleast 10 years in this
area.
b. Having minimum out reach of 3000 existing borrowers for MFIs.
c. Having suitable systems, processes and procedures such as internal accounting, risk management,
internal audit, MIS, cash management, etc.

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