Union Finance Minister Nirmala Sitharaman has asked banks providing loans under the Pradhan Mantri MUDRA Yojana (PMMY) to strengthen financial literacy initiatives across states. The move aims to help small entrepreneurs better understand formal credit, manage loans and expand their businesses.
During an interaction with MUDRA beneficiaries, Sitharaman highlighted the importance of financial awareness in helping entrepreneurs make effective use of credit.
Her remarks followed a suggestion from an entrepreneur in Nagaland, who highlighted the need for greater financial literacy among small businesses. The entrepreneur said her network was working across more than 10 districts to improve awareness of financial services and credit access.
Sitharaman said banks involved in MUDRA lending should undertake financial literacy efforts in every state.
The Finance Minister also explained that timely repayment of MUDRA loans can help beneficiaries establish a credit record. Over time, this may allow successful entrepreneurs to access larger loans and regular banking facilities.
MUDRA was designed to provide collateral-free credit, enabling small entrepreneurs without assets for security to seek formal financing.
“Now you are getting that opportunity, you are growing in it, and by graduating from it, you are able to get facilities from the bank like a regular business,” Sitharaman said.
Several entrepreneurs described how MUDRA loans had helped them establish or expand their businesses.
An entrepreneur from Karnataka said his loan increased from Rs 1 lakh to Rs 5 lakh as his business grew. He currently employs three people and plans to establish a larger factory.
A printing business owner from West Bengal said she rebuilt her business after pandemic-related losses and now employs eight people. She is seeking to purchase a digital machine to expand operations.
Sitharaman also recalled the role of the Pradhan Mantri Jan Dhan Yojana, launched in 2014, in expanding access to formal banking through accounts without a minimum balance requirement.
The MUDRA scheme followed in 2015, focusing on collateral-free credit for small entrepreneurs.
