MUDRA has democratised India's financial system: PM Modi

The Prime Minister explained that the MUDRA scheme was born as the result of his travels across the country as a "karyakarta" when he observed that there was a dire need for "funding the unfunded" at the grassroots to lift the masses out of poverty.

He highlighted that the scheme democratised the financial system and the success of the scheme is also reflected in the fact that a mere 3.5 per cent of loans under the scheme were NPAs.

In a post on X, the Prime Minister said, "Sharing my interview with Economic Times, where I elaborate on the life-changing ability of Mudra Yojana and why it remains an important scheme in our quest for dignity and empowerment. #10YearsOfMUDRA."

The Prime Minister said that the MUDRA (Micro Units Development & Refinance Agency) scheme needs to be seen in a particular context and not as a standalone scheme.

" Even before I held any government position, I had travelled extensively across the country for many decades as a karyakarta. There was a common theme that I saw everywhere. A vast majority of our population, such as the poor, farmers, women and marginalised sections, had aspirations for growth, a strong spirit of enterprise, energy and resilience qualities, needed to be a successful entrepreneur, he observed.

"But these were the very sections that had been completely excluded from the formal banking and financial system. Tell me, if you do not have a bank account, will you ever visit a bank? When people did not even have access to basic banking, funding for entrepreneurship looked like a distant dream. So, when the people voted for us in 2014, we decided to make the whole financial architecture people-centric and inclusive, so that we could give wings to their aspirations," PM Modi said.

He highlighted that the scheme democratised the financial system.

"This started with 'banking the unbanked' with Jan Dhan Yojana. Once those who were left out and left behind began to become part of the formal financial system through this scheme, we went on to 'funding the unfunded' through the MUDRA Yojana and 'insuring the uninsured' through the Jan Suraksha portfolio of schemes. So, MUDRA is part of a larger vision to ensure that the entrepreneurial ability, innovation, creativity and self-reliance of the people at the grassroots is respected, celebrated and supported," he said.

"Through the MUDRA Yojana, we wanted to give a message to every Indian that we had trust in their abilities and would stand as a guarantee in their journey to fulfil their aspirations. Trust begets trust. The people, too, responded with great zeal and today, with over 52 crore loans given worth Rs 33 lakh crore, they have made MUDRA a massive success," PM Modi said.

Talking about the NPA issue in India's baking sector, PM Modi said: "There are two perspectives on the problem. On the one hand, we have experience from the tenure of the Congress-led United Progressive Alliance. Then, the banking sector operated under a system that came to be known as 'phone banking'. Loans were sanctioned based on calls from political connections rather than on competence or adherence to strict financial due diligence. We all know how this created the twin balance sheet problem. The period, marked by a lack of transparency and accountability, left public sector banks grappling with a legacy of stressed assets, undermining their ability to support broader economic growth."

He said: "On the other hand, we lent money to the poor and the middle class through the MUDRA Yojana. It was designed to empower small and medium entrepreneurs who had no connections but had competence and conviction. Unlike the UPA's top-heavy lending model, MUDRA focused on grassroots economic activity. Today, with more than 52 crore loan accounts, MUDRA reflects the massive scale and ambition of the scheme."

"When we launched this initiative, several prominent Congress leaders and commentators from their ecosystem said that extending credit to crores of small-scale borrowers would cause an NPA issue. They had no trust in the poor and middle class of our country. But the outcomes have defied these predictions. What stands out is the performance of these loans-just 3.5 per cent have turned into NPAs. This is an exceptionally low default rate in this segment world over. While the UPA's phone banking era left banks burdened with toxic assets and favoured select elites of those who were close to power centres, MUDRA has redirected resources to the grassroots, fostering entrepreneurship without compromising financial stability," PM Modi added.