Mudra Loan Uptake Rising Among MSMEs in Bihar, UP, Odisha, N-E Shows SBI Report

Over the past decade, the Pradhan Mantri Mudra Yojana (PMMY) has played a crucial role in providing financial support to small and micro enterprises across India. 

A recent report by the State Bank of India (SBI) highlights how the distribution of MUDRA loans has evolved, particularly in states with historically lower financial inclusion. The findings indicate a positive shift towards a more inclusive credit distribution pattern, benefiting regions that previously had limited access to formal financial services.

Rising Share of MUDRA Loans in Historically Underserved States

The Pradhan Mantri Mudra Yojana (PMMY) has witnessed a significant shift in loan distribution over the past decade, with a growing focus on states that previously had lower financial inclusion. A recent report by the State Bank of India (SBI) highlights that Bihar, Uttar Pradesh, Odisha, and the North-east have seen a notable increase in their share of MUDRA loans.

Bihar’s share of PMMY loans has nearly doubled from 5.67% in FY16 to 10.97% in FY25. Uttar Pradesh has also seen an increase from 9.27% to 11.30%, while Odisha’s share has risen from 4.24% to 4.51%. The North-east, traditionally characterised by lower credit penetration, has also experienced steady growth in loan disbursement. This upward trend signifies the success of targeted policy interventions aimed at financially underserved regions, providing easier access to microcredit for small businesses and entrepreneurs.

Impact of Policy and Digital Lending Expansion

The SBI report attributes this shift to policy-driven initiatives designed to enhance financial accessibility in lagging states. The implementation of digital lending platforms, such as ‘PSB Loans in 59 Minutes’ and ‘UdyamiMitra,’ has played a crucial role in bridging the credit gap. Additionally, the introduction of the Unified Lending Interface (ULI) is expected to further strengthen access to formal credit in these regions.

Despite this progress, Maharashtra, Tamil Nadu, and Karnataka continue to receive a substantial share of MUDRA loans. However, the policy emphasis is increasingly shifting towards states where financial inclusion was previously limited. The report also highlights a growth in the average loan ticket size, from ₹38,000 in FY16 to ₹1.02 lakh in FY25, indicating an expansion in the scale of small businesses supported under PMMY. This transformation reflects a significant impact, highlighted by the PMMY’s sanctioning of over ₹33 lakh crore in loans to micro and small enterprises over the past decade

Conclusion

The evolving distribution of PMMY loans demonstrates a positive move towards addressing regional financial disparities. While significant progress has been made in improving credit accessibility, challenges such as infrastructure constraints, financial awareness, and skill development gaps remain. Nevertheless, the continued policy focus on financial inclusion is expected to contribute to sustained economic growth and the empowerment of small enterprises across the country.

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