Financial literacy enhances the ability of the borrower to manage their finances such as budgeting and monitoring cash flow, thus leading to successful repayment of debts. This research employs a detailed review of secondary data, which includes qualitative insights. By focussing articles, reports, journals and websites, the study aims at providing insights on Mudra scheme and the role financial literacy in successful loan repayment and the importance of financial literacy to address the challenges faced by borrowers under the Mudra Yojana Scheme. Research reveal that higher financial literacy leads to better finance management, which leads to informed decisions and adherence to repayment schedules. Financial literacy enables individuals to mitigate financial challenges, make informed decisions, financial management, which in turn leads to timely loan repayments. It also highlights the importance of enhancing financial education through training programs conducted by policy makers, as it contributes to the strategic decision making and business growth. Thus contributing to the broader goals of financial inclusion and economic development.