A downhole tool having a progressive cavity mud motor with an impact generator disposed within the mud motor rotor or bearing assembly. In one embodiment, the impact generator includes a mud turbine connected to a eccentric ring that encircles and periodically strikes an anvil surface of a percussion shaft. The eccentric ring is pivotable between an engaged striking position and a disengaged non-striking position. The percussion shaft is coupled to a drill bit though a splined connector that provides limited slip for transmitting rotation of the mud motor rotor to the drill bit and for transmitting percussion strikes against the anvil to the drill bit without the need to accelerate the entire drill string.