In a major boost for small businesses and budding entrepreneurs, the government on Friday announced an increase in the limit for Mudra loans under the Pradhan Mantri Mudra Yojana (PMMY). The new loan cap has doubled from Rs 10 lakh to Rs 20 lakh, introduced under the “Tarun Plus” category. This increase aims to expand funding access for aspiring entrepreneurs across the country.
Initiative to Support Small Businesses
The Finance Ministry, in an official statement, explained the rationale behind this enhancement. “The increase aims to further the objective of the Mudra Scheme, which is to fund the unfunded. This enhancement is specifically beneficial to emerging entrepreneurs, facilitating their growth and expansion,” stated the ministry. The move underscores the government’s commitment to building a strong and inclusive entrepreneurial ecosystem in India.
Announcement by Finance Minister in Union Budget
Finance Minister Nirmala Sitharaman first announced the updated Mudra loan limit during her July 2024 Union Budget speech. She highlighted that the new Rs 20 lakh limit would be available for those who have previously availed of and successfully repaid loans under the existing “Tarun” category.
Background on PMMY and Loan Categories
The Pradhan Mantri Mudra Yojana was launched on April 8, 2015, by Prime Minister Narendra Modi to provide accessible, collateral-free credit for small and micro-enterprises. Initially, the scheme facilitated loans of up to Rs 10 lakh for non-corporate, non-farm businesses. Loans under PMMY are issued by banks, non-banking financial companies (NBFCs), microfinance institutions, and other financial intermediaries.
PMMY loans are divided into three tiers:
- Shishu: Up to Rs 50,000
- Kishore: Between Rs 50,000 and Rs 5 lakh
- Tarun: Up to Rs 10 lakh
With the addition of the “Tarun Plus” category, entrepreneurs now have access to Rs 20 lakh for scaling up their businesses.
Impressive Growth of Mudra Loans Since Launch
According to government data, the PMMY scheme has seen substantial success. In the fiscal year 2023-24 alone, 66.8 million loans were sanctioned under PMMY, amounting to Rs 5.4 trillion. Since its inception, the program has sanctioned over 487.8 million loans totaling Rs 29.79 trillion.
Improved Loan Performance Reduces NPAs
The non-performing asset (NPA) ratio for Mudra loans issued by public sector banks has decreased, reaching 3.4% in FY24, a reduction from 4.77% in 2020-21. Comparatively, the gross NPA for all scheduled commercial banks stood at 2.8% as of March 2024, demonstrating positive performance within the PMMY program.
Expanding Financial Inclusion with PMMY Loans
The PMMY scheme aligns with the government’s financial inclusion strategy, focused on “Banking the Unbanked, Securing the Unsecured, and Funding the Unfunded.” Loans under PMMY support income-generating activities in manufacturing, trading, and service sectors, including agriculture-linked activities like poultry, dairy, and beekeeping. Additionally, the government has ensured that loans up to Rs 20 lakh under the new limit will be covered by the Credit Guarantee Fund for Micro Units (CGFMU).
Strengthening the Entrepreneurial Ecosystem
With the expanded loan limit, the PMMY scheme is expected to offer a significant boost for small enterprises and the overall entrepreneurial landscape in India. The Finance Ministry stated that this adjustment aligns with the government’s goal of fostering a robust entrepreneurial ecosystem, encouraging growth, and providing a solid foundation for small businesses.
How to apply for Pradhan Mantri Mudra Yojana (PMMY)?
In order to apply for Pradhan Mantri Mudra Yojana (PMMY), you need to visit the nearest bank branch and apply for loan. You can download application forms via link given below.
- Common Loan Application form for Kishor and Tarun: Download
- Application Form for Shishu: Download
- Check list for Shishu Application: Download
