The Finance Ministry reiterated the government's focus on expanding credit access, especially for entrepreneurs in rural and underserved areas, where support for small businesses is essential for local employment and economic development.
In a significant move to bolster support for small businesses, Prime Minister Narendra Modi's administration increased the loan ceiling under the Pradhan Mantri Mudra Yojana program from Rs 10 lakh to Rs 20 lakh. It is an enhancement of a program that seeks to fund the unfunded as a way of offering essential funding to micro and small business across the country. The Finance Ministry announced the change via an official notification on Thursday.
During her Union Budget speech for the fiscal year 2024-25 on July 23, 2024, the new loan cap was initially introduced by Finance Minister Nirmala Sitharaman. The Finance Ministry reiterated the government's focus on expanding credit access, especially for entrepreneurs in rural and underserved areas, where support for small businesses is essential for local employment and economic development.
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This change is designed to nurture an entrepreneurial ecosystem, facilitate job creation, and stimulate economic growth across various sectors.
"The limit of Mudra loans will be enhanced to Rs 20 lakh from the current Rs 10 lakh for entrepreneurs who have previously availed and successfully repaid loans under the 'Tarun' category," the Finance Minister had said.
This increase will be implemented under a new category, 'Tarun Plus,' intended specifically for loans above Rs 10 lakh and up to Rs 20 lakh. The decision aligns with the government's commitment to fostering a robust environment for emerging businesses and enabling them to expand operations and scale up successfully.
The enhanced limit is available only to those who have repaid the prior 'Tarun' loans under which earlier the maximum limit of loans was up to Rs 10 lakh. Its Credit Guarantee Fund for Micro Units (CGFMU) shall extend guarantee for prime credit always for the PMMY loans up to the newly announced Rs 20 lakh availability without incurring too much risk which makes it secure for lending activities to flow smoothly.
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The Pradhan Mantri Mudra Yojana was launched on April 8, 2015, by Prime Minister Narendra Modi and was designed to facilitate easy, collateral-free micro-credit for non-corporate, non-farm small and micro-entrepreneurs engaged in income-generating activities. Loans under PMMY are distributed by Member Lending Institutions (MLIs), including banks, Non-Banking Financial Companies (NBFCs), and Microfinance Institutions (MFIs).
The scheme categorised loans into three tiers: 'Shishu' (up to Rs 50,000), 'Kishore' (Rs 50,000 to Rs 5 lakh), and 'Tarun' (Rs 10 lakh).