Government Doubles Loan Limit Under Pradhan Mantri Mudra Yojana to Boost Entrepreneurship

The Indian government has raised the loan limit under the Pradhan Mantri Mudra Yojana (PMMY) from Rs 10 lakh to Rs 20 lakh, aiming to provide greater financial support for entrepreneurs. This change, announced in a recent notification following Finance Minister Nirmala Sitharaman’s Union Budget 2024-25 statement, will facilitate business expansion and support the growth of small enterprises across the country.

New “Tarun Plus” Category Introduced

To implement this change, a new “Tarun Plus” category has been introduced for loans between Rs 10 lakh and Rs 20 lakh. Entrepreneurs eligible for this category include those who have previously borrowed and successfully repaid loans under the original “Tarun” category. Loans under this category will also benefit from guarantee coverage through the Credit Guarantee Fund for Micro Units (CGFMU), providing additional financial security to borrowers.

Key Details of Pradhan Mantri Mudra Yojana

Launched on April 8, 2015, by Prime Minister Narendra Modi, the PMMY scheme was designed to provide collateral-free microcredit to non-corporate, non-farm small businesses. Loans under PMMY are available from a range of Member Lending Institutions (MLIs), including banks, Non-Banking Financial Companies (NBFCs), Microfinance Institutions (MFIs), and other financial bodies. The scheme categorizes loans based on the funding needs:

1. Shishu: Up to Rs 50,000 for smaller micro-businesses.
2. Kishore: Between Rs 50,000 and Rs 5 lakh for growing businesses.
3. Tarun: Loans up to Rs 10 lakh for established small businesses.
4. Tarun Plus: New category introduced for loans between Rs 10 lakh and Rs 20 lakh for eligible entrepreneurs.

Encouraging Entrepreneurial Growth

The government’s decision to double the loan limit reflects its commitment to “funding the unfunded” and promoting entrepreneurship at the grassroots level. The initiative supports emerging entrepreneurs, providing financial opportunities to help them build and expand businesses, ultimately fostering job creation and contributing to India’s economic growth.

The increase in loan limit and guarantee coverage through CGFMU strengthen the Mudra Scheme’s vision, equipping small business owners with the resources to achieve financial independence and scale their operations.