• As announced by the Finance Minister Nirmala Sitharaman on July 23, 2024, in the Union Budget 2024-25, the limit under the Pradhan Mantri Mudra Yojana (PMMY) has been enhanced from the current Rs 10 lakh to Rs 20 lakh.

• A notification in this regard was issued on October 24.

• This enhancement is specifically beneficial to upcoming entrepreneurs facilitating their growth and expansion. The move is in alignment with the government’s commitment in fostering a robust entrepreneurial ecosystem.

• As per the notification issued in this regard, the new category of ‘Tarun Plus’ is for loans above Rs 10 lakh and up to Rs 20 lakh and would be available to the entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category.

• The guarantee coverage of PMMY loans up to Rs 20 lakh will be provided under the Credit Guarantee Fund for Micro Units (CGFMU).

What is Pradhan Mantri Mudra Yojana?

• Pradhan Mantri Mudra Yojana (PMMY), an important aspect of financial inclusion,  is enabling the flow of credit to small businesses. In pursuance of the announcement in the Union Budget 2015-16, the Micro Units Development Finance Agency (MUDRA) Ltd was established as a wholly owned subsidiary of Small Industries Development bank of India (SIDBI).

• PMMY was launched on April 8, 2015, by Prime Minister Narendra Modi to facilitate easy collateral-free micro-credit of up to Rs 10 lakh to non-corporate, non-farm small and micro-entrepreneurs for income-generating activities.

• These loans are given by commercial banks, regional rural banks (RRBs), Small Finance Banks, Micro Finance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs).

• Under the aegis of PMMY, MUDRA has created three products namely, ‘Shishu’, ‘Kishore’ and ‘Tarun’ to signify the stage of growth or development and funding needs of the beneficiary micro unit or entrepreneur.

i) Shishu: covering loans up to Rs 50,000.

ii) Kishor: covering loans above Rs 50,000 and up to Rs 5 lakh.

iii) Tarun: covering loans above Rs 5 lakh and up to Rs 10 lakh.

iv) Tarun Plus: Covering loans above Rs 10 lakh and up to Rs 20 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category. 

• With an objective to promote entrepreneurship among the new generation aspiring youth, it is ensured that more focus is given to Shishu category loans followed by Kishore and Tarun categories.

• Within the framework and overall objective of development and growth of micro enterprises sector under Shishu, Kishore and Tarun, the products being offered by MUDRA are designed to meet requirements of different sectors/business activities.

• Loans under PMMY are provided to meet both term loan and working capital components of financing for income generating activities in manufacturing, trading and service sectors, including activities allied to agriculture such as poultry, dairy, beekeeping, etc. 

• The rate of interest is decided by lending institutions in terms of RBI guidelines. In case of working capital facility, interest is charged only on money held overnight by the borrower.

How PMMY helps in financial inclusion?

• Implementation of financial inclusion programme in the country is based on three pillars — ‘Banking the Unbanked’, ‘Securing the Unsecured’ and ‘Funding the Unfunded’. 

• ‘Funding the Unfunded’, is reflected in the financial inclusion programme through Pradhan Mantri Mudra Yojana (PMMY), which is being implemented with the objective to provide access to credit for small entrepreneurs. 

• PMMY focuses on the financial needs of all stakeholders, ranging from budding entrepreneurs to the hard-working farmers, through various initiatives of the scheme.

• It is a key initiative towards providing financial support to the marginalised and hitherto socio-economically neglected classes, PMMY has given wings to the dreams and aspirations of millions.

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