Govt doubles loan limit under Mudra Yojana to ₹20 lakh

The government on Friday doubled the loan limit under the Pradhan Mantri Mudra Yojana (PMMY) to ₹20 lakh to promote entrepreneurs and job creation.

This increase aspires to further the overall objective of the Mudra Scheme which is funding the unfunded, the finance ministry said in a statement on Friday.

This enhancement is specifically beneficial to upcoming entrepreneurs facilitating their growth and expansion, the ministry says.

The move is in alignment with the government’s commitment to fostering a robust entrepreneurial ecosystem. The announcement was first made by finance minister Nirmala Sitharaman on July 23, 2024 in the Union Budget 2024-25.

As per the notification issued in this regard, the new category of Tarun Plus is for loans above ₹10 lakh and up to ₹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).

Pradhan Mantri Mudra Yojana offers loans or financial assistance by way of collateral-free or third-party guarantee free loan/limit (currently ₹20 lakh), extended by the lending institution to the eligible borrower, as per the guidelines prescribed by the fund. Under the aegis of Pradhan Mantri MUDRA Yojana, MUDRA has already been created to support development and financing of micro loans.

Loans are categorised into 'Shishu', 'Kishor' 'Tarun' and ‘Tarun Plus’ to signify the stage of growth, development and funding needs of the beneficiary micro unit or entrepreneur and also provide a reference point for the next phase of growth.

These loans are presently defined as: Shishu - covering loans up to ₹50,000; Kishor - covering loans above ₹50,000 and up to ₹5 lakh. Tarun covers loans above ₹5 lakh and up to ₹10 lakh while Tarun Plus covers loans above ₹10 lakh and up to ₹20 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category. Further, an overdraft facility of ₹10,000 sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund.