Finance Ministry doubles PMMY loan limit to ₹20 lakh
What's the story
The Indian Finance Ministry has announced a major hike in the loan limit under the Pradhan Mantri Mudra Yojana (PMMY). The new cap, which comes into effect immediately, is fixed at ₹20 lakh - double the previous limit. This was first announced in the Union Budget 2024-25 by Finance Minister Nirmala Sitharaman on July 23. The move aims to provide better financial support to budding entrepreneurs.
New category
Introduction of 'Tarun Plus' loan category
The revamped PMMY scheme also introduces a new loan category called 'Tarun Plus.' This category is targeted at entrepreneurs who have borrowed and repaid loans under the existing 'Tarun' category. It provides loans between ₹10 lakh and ₹20 lakh. Further, the Credit Guarantee Fund for Micro Units (CGFMU) will guarantee loans up to ₹20 lakh, bolstering the government's commitment to a strong entrepreneurial ecosystem.
Fund backing
CGFMU's role in supporting micro loans
The CGFMU will cover micro loans up to the new limit of ₹20 lakh, extended by a lending institution to an eligible borrower. This is subject to the lending institution applying for guarantee cover within a specified time frame and following procedures set by the fund. The Department of Financial Services has also clarified that an overdraft loan amount of ₹10,000 sanctioned under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts will be eligible for coverage under this credit guarantee fund.
Beneficiary impact
PMMY expansion benefits entrepreneurs
The expansion of the PMMY loan scheme will greatly benefit emerging entrepreneurs. The Union finance ministry said, "This enhancement is specifically beneficial to upcoming entrepreneurs facilitating their growth and expansion." The move is in line with the government's commitment to building a robust entrepreneurial ecosystem. It also expands the categories of Mudra loans beneficiaries from three to four under PMMY, launched by Prime Minister Narendra Modi on April 8, 2015.
Scheme categories
Four categories under revised loan scheme
The revamped PMMY loan scheme now has four categories: 'Shishu' (covering loans up to ₹50,000), 'Kishore' (loans above ₹50,000 and up to ₹5 lakh), 'Tarun' (above ₹5 lakh and up to ₹10 lakh) and the new class of 'Tarun Plus' (above ₹10 lakh and up to ₹20 lakh). These categories indicate the growth stage and funding requirements of the beneficiary micro unit, serving as a reference point for their next growth phase.
Scheme performance
PMMY's impact and future prospects
Government data shows that in the fiscal year 2023-24 alone, over 6.67 crore loans were sanctioned under the PMMY scheme, worth ₹5.41 lakh crore. The total disbursal during the period stood at ₹5.32 lakh crore. Since inception, over 48.78 crore loans worth ₹29.79 lakh crore have been sanctioned as of June 2024, highlighting the scheme's transformative impact on India's entrepreneurial landscape.