Mudra Loan Limit Doubled to Rs 20 Lakh: A Boost for Entrepreneurs

The government has doubled the limit of Mudra loans under the Pradhan Mantri Mudra Yojana (PMMY) from Rs 10 lakh to Rs 20 lakh, introducing a new ‘Tarun Plus’ category. This change, announced by Finance Minister Nirmala Sitharaman in her July 2024 Budget speech, aims to promote entrepreneurship and support emerging business owners. The increase is designed to empower budding entrepreneurs who have successfully repaid previous loans under the existing Tarun category, furthering the government’s commitment to “Funding the Unfunded.”

Key Details of the Announcement

Enhanced Loan Limits: The new ‘Tarun Plus’ category allows loans up to Rs 20 lakh, providing crucial capital for business expansion.

Historical Context: Launched on April 8, 2015, PMMY initially provided loans up to Rs 10 lakh for non-corporate, non-farm small and micro-entrepreneurs, facilitating easy, collateral-free access to credit.

Loan Categories: The scheme includes three existing categories—Shishu (up to Rs 50,000), Kishore (between Rs 50,000 and Rs 5 lakh), and Tarun (up to Rs 10 lakh).

Impact on the Entrepreneurial Ecosystem

Loan Sanctions: In 2023-24, 66.8 million loans worth Rs 5.4 trillion were sanctioned under PMMY. Since its inception, over 487.8 million loans totaling Rs 29.79 trillion have been approved.

Non-Performing Assets: The NPA for public sector banks regarding Mudra loans has decreased to 3.4% in FY24, down from 4.77% in 2020-21, indicating improved loan recovery rates.

Guarantee Coverage: Loans up to Rs 20 lakh under the new category will receive guarantee coverage through the Credit Guarantee Fund for Micro Units (CGFMU), further enhancing support for small businesses.