The government has raised the loan ceiling under the Pradhan Mantri Mudra Yojana (PMMY) to Rs 20 lakh in a bid to boost entrepreneurship, according to an announcement from the finance ministry. This increase is aimed at enhancing financial support for small entrepreneurs across the country, a ministry statement said on Friday.


The decision, formally notified on Thursday, was initially announced by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25, presented on July 23, 2024. The finance minister outlined plans to expand the Mudra loan limit from Rs 10 lakh to Rs 20 lakh, specifically targeting entrepreneurs who have successfully repaid previous loans under the scheme’s Tarun category.


"The limit of Mudra loans will be enhanced to Rs 20 lakh from the current Rs 10 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the 'Tarun' category," Sitharaman said in her Budget speech in the Lok Sabha.


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The new loan category, termed "Tarun Plus," will cover loans above Rs 10 lakh and up to Rs 20 lakh, intended to aid upcoming entrepreneurs in expanding their businesses. The Credit Guarantee Fund for Micro Units (CGFMU) will provide guarantee coverage for loans up to Rs 20 lakh under the revised PMMY scheme.


Launched in April 2015 by Prime Minister Narendra Modi, PMMY provides collateral-free micro-credit to non-corporate, non-farm small and micro-entrepreneurs to promote income-generating activities. Loans are issued through Member Lending Institutions (MLIs) including banks, Non-Banking Financial Companies (NBFCs), Microfinance Institutions (MFIs), and other financial intermediaries.


Under the existing PMMY framework, loans are categorised into three tiers based on the loan amount: Shishu (up to Rs 50,000), Kishore (Rs 50,000 to Rs 5 lakh), and Tarun (up to Rs 10 lakh). With the addition of the Tarun Plus category, the government aims to support Indias small-business sector in its next phase of growth.


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