Pradhan Mantri Mudra Yojana doubled

Pradhan Mantri Mudra Yojana reached INR 20 lakh

• Finance Minister Nirmala Sitharaman announced during Union Budget 2024 session that the government has made the loan limit under the Pradhan Mantri Mudra Yojana (PMMY) twofold by increasing it to INR 20 lakh from INR 10 lakh to promote entrepreneurship in the country.
• A notification issued in this regard stated that this hike aims to further the overall objective of the Mudra Scheme which is funding the unfunded.
• 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).
• A section of the notification read "The fund shall cover micro loans up to the specified limit (Rs 20 lakh) extended by a lending institution to an eligible borrower, provided that the lending institution applies for guarantee cover in respect of such loans so sanctioned within such time period and as per procedures prescribed by the fund for the purpose. Further, overdraft loan amount of Rs 10,000 sanctioned under PMJDY accounts shall also be eligible to be covered under the credit guarantee fund.’’

Inception of Pradhan Mantri Mudra Yojana

• Since MSME units existed outside the formal banking system, they were deprived of the benefits available for units that existed within the organised financial system of the country. Thus, the Pradhan Mantri Mudra Yojana was introduced by the Honourable Prime Minister on April 8, 2015 to bring the thriving MSME sector under the umbrella of banking.
• The slogan of the program was ‘fund the unfunded’. The Pradhan Mantri Mudra Yojana (PMMY) scheme enables the extension of loans under affordable terms to this sector from public sector banks, regional rural banks, and non-banking financial companies (NBFCs), microfinance institutions and foreign banks.
• The three categories of loans available under PMMY are a) Shishu Scheme -Upto INR 50,000 b) Kishore Scheme – Between INR 50,000-INR 5 lakhs.
• Tarun Scheme -Between INR 5 lakhs -INR 10 lakhs.
• Eligibility Criteria:
  • The applicant has to be an Indian citizen and an entrepreneur who may be a proprietor or has a small partnership firm.
  • The minimum age of the applicant has to be 18 years and the maximum age limit is 65 years
  • The requirement of loans must be for non-farm related business activities
  • The preferred segments of business are trading, manufacturing and services
  • The maximum permissible loan under the PMMY scheme is INR 10 lakhs, so the requirement needs to be less than or equal to INR 10 lakhs.

Criterion

• The applicant has to be an Indian citizen and an entrepreneur who may be a proprietor or has a small partnership firm.
• The minimum age of the applicant has to be 18 years and the maximum age limit is 65 years.
• The requirement of loans must be for non-farm related business activities.
• The preferred segments of business are trading, manufacturing and services.
• The maximum permissible loan under the PMMY scheme is INR 10 lakhs, so the requirement needs to be less than or equal to INR 10 lakhs.

Benefits

• The PMMY scheme offers upto INR 10 lakhs to a business enterprise. The terms of the loan are designed in a manner to encourage the growth of MSMEs, startups and small units. The maximum amount of loan is INR 10 lakhs, which is a reasonably good sum to meet the requirement of a small unit.
• PMMY scheme provides unsecured loans, so no collateral is required when applying for the loan.
• Lending institutions like banks, NBFCs or micro-finance companies have been directed to ensure easy and hassle-free loan disbursement. Most of the small units do not have documents to satisfy a bank. The simplified process of Mudra scheme takes care of the problem that was always faced by the small units of not having satisfactory documentary evidence to prove creditworthiness.
• The PMMY Scheme has been introduced as a tool to empower startups and small entrepreneurs to grow profitably. The Government stands in as the guarantor which works as a comfort factor for the banks. In case of default, the responsibility is taken over by the government. This feature greatly favours the incumbent applicants who can invest the borrowed funds for their growth.
• One may use the borrowed funds for various business needs like procurement of equipment and machinery to be used in business. The PMMY loan may also be used for purposes like the geographical expansion of business or brand promotion.

Editor’s Note