Loan limit under PM Mudra Yojana raised to Rs 20 lakh from Rs 10 lakh

The limit of Mudra loans under the Pradhan Mantri Mudra Yojana (PMMY) has been enhanced from the current Rs 10 lakh to Rs 20 lakh in keeping with the announcement by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25, a statement said on Friday. 

A new ‘Tarun Plus’ category has been created under the Mudra Scheme to offer 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 Department of Financial Services, whose mandate covers the functioning of banks and financial institutions, said in a post on X, “Great news for small business owners! The guarantee coverage for #PMMY loans up to Rs 20 lakh will now fall under the Credit Guarantee Fund for Micro Units (CGFMU). Supporting dreams, one step at a time.”

Sharing details of the enhanced loan limit, a notification issued by Joint Secretary Prashant Kumar Goyal, said, “The Fund shall cover micro loans up to the specified limit (currently Rs 20 lakh) extended by Member Lending Institution(s) 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 Credit Guarantee Fund. It may be noted that micro loans under PMMY inclusive of overdraft under PMJDY, sanctioned since April 8, 2015 would qualify for guarantee cover under the scheme,” it said.

The statement said the increase in loan limit aims to further the overall objective of the Mudra Scheme, which is funding the unfunded.

“This enhancement is specifically beneficial to upcoming entrepreneurs facilitating their growth and expansion. The move is in alignment with the government’s commitment in fostering a robust entrepreneurial ecosystem,” said the statement.

Under the aegis of PMMY, MUDRA Ltd. has already been created to support development and financing of micro loans.

The schematic interventions of MUDRA Ltd. have been named 'Shishu', 'Kishor' 'Tarun' and ‘Tarun Plus’ to signify the stage of growth/development and funding needs of the beneficiary micro-unit/entrepreneur and also provide a reference point for the next phase of graduation/growth.

They are at present defined as Shishu, covering loans up to Rs 50,000; Kishor, covering loans above Rs 50,000 and up to Rs 5 lakh; Tarun covering loans above Rs 5 lakh and upto Rs 10 lakh and Tarun Plus, covering loans above Rs 10 lakh and up to Rs 20 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category.