Government Doubles Mudra Loan Limit in New ‘Tarun Plus’ Category

1. On 25th October The Indian government increased the loan limit under the Pradhan Mantri Mudra Yojana (PMMY) from Rs 10 lakh to Rs 20 lakh, introducing a new category called ‘Tarun Plus.’
2. This initiative aims to support emerging entrepreneurs, facilitating their growth and expansion.
3. The announcement was initially made by Finance Minister Nirmala Sitharaman in the July 2024 Union Budget, specifically targeting individuals who have successfully repaid previous loans in the existing 'Tarun' category.

About Pradhan Mantri Mudra Yojana (PMMY):

1. Launch Date: April 2015
2. Objective: PMMY is designed to provide loans up to Rs 10 lakh to non-corporate, non-farm small/micro enterprises.
3. Loan Classification: These loans are categorized as MUDRA loans and are provided by various financial institutions, including:
   1. Commercial Banks
   2. Regional Rural Banks (RRBs)
   3. Small Finance Banks
   4. Micro Finance Institutions (MFIs)
   5. Non-Banking Financial Companies (NBFCs)

What is MUDRA (Micro Units Development & Refinance Agency Ltd.):

1. Role: MUDRA is the financial institution established by the Government of India to support the non-corporate small business sector through last-mile financial institutions.
2. Application Process: Eligible individuals can apply for PMMY loans through any of the mentioned institutions, as MUDRA does not lend directly to micro-entrepreneurs.

Categories of Loans under PMMY:

1. Shishu: Loans up to Rs 50,000
2. Kishore: Loans above Rs 50,000 and up to Rs 5 lakh
3. Tarun: Loans above Rs 5 lakh and up to Rs 10 lakh
4. Tarun Plus: Newly introduced, covering loans up to Rs 20 lakh for those in the Tarun category.

Eligibility Criteria for PMMY:

1. Applicants must have a business plan for non-farm income-generating activities (manufacturing, processing, trading, or service sector).
2. The applicant should not be a defaulter with any bank or financial institution and must have a satisfactory credit track record.
3. Application Process: Loans can be applied for online via the portal udyamimitra.in.

Interest Rates on Mudra Loans:

1. Public Sector Banks (PSBs): Interest rates range from 9.15% to 12.80%.
2. Private Banks: Interest rates vary from 6.96% to 28%, depending on factors like the cost of funds, borrower’s risk profile, and loan tenure.

Benefits of PMMY:

1. Borrowers do not need to provide collateral to secure loans, reducing the risk to personal or business assets.
2. Loans are readily available for entrepreneurs establishing micro-sized enterprises across India.
3. In case of default due to unforeseen circumstances, the government is responsible for loan repayment.
4. Quick Capital: Loans up to Rs 10 lakh can be obtained quickly and easily.
5. Women Empowerment: Special concessional benefits are available for women entrepreneurs under the MUDRA scheme.
6. Rural Support: The loans are accessible to both rural and urban small-scale businesses, with rural areas benefiting from enhanced accessibility.
7. Loan repayment can be extended up to 7 years, providing flexibility.
8. Options for cash credit, equipment financing, etc., are available under the MUDRA scheme.
9. MUDRA Card: Applicants can obtain a MUDRA card for instant access to funds and overdraft facilities.

Achievements of PMMY:

1. In 2023-24, 66.8 million loans were sanctioned, amounting to Rs 5.4 trillion.
2. As of June 2024, over 487.8 million loans totaling Rs 29.79 trillion have been sanctioned since the scheme's inception.
3. The non-performing assets (NPA) ratio of public sector banks for Mudra loans decreased to 3.4% in FY24, down from 4.77% in 2020-21 and 4.89% in 2019-20.
4. The gross NPA of scheduled commercial banks in India stands at 2.8% as of March 2024.

Conclusion

The doubling of the loan limit under the Mudra Yojana to Rs 20 lakh in the new ‘Tarun Plus’ category represents a significant step in enhancing financial support for emerging entrepreneurs in India. This initiative aligns with the government's ongoing efforts to promote entrepreneurship and strengthen the micro, small, and medium enterprises (MSME) sector, ultimately contributing to economic growth and job creation.

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