PM MUDRA YOJANA (Syllabus: GS Paper 3 – Economy)

Context: Recently, the Finance Minister of India announced an increase in Mudra loan limits from Rs 10 lakh to Rs 20 lakh.

PM Mudra Yojana

• About: Initially, PMMY offers unsecured loans of up to 10 lakh to small/micro enterprises that are non-corporate and non-farm in nature.
• Launched: In 2015
• Objective: To encourage young people to become 1st generation entrepreneurs.
• Eligible Banks for Loan: Banks, NBFCs, Micro finance Institutions (MFIs) and financial intermediaries as notified by MUDRA Ltd.
• Loan Instruments:

o Shishu: covers loans up to Rs 50,000/-

o Kishor: covers loans above Rs 50,000/- and upto Rs. 5 lakh

o Tarun: covers loans above Rs 5 lakh and up to Rs 10 lakh.( Now from Rs 10 lakh to Rs 20 lakh).

Benefits:

• The PMMY scheme offers up to INR 10 lakhs, providing a substantial sum to support the needs of small units, startups, and MSMEs.
• Loans under PMMY are unsecured, meaning that borrowers do not need to provide any collateral to access funding.
• The loan disbursement process is streamlined and simplified, accommodating small units that may lack extensive documentation.
• The scheme supports startups and small entrepreneurs by having the government act as a guarantor, reducing the risk for banks and encouraging lending.
• Borrowed funds can be utilized for various business needs, including equipment procurement, geographical expansion, and brand promotion.