The Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, was established to support micro, small, and medium enterprises (MSMEs) by providing collateral-free loans up to Rs 10 lakh. In the 2024 Union Budget, Finance Minister Nirmala Sitharaman announced a major enhancement to this scheme, raising the maximum loan amount to Rs 20 lakh to stimulate growth for these businesses. This increase aims to encourage MSMEs in India, especially those that have already demonstrated responsible loan repayment and business growth.
Under this revision, a new category called “Tarun Plus” was introduced, allowing eligible borrowers who previously repaid their loans under the Rs 10 lakh “Tarun” category to apply for increased funding. Loans will be granted through banks, non-banking financial institutions, and microfinance institutions (MFIs), backed by the Credit Guarantee Fund for Micro Units (CGFMU). This enhancement particularly benefits small business owners, artisans, and rural entrepreneurs who previously struggled to secure higher financing without collateral.
PMMY Loan Statistics: Impact and Growth
Since its inception, the PMMY has sanctioned over 40 crore loans with a total disbursement exceeding Rs 23 lakh crore. The increased limit is expected to enhance this impact by providing greater access to credit, particularly for enterprises looking to expand operations or upgrade equipment, which often exceeds the Rs 10 lakh cap. The government also aims to support borrowers through additional measures such as streamlined credit assessment tools to evaluate borrower creditworthiness, even without traditional collateral or third-party guarantees.
Benefits of the Raised Loan Limit
- Enhanced Capital for Expansion: Businesses, especially in manufacturing, can better afford essential equipment and materials, improving productivity.
- Employment Generation: MSMEs employ approximately 120 million people in India. With additional funds, businesses can hire more workers, supporting economic and social development.
- Increased Financial Stability: The move will also provide MSMEs with a safety net by offering sustained credit availability even during economic downturns.
- Improved Access to Markets: The government’s support also includes initiatives for e-commerce hubs, enabling MSMEs to expand their market reach and sell globally.
This change represents a pivotal shift toward empowering MSMEs, enhancing credit access, and building resilience for India’s substantial small business ecosystem. The focus on ease of access to credit and additional regulatory support is expected to play a transformative role for the MSME sector in the coming years.
