In a significant move to bolster entrepreneurship in India, the Finance Ministry announced an increase in the loan ceiling under the Pradhan Mantri Mudra Yojana (PMMY) to Rs. 20 lakh (US$ 23,789). This initiative, initially introduced by Union Minister of Finance Nirmala Sitharaman during the Union Budget 2024-25 on July 23, 2024, aims to fulfill the scheme's vision of “funding the unfunded.”

The updated scheme introduces a new category called 'Tarun Plus,' which allows entrepreneurs who have previously availed and successfully repaid loans under the existing Tarun category to access enhanced financial support. This new provision permits these entrepreneurs to borrow amounts above Rs. 10 lakh (US$ 11,894), further encouraging the growth of small businesses across the country.

To ensure the viability of these larger loans, the Credit Guarantee Fund for Micro Units (CGFMU) will offer coverage for PMMY loans up to the newly increased ceiling of Rs. 20 lakh. The PMMY, launched on April 8, 2015, by Prime Minister Narendra Modi, is designed to facilitate collateral-free microcredit for non-corporate, non-farm small and micro-entrepreneurs engaged in income-generating activities.

Currently, the PMMY loans are categorized into three tiers:

• Shishu: Loans up to Rs. 50,000 (US$ 594.50)
• Kishore: Loans ranging from Rs. 50,000 to Rs. 5 lakh (US$ 594.50 to US$ 5,945)
• Tarun: Loans up to Rs. 10 lakh (US$ 11,894)

With the introduction of the Tarun Plus category, aspiring entrepreneurs can now access additional financial resources, promoting not only their personal growth but also the overall development of India’s entrepreneurial ecosystem.

The PMMY has consistently aimed at supporting micro and small businesses that play a crucial role in India’s economy. This enhancement of the loan ceiling is expected to empower a larger number of individuals to turn their business ideas into reality. It also aligns with the government’s objective of fostering an environment where entrepreneurship can thrive, contributing to economic growth and job creation.

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