 "The limit of loans under the Pradhan Mantri Mudra Yojana (PMMY) was doubled to Rs 20 lakh recently, inserting a new category—Tarun Plus. Launched 10 years ago, the scheme intended to provide microfinance to small entrepreneurs. However, the number of")
The Union Ministry of Micro, Small and Medium Enterprises (MSME) has recommended increasing loan limits for Shishu and Kishore categories under the Pradhan Mantri Mudra Yojana in the FY26 Budget to be presented on February 1.
In the proposal sent to the finance ministry, the MSME ministry has suggested raising the Shishu category limit to Rs 5 lakh and the Kishore category to Rs 10 lakh, according to a senior government official who spoke on condition of anonymity.
“The MSME ministry has submitted multiple recommendations, and increasing the limit of other categories of Mudra scheme is one of them. The final decision will be made by the finance ministry in the Union Budget,” the official said.
Currently, the scheme provides loans across three categories. While Shishu offers loans up to Rs 50,000, the Kishore category loans range between Rs 50,001 and Rs 5 lakh and Tarun category extends loans from Rs 5,00,001 to Rs 10 lakh.
In the FY25 Union Budget, the loan limit for borrowers who have previously availed of and successfully repaid Tarun category loans was increased to Rs 20 lakh under a new Tarun Plus segment. The Credit Guarantee Fund for Micro Units will provide guarantee coverage for these enhanced loans, reinforcing the government’s commitment to fostering a robust entrepreneurial ecosystem in India.
The total number of Mudra loans sanctioned till January 17 was 37 million while the amount sanctioned stood at 3.66 trillion.
However, public-sector banks (PSBs), including their sponsored regional rural banks, have only achieved 42 per cent of their disbursement target for Mudra loans by the end of October in the current financial year (FY25). According to an internal document reviewed by Business Standard, the banks have disbursed around Rs 97,094 crore against the target of Rs 2.3 trillion for FY25 by October 25, 2024.
Bank of Baroda has reported the lowest performance among PSBs, with only 16 per cent of its annual Mudra disbursement target within the first seven months of FY25. With an annual target of Rs 22,000 crore, it has disbursed only Rs 3,515 crore by October 25.
State Bank of India, the country’s largest bank, has disbursed Rs 26,420 crore, or 44 per cent of its annual target of Rs 60,000 crore. While Canara Bank has met 52 per cent of its annual target, Union Bank of India has achieved the highest rate among PSBs at 57 per cent of its FY25 target.
“These are all microfinance loans. The microfinance sector is facing significant difficulties, with many institutions reporting higher -performing assets (NPAs) and sharply declining profits. Some microfinance institutions have been debarred by the RBI from accepting fresh deposits and making loans. I believe the reduced sanctioning of MUDRA loans is the combined effect of these factors,” said Subhash Chandra Garg, Former Finance Secretary of India.
In a reply to the Lok Sabha in August 2024, Union Finance Minister Nirmala Sithraraman said NPAs of PSBs’ associated with Mudra loans have declined to 3.4 per cent in the 2023-24, down from 4.77 per cent in 2020-21, 4.89 per cent in 2019-20, she said.
She had further said Mudra loan NPAs in private commercial banks fell to 0.95 per cent in 2023-24 from a peak of 1.77 per cent in 2020-21 and 0.67 per cent in 2018-19. NPAs are loans or advances for which the principal or interest payment remains overdue for 90 days.
