Mudra Loans: New Developments with Budget Boost

Mudra Loans: New Developments with Budget Boost

Sub: Eco

Sec: Monetary  Policy

• Introduction:
  • Mudra loans, part of the Pradhan Mantri Mudra Yojana (PMMY), have been a crucial source of funding for small businesses, particularly benefiting women entrepreneurs.
• Loan Categories:
  • The Mudra scheme offers loans in three categories:
    • Shishu: Loans up to ₹50,000
    • Kishore: Loans above ₹50,000 and up to ₹5 lakh
    • Tarun: Loans above ₹5 lakh and up to ₹10 lakh
  • Recent Budget Announcement: Finance Minister Nirmala Sitharaman announced an increase in the Tarun loan limit to ₹20 lakh for entrepreneurs who have successfully repaid previous loans under this category.
• Impact of the Budget Increase:
  • The increase is anticipated to significantly enhance business growth, especially for those who have already benefitted from the scheme.
  • Women entrepreneurs, who constitute 70% of the beneficiaries, are likely to see expanded opportunities.
• Loan Disbursement Trends:
  • Steady Disbursement: In the first quarter of FY25, Mudra loan disbursals exceeded ₹1 lakh crore, a rise from ₹81,957 crore in the previous year.
  • Record Growth in FY24: Disbursements reached a record ₹5 lakh crore, surpassing the previous year’s figure of ₹4.4 lakh crore.
• Cumulative Impact:
  • Since its inception in 2015, Mudra loans have totaled over ₹30 lakh crore in disbursements.
• Regional and Institutional Performance:
  • State Performance: States like Uttar Pradesh, Bihar, and Tamil Nadu lead in Mudra loan disbursals.
  • Institutional Leaders: Public sector banks, especially the State Bank of India, Punjab National Bank, and Canara Bank, have been at the forefront of Mudra loan disbursements.
• Factors Driving Growth:
  • Bank Initiatives: Public sector banks are actively promoting these loans and ensuring proper fund utilization through regular follow-ups and customer interactions.
  • Guarantee Support: The National Credit Guarantee Trustee Company Ltd. (NCGTC) provides guarantees for eligible micro-units under PMMY, boosting lender confidence.

The Mudra scheme’s expansion and increased loan limits are poised to foster further growth and empowerment among small business owners, particularly women, while also ensuring that more resources are available to sustain and expand their enterprises.