Pradhan Mantri Mudra Yojana

June 25, 2020

On June 24, 2020, the Union Cabinet under PM Modi approved the scheme for interest subvention of 2% to all Shishu loans under Pradhan Mantri Mudra Yojana (PMMY).

Highlights

The scheme is to be extended to loans that will meet the following criteria

The Outstanding loans as on March 31, 2020
The loans that are not in the category of Non-Performing Assets.

The estimated cost of the scheme is Rs 1,542 crores. This is to be provided by GoI.

This will enable the small businesses to continue functioning without concerns of lack of funds.

Significance

The scheme has been launched to implement one of the measures relating to MSME that were announced under Atma Nirbhar Bharat Abhiyan. The PMMY loans are important as they are extended by wide range of financial institutions and hence support varied types of businesses. It includes Non-banking financial institutions, scheduled commercial banks, micro financial institutions and other institutions registered with MUDRA.

Background

The COVID-19 crisis led to severe disruptions of businesses for the MSMEs that are funded through Shishu loans of PMMY. The loans that generate activities up to Rs 50,000 are termed as Shishu loans. Small businesses that function on thin operating margins has had severe impacts on their cash flows. This has jeopardized their ability to serve their loans.

As of March 31, 2020, around 9.37 crores of loan account that amount to Rs 1.62 lakh crores were outstanding.