Previous Year Question
Pradhan Mantri MUDRA Yojana is aimed at:
Bringing small entrepreneurs into the formal financial system
Providing loans to poor farmers for cultivating particular crops
Providing pensions to old and destitute persons
Funding voluntary organisations involved in the promotion of skill development and employment generation
Correct Answer: A
Detailed Solution
The Government of India launched the Pradhan Mantri MUDRA Yojana (PMMY) on 8 April 2015. Its principal objective is to provide small and micro-entrepreneurs with access to credit through the formal financial system instead of leaving them dependent on moneylenders and informal sources.
The scheme primarily covers non-corporate, non-farm micro-enterprises. Income-generating activities in manufacturing, trading and services, along with agriculture-allied activities, may be financed. It is not a crop-loan scheme for poor farmers cultivating particular crops.
Under the original scheme, loans were divided into three categories according to the enterprise’s stage of development and financial requirements:
Shishu: Up to ₹50,000.
Kishor: Above ₹50,000 and up to ₹5 lakh.
Tarun: Above ₹5 lakh and up to ₹10 lakh.
PMMY loans are provided through Member Lending Institutions such as Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Microfinance Institutions and eligible NBFCs. MUDRA Limited provides refinance and other support to these lending institutions; it does not ordinarily lend directly to every micro-entrepreneur.
The loan may be used for machinery, equipment, shops, vehicles, working capital or other business requirements. The scheme does not automatically provide a separate subsidy; it is primarily a credit facility.
Current status (2026)
Pradhan Mantri MUDRA Yojana remains operational. Following the Union Budget 2024-25 announcement, a fourth category called Tarun Plus was introduced:
Tarun Plus: Above ₹10 lakh and up to ₹20 lakh.
It is available to entrepreneurs who have successfully repaid an earlier Tarun loan.
This arrangement became effective from 24 October 2024.
Thus, the present maximum limit is not automatically ₹20 lakh for every new applicant. Successful repayment of a previous Tarun loan is required for Tarun Plus eligibility.