The Union Ministry of Micro, Small and Medium Enterprises has recommended increasing the loan limit in the child and adolescent categories under the Pradhan Mantri Mudra Yojana in the budget of the upcoming financial year. The Union Budget will be presented in Parliament on 1 February. A senior government official, on the condition of anonymity, said that in the proposal sent to the Finance Ministry, it has been suggested to increase the loan limit under the child category to Rs 5 lakh and under the juvenile category to Rs 10 lakh.
The official said, ‘The ministry has made several recommendations. These also include increasing the loan limit under Mudra loan categories. But the final decision in this regard will be taken by the Finance Ministry. At present, under Mudra Yojana, loans are given in three categories: Shishu, Kishor and Tarun. Loans are given up to Rs 50,000 under Shishu category, Rs 50,001 to Rs 5 lakh under Kishore category and Rs 5,00,001 to Rs 10 lakh under Tarun category. In the Union Budget for the financial year 2025, Tarun Plus category was created to give new loans to those who have repaid the loans received under Tarun category and under this, a provision was made to give loans up to Rs 20 lakh.
Credit guarantee for the increased loan will come from the Fund for Micro Units (CGFMU). This reflects the government’s resolve to promote the entrepreneurial ecosystem in India. The total number of loans sanctioned under the Mudra Scheme till January 17, 2025 was 3.7 crore and the amount sanctioned was Rs 3.66 lakh crore.
However, regional rural banks as well as their sponsoring public sector banks had achieved only 42 per cent of the loan disbursement target under the Mudra scheme by the end of October. According to internal documents seen by Business Standard, banks have disbursed only Rs 97,094 crore till October 25, 2024, against the target of Rs 2.3 lakh crore for FY2025. Bank of Baroda had the worst performance among public sector banks. It has achieved only 16 percent of the annual loan disbursement target during the first seven months of FY 2025.
It has disbursed only Rs 3,515 crore till October 25 against the annual target of Rs 22,000 crore. State Bank of India disbursed Rs 26,420 crore under the scheme, which is 44 per cent of the annual target of Rs 60,000 crore. Canara Bank has achieved 52 per cent of its annual target while Union Bank of India has performed best among public sector banks by achieving 57 per cent of the target.
Former Finance Secretary Subhash Chandra Garg said, ‘These are all microfinance loans. The microfinance sector is facing a lot of difficulties. Many institutions have reported increase in non-performing loans (NPAs) and sharp decline in profits. Some microfinance institutions have been barred by the RBI from accepting new deposits and allocating loans. Due to this also there has been slowness in loan allocation.
Finance Minister Nirmala Sitharaman had said in response to a question in the Lok Sabha in August 2024 that the NPA of public sector banks belonging to the currency loan category declined to 3.4 percent in the financial year 2023-24. He had said that this figure shows an improvement compared to 4.77 percent in 2020-21, 4.89 percent in 2019-20 and 3.76 percent in 2018-19. Sitharaman had also said that the NPA of Mudra loans in private sector commercial banks reduced to 0.95 per cent in 2023-24 from 1.77 per cent in 2020-21 and 0.67 per cent in 2018-19.