PM Mudra Yojana Now Offers Collateral-Free Loans up to Rs 20 Lakh

Entrepreneurs and small businesses can avail collateral-free loans of up to Rs 20 lakh under the Pradhan Mantri Mudra Yojana (PMMY), with the introduction of a new loan category called ‘Tarun Plus’ aimed at supporting borrowers who have successfully repaid earlier loans.

According to the Department of Financial Services (DFS), PMMY was launched on April 8, 2015, to provide collateral-free credit to micro and small enterprises through Member Lending Institutions (MLIs), including Scheduled Commercial Banks (SCBs), Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs).

Any individual with a viable business plan for income-generating activities in manufacturing, trading, services and agriculture-allied sectors can apply for loans under the scheme.

Loans under PMMY are classified into four categories based on the funding requirement. ‘Shishu’ covers loans up to Rs 50,000, ‘Kishor’ includes loans above Rs 50,000 and up to Rs 5 lakh, while ‘Tarun’ provides loans above Rs 5 lakh and up to Rs 10 lakh.

The government introduced the ‘Tarun Plus’ category in 2024-25 to incentivise successful borrowers. Under this category, entrepreneurs who have repaid their ‘Tarun’ loans can access collateral-free loans of up to Rs 20 lakh.

The scheme provides financial support to small businesses, traditional enterprises, handicrafts and agriculture-allied activities, sectors that generate significant employment, particularly in rural areas. Women entrepreneurs have also benefited from the scheme, as it enables access to credit even in the absence of collateral or a formal credit history.

To simplify the loan application process and improve access to credit, the government has also launched digital platforms such as the Jan Samarth portal, which integrates 15 credit-linked schemes and allows applicants to apply for loans either independently or through assisted support.

The measures are aimed at ensuring easier access to credit and faster disbursal of loans to eligible entrepreneurs, the government said.