Mudra Loan Scheme extended by 5 years; loans of up to ₹20 lakh available even with lower collateral/guarantee..
An important update has been announced regarding the popular 'Pradhan Mantri Mudra Yojana' (PMMY), which provides easy access to loans—without the need for any guarantee or collateral—to small business owners and micro-enterprises. The Central Government has extended the tenure of the 'Credit Guarantee Fund for Micro Units' (CGFMU) associated with this scheme by another 5 years, ensuring the scheme remains in effect until March 31, 2031. This extension aims to provide robust financial support to the nation's youth and small business owners for self-employment.
**New Provisions in the Scheme**
The Credit Guarantee Fund for Micro Units scheme has now been extended until March 31, 2031, with a target to facilitate total loans amounting to approximately ₹12.6 lakh crore over the next five years. The government has approved a fund of ₹5,000 crore under this scheme to provide a security cover to lending institutions against the risk of loan defaults. Furthermore, to reduce the cost of borrowing for small entrepreneurs, the government has lowered the annual guarantee fee from 1% to 0.75%. However, for Self-Help Groups (SHGs), the guarantee fee will remain unchanged: 0.25% for the first year and 0.50% for subsequent years.
**Categories and Limits for Mudra Loans**
Under the Pradhan Mantri Mudra Yojana, loans are categorized based on the specific needs of small businesses, with a maximum limit of up to ₹20 lakh.
* **Shishu:** Loans up to ₹50,000—intended for the initial stage of starting a business.
* **Kishore:** Loans from ₹50,001 to ₹5 lakh—intended for the expansion and operation of a business.
* **Tarun:** Loans from ₹5 lakh to ₹10 lakh—intended for scaling up established businesses to a larger level. Tarun Plus – Loans ranging from ₹10 lakh to ₹20 lakh; this is intended for entrepreneurs who have successfully repaid a previous loan under the 'Tarun' category.
According to official data, more than 60.36 crore loans have been sanctioned across the country under this scheme as of September 2026, amounting to a total value exceeding ₹43.34 lakh crore.
Who can apply?
Any citizen of India who wishes to start a new business or expand an existing one in non-agricultural, income-generating sectors—such as manufacturing, trading, or services—is eligible. Interested entrepreneurs can apply through any authorized commercial bank, small finance bank, rural bank, NBFC, or microfinance institution. Additionally, the application process can be completed online via the official digital portal, 'JanSamarth'. Applicants are required to provide necessary documents, such as proof of identity, proof of address, proof of business, and bank statements.
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