The government is likely to extend the flagship Pradhan Mantri MUDRA Yojana (PMMY) by another five years up to 2030-31, reinforcing its focus on promoting entrepreneurship and self-employment through collateral-free credit to micro and small businesses in the non-corporate, non-farm sector, sources said.
The scheme, launched in 2015, is currently scheduled to run until March 31, 2026. “The scheme will likely be extended by another five years,” a government official said, indicating continuity in policy support for small entrepreneurs. An announcement in this regard is expected in the Budget for FY27.
PMMY primarily caters to sections of society that have traditionally remained outside the formal credit system due to the absence of collateral, limited business experience or lack of access to institutional finance. By enabling easy access to loans without security, the scheme has played a key role in formalising micro enterprises and encouraging first-time entrepreneurs, particularly from marginalised backgrounds.
Risk vs. Reward
As of June 2025, the non-performing asset (NPA) rate under PMMY for public sector banks stood at 3.31% of the disbursed amount. Officials note that the relatively higher risk profile is inherent to the scheme, as loans are collateral-free and extended largely to new entrepreneurs who may lack managerial experience or financial buffers. Despite this, the NPA level remains within manageable limits given the social and economic objectives of the programme.
Under PMMY, borrowers can avail loans of up to ₹10 lakh for non-corporate and non-farm income-generating activities. To further strengthen support for aspiring entrepreneurs, Finance Minister Nirmala Sitharaman announced an enhancement of the loan ceiling to ₹20 lakh in the Union Budget 2024-25, presented on July 23, 2024. The enhanced limit came into effect from October 24, 2024, expanding the scale at which successful micro enterprises can operate. Loans are extended through banks, non-banking financial companies (NBFCs), microfinance institutions (MFIs) and other financial intermediaries.
Scaling Up Micro-Enterprises
A new loan category, Tarun Plus, has been introduced for borrowers who have previously availed and successfully repaid loans under the Tarun category. This allows eligible entrepreneurs to access funding between ₹10 lakh and ₹20 lakh, facilitating business expansion and graduation to a higher scale of operations. The Credit Guarantee Fund for Micro Units (CGFMU) has also been extended to cover these enhanced loans, reducing lender risk and encouraging greater credit flow.
The annual budgetary cost of PMMY is estimated at around ₹400–500 crore, as most loans are in relatively small ticket sizes of ₹1–2 lakh. Since its inception, the scheme has sanctioned over ₹33.65 lakh crore across more than 52 crore loan accounts, making it one of the largest micro-credit initiatives globally. Importantly, ₹11.58 lakh crore worth of loans have been sanctioned to entrepreneurs from Scheduled Castes, Scheduled Tribes and Other Backward Classes.