Union Cabinet approved 2 per cent interest subsidy on Mudra loans of less than Rs 50,000.
In a major relief to small borrowers amid the coronavirus-led income crisis, the Union Cabinet led by Prime Minister Narendra Modi today approved 2 per cent interest subsidy on Mudra loans of less than Rs 50,000. Cabinet Minister Prakash Javadekar said that there are 9.37 crore beneficiaries of the Shishu Yojana (loans of less than Rs 50,000) under the MUDRA scheme, thus today’s move will give a big relief to poor sections of the society. The government announced to spend Rs 1,540 crore to give the benefit of interest subsidy, which will continue from June 1, 2020, to May 31, 2021.
Micro Units Development and Refinance Agency (MUDRA) scheme is the world’s biggest small loans programme, giving working capital to nearly 20 crore people. It is formulated to support the development of micro-enterprise sector in the country. MUDRA provides refinance support to banks / MFIs / NBFCs for lending to micro units having loan requirement up to 10 lakh. Under the MUDRA scheme, Shishu Yojana covers loans up to Rs 50,000; Kishor Yojana covers loans above Rs 50,000 and up to Rs 5 lakh; and Tarun Yojana covers loans above Rs 5 lakh and up to Rs 10 lakh.
Prakash Javadekar further said that earlier the small borrowers used to take loans from sahukars at a very high interest rate, however, with the introduction of the MUDRA scheme, street vendors and small shop owners have been taking loans from banks at comparatively much lower interest rates.
In the wake of a nationwide economic downturn, the Modi government has recently announced many measures to improve the conditions of street vendors and small businesses. Under the PM SVANidhi scheme, the government allowed the street vendors to take a loan of Rs 10,000 to reestablish their businesses hit by the lockdown. The government had added that it aims to benefit over 50 lakh street vendors through PM SVANidhi scheme. It also mentioned giving an interest subsidy of 7 per cent to the beneficiaries who repay timely.