interest-subvention-approved-on-repayment-of-shishu-loans-under-mudra-yojana

Context: Union Cabinet recently approved a scheme for interest subvention of 2% for a period of 12 months, to all Shishu loan accounts under Pradhan Mantri Mudra Yojana (PMMY) to eligible borrowers.

More on news:

  • The scheme will be extended to loans which meet the following criteria
    • outstanding as on 31st March, 2020; and 
    • not in Non-Performing Asset (NPA) category, as per Reserve Bank of India (RBI) guidelines, on 31st March 2020 and during the period of operation of the Scheme.
  • The interest subvention would be payable for the months in which the accounts are not in NPA category including for months that the account becomes a performing asset again, after turning NPA.
    • Subvention means grant of money by the government. In the context of the Budget, it is interest subvention, the government paying part of the interest on a loan. The government offers subvention mostly on home, crop and education loans.
  • The scheme will incentivize people who will make regular repayments of loans.

MUDRA yojana:

  • Mission: To create an inclusive, sustainable and value based entrepreneurial culture, in collaboration with our partner institutions in achieving economic success and financial security.
  • MUDRA would be responsible for refinancing all Last Mile Financiers such as Non-Banking Finance Companies, Micro Finance Institutions, Societies, Trusts, Section 8 Companies [formerly Section 25], Small Finance Banks and Regional Rural Banks which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities as well as agri-allied activities.
  • The interventions under MUDRA have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also to provide a reference point for the next phase of graduation / growth to look forward to. The financial limit for these schemes are:-

a. Shishu : covering loans upto  50,000/-

b. Kishor : covering loans above  50,000/- and upto  5 lakh

c. Tarun : covering loans above  5 lakh to  10 lakh


Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1633891#:~:text=Union Cabinet chaired by Prime,(PMMY) to eligible borrowers.

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