Modi Cabinet approves 2% Interest Subvention on repayment of Shishu Loans under PMMY

The Union Cabinet meeting chaired by Prime Minister Narendra Modi on Wednesday approved a scheme for interest subvention of 2% for a period of 12 months, to all Shishu loan accounts under the Pradhan Mantri Mudra Yojana (PMMY) to eligible borrowers. The scheme will be extended to loans that meet the following criteria - outstanding as on March 31, 2020, and not in Non-Performing Asset (NPA) category, as per Reserve Bank of India (RBI) guidelines, 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 the months that the account becomes a performing asset again, after turning NPA. The scheme will incentivize people who will make regular repayments of loans. The estimated cost of the scheme would be approximately Rs. 1,542 crore which would be provided by the Union Government. 

According to a press release by the government, the scheme will be implemented through the Small Industries Development Bank of India (SIDBI) and will be in operation for 12 months. For borrowers, who have been allowed a moratorium by their respective lenders, as permitted by RBI under the ‘COVID 19 Regulatory Package’, the scheme would commence post completion of the moratorium period till a period of 12 months i.e. from September 01, 2020, till August 31, 2021. For other borrowers, the scheme would commence w.e.f. June 01, 2020, till May 31, 2021.

Pradhan Mantri Mudra Yojana (PMMY)

The PMMY is for implementation of one of the measures relating to MSMEs, announced under the Atma Nirbhar Bharat Abhiyan. Under PMMY, loans for income-generating activities up to Rs. 50,000 are termed as Shishu loans. PMMY loans are extended by Member Lending Institutions which are Scheduled Commercial Banks, Non-Banking Finance Companies, and Micro Financial Institutions, registered with Mudra Ltd. The ongoing COVID-19 crisis and the consequent lockdown has led to severe disruption of business for micro and small enterprises which are funded through Shishu Mudra loans. As on March 31, 2020, about 9.37 crore loan accounts under the Shishu category of PMMY with a total loan amount of about Rs 1.62 Lakh crore, were outstanding.