Union Cabinet approves 2% interest subvention for Shishu loans 

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New Delhi : The Union Cabinet on Wednesday cleared 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.

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 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 central Government.

This Scheme 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 viz. Scheduled Commercial Banks, Non Banking Finance Companies and Micro Financial Institutions, registered with Mudra Ltd.

The Scheme is expected to provide much needed relief to the MSME sector, thereby enabling small businesses to continue functioning without laying off employees due to lack of funds.

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