**Executive Summary**
This document is the response to Starred Question No. †*130 in the Lok Sabha on February 9, 2026, concerning mortgage-free loans to traders under the Pradhan Mantri Mudra Yojana (PMMY). The response, provided by the Finance Minister, addresses proposals for increasing loan limits, controlling bank fees, and providing free insurance cover. The statement was laid on the Table of the House.
**Key Points / Main Content**
* **Loan Enhancements:**
* The collateral-free loan limit under PMMY has been increased to Rs. 20 lakh from Rs. 10 lakh, effective October 24, 2024, for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category. This falls under a new category called 'Tarun Plus'.
* A proposal to further enhance collateral-free loans up to Rs. 30 lakh to traders registered under PMMY is currently not under consideration.
* **Bank Fees:**
* Credit-related matters, including loan pricing by banks, are deregulated by the Reserve Bank of India (RBI) and governed by the respective bank's lending policies, subject to RBI guidelines.
* Banks are required to provide a Key Facts Statement (KFS), including loan tenure, repayment details, interest rates, and applicable charges, to prospective borrowers in a language understood by them, explaining the contents to the borrower before executing the loan contract.
* **Insurance:**
* For loans extended under PMMY, Member Lending Institutions (MLIs) can avail guarantee cover under Credit Guarantee Fund for Micro Units (CGFMU).
* There is no specific scheme to provide free insurance to registered traders affected by natural calamities/fire under the PMMY scheme.
**Impact Analysis**
**Entrepreneurs who have availed and repaid previous loans under the ‘Tarun’ category**
* **Impact:** Can access higher collateral-free loans (up to Rs. 20 lakh) under the 'Tarun Plus' category.
* **Action Required:** Contact their bank for details on accessing the enhanced loan amount.
**Traders registered under PMMY**
* **Impact:** Will not receive mortgage free loans up to Rs. 30 lakh.
* **Action Required:** No specific action, as there is no such proposal currently under consideration.
**Banks/Member Lending Institutions (MLIs)**
* **Impact:** Must adhere to RBI guidelines regarding loan pricing and transparency. Can avail guarantee cover under CGFMU for loans extended under PMMY.
* **Action Required:** Ensure compliance with RBI guidelines on loan pricing and providing KFS to borrowers. Explore the option of availing guarantee cover under CGFMU.
**Prospective Borrowers under PMMY**
* **Impact:** To be given a Key Fact Statement (KFS) that shall be written in a language that they understand.
* **Action Required:** Carefully review the Key Fact Statement (KFS) before signing the loan contract and ensure that the contents are understood.
Key Entities Referenced
Pradhan Mantri Mudra Yojana (PMMY): A scheme providing collateral-free loans to traders, mentioned as the core program under discussion.
Reserve Bank of India (RBI): The regulator that has deregulated credit-related matters, such as loan pricing by banks.
Credit Guarantee Fund for Micro Units (CGFMU): A fund providing guarantee cover for loans extended under PMMY.
Ministry of Finance: The ministry answering the questions about PMMY.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
STARRED QUESTION NO. †*130
ANSWERED ON MONDAY, FEBRUARY 9, 2026/ MAGHA 20, 1947 (SAKA)
Mortgage Free Loans to Traders under PMMY
†*130. SHRI JITENDRA KUMAR DOHARE:
Will the Minister of FINANCE be pleased to state:
(a) whether there is any proposal to provide mortgage free loans up to Rs. 30 lakh to traders registered
under Pradhan Mantri Mudra Yojana (PMMY) and to increase the loan limit, if so, the details thereof;
(b) whether the excessive fees being charged by banks for sanctioning and renewal of trading limits is
likely to be controlled by the Government and a maximum one-time fee of 1 per cent is to be fixed, if
so, the details thereof; and
(c) whether there is any scheme to provide free insurance cover up to 75 per cent of the stock value to
the registered traders affected by the incidents like natural calamity/fire and if so, the details thereof?
ANSWER
THE FINANCE MINISTER
(SMT. NIRMALA SITHARAMAN)
(a) to (c): A statement is laid on the Table of the House.STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. †*130
FOR ANSWER ON 09.02.2026 BY SHRI JITENDRA KUMAR DOHARE ON MORTGAGE
FREE LOANS TO TRADERS UNDER PMMY
(a) to (c): The limit of Pradhan Mantri Mudra Yojana (PMMY) collateral free loan has been enhanced
to Rs.20 lakh from Rs.10 lakh w.e.f. 24.10.2024 for those entrepreneurs who have availed and
successfully repaid previous loans under the ‘Tarun’ category, under a new category ‘Tarun Plus’.
No such proposal to further enhance collateral free loans up to Rs. 30 lakh to traders registered under
PMMY is under consideration.
Credit related matters such as pricing of loans by banks have been deregulated by RBI and are governed
by the respective bank’s lending policies, subject to extant broad regulatory guidelines of RBI.
Also as per RBI guidelines, the bank shall provide a Key Facts Statement (KFS) including tenure of the
loan, repayment details, rate of interest, details of processing and other applicable charges, etc. to all
prospective borrowers to help them take an informed view before executing the loan contract. The KFS
shall be written in a language understood by the borrowers and the contents of it shall also be explained
to the borrower.
For the loans extended under PMMY, Member Lending Institutions (MLIs) can avail guarantee cover
under Credit Guarantee Fund for Micro Units (CGFMU), though there is no specific scheme to provide
free insurance to registered traders affected by natural calamities/fire under the Scheme.
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