Mudra Loan Eligibility

A public sector/private sector/regional rural bank will be eligible for a MUDRA loan if it satisfies the following criteria:

• Should have generated profits for the previous 2 years
• Level of net performing assets should be below 15%, 10%, and 6% for public sector, private sector, and regional rural banks respectively
• Net worth is above Rs.250 crore for private and public sector banks. For regional rural banks, it should be above Rs.50 crore.
• Capital to Risk Weighted Assets Ratio (CRAR) should be as per the RBI regulations

Eligibility conditions for Small Finance Banks

Micro Units Development and Refinance Agency (MUDRA) loans can be availed by borrowers who fulfill a specific set of eligibility criteria. These are listed below:

1. Scheduled Commercial Banks

Public Sector Banks

• Should have been profitable during last 2 years*
• Net NPAs should not be more than 15%
• Net worth should be above Rs.250 crore

Private Sector Banks

• Should have been profitable during last 2 years*
• Net NPAs should not be more than 10%
• Net worth should be above Rs.250 crore

Regional Rural Banks

• Should have been profitable during last 2 years
• Net NPAs should be equal to or less than 6%
• Net owned fund should be above Rs.50 crore

Small Finance Banks

• Should be licensed by the RBI to operate as a Small Finance Bank
• Should have been profitable during last 2 years
• Should have outstanding portfolio greater than Rs.500 crore
• Fundamentals should be strong, as per the last audited balance sheet
• Net worth should be Rs.100 crore or more
• Gross NPA should be equal to 5% or lower

*CRAR(Capital Adequacy Ratio) as per RBI norms

*If the bank has not earned a profit in the previous 2 years, then the minimum external rating of long-term instruments should not fall below A-

2. Micro Finance Institutions (MFIs)

• Should be a registered entity that lends to micro units and is in accordance with the loan size criteria of the MUDRA scheme for a minimum of 3 years. If this is not the case, the management of the organisation should have an overall experience of 10 years.
• The minimum outreach should be 3,000 existing borrowers.
• The minimum capacity assessment rating should be as indicated below:
• Mfr-4 (CRISIL) for Kerala, Tamil Nadu, Karnataka, and Puducherry
• Mfr-4 (CRISIL) for Tier 1 and Tier 2 MFIs in all other states
• Mfr-5 (CRISIL) for Tier 3 MFIs in all other states
• Should have appropriate processes, systems, and procedures such as risk management, internal accounting, MIS, internal audit, cash management, etc.
• Should target businesses run by the owner in the micro units category.
• Should meet the CRAR regulations set by the RBI.
• Should have been profitable for 3 years.
• Recovery performance should not be less than 90%.
• Portfolio at Risk should be greater than 90 days.
• The MFI should be a member of credit bureaus according to RBI policy.
• The minimum refinance or term loan requirement should be Rs.0.50 crore.
• The company should ideally target the backward segments of the society, particularly the women.
• The company should have audited financial statements.
• If the MFI has been set up by taking over the existing operations of another entity, the previous entity’s track record will be taken into consideration.
• MUDRA loans should be provided by the MFI for setting up or running non-farm income generating activities.

3. Non-Banking Financial Companies (NBFCs)

Larger NBFC (Asset size greater than Rs.500 crore)

• Should be registered as a Loan Company or an Asset Finance Company (AFC)
• Should have been in business for 5 years and is profitable for the last 3 years
• Minimum Net Owned Fund should be Rs.20 crore
• Minimum Asset Size should be Rs.500 crore
• CRAR should be a minimum of 15%
• Minimum Gross NPA and Net NPA is based on the agency rating
• External rating range should be BBB+ or more

Smaller NBFC (Asset size lesser than Rs.500 crore)

• Should be registered as a Loan Company or an Asset Finance Company (AFC)
• Should have been in business for 5 years and is profitable for the last 3 years*
• Minimum Net Owned Fund should be Rs.15 crore
• Minimum Asset Size should be Rs.25 crore
• CRAR should be a minimum of 15%
• Minimum Gross NPA and Net NPA is based on the agency rating
• External rating range should be BB- or more
• The NBFC should have done lending business of a minimum of Rs.20 crore the previous financial year

(*If the NBFC finances second-hand vehicles, it should have 3 years’ experience in the industry and should have been profitable during this time.)

MUDRA Loan Eligibility FAQs

1. What is the maximum loan amount that can be availed by a borrower under the MUDRA scheme?

   MUDRA offers loans to MFIs and banks that, in turn, lend to micro units with loan requirements up to Rs.10 lakh. The products under the MUDRA loan scheme based on funding requirement are as follows:

   • Shishu – This covers loans up to a maximum amount of Rs.50,000
   • Kishor – This covers loans between Rs.50,000 and Rs.5 lakh
   • Tarun – This covers loans between Rs.5 lakh and Rs.10 lakh
2. Can MUDRA loan be availed for the purchase of goods vehicles or taxis?

   Yes, it is possible to avail a MUDRA loan for the purchase of a taxi, passenger car, or small goods transport vehicle. The loan can even be availed for the purchase of an auto rickshaw.

3. Can the MUDRA loan be taken for setting up a beauty parlour?

   Yes, MUDRA loan can be availed for community or social service activities such as setting up of beauty parlours, saloons, gymnasiums, tailoring shops, motorcycle/cycle repair shops, dry cleaning businesses, photocopying facilities, courier agencies, and medical shops.

4. What are some of the activities for which MUDRA loan can be availed in the food products sector?

   MUDRA loan can be taken by the following businesses in the food products sector:

   • Pickle and papad making units
   • Jam making units
   • Facilities aligned to the preservation of agricultural produce
   • Sweet shops
   • Small food stalls
   • Canteen or catering services
   • Cold storages
   • Ice-cream making facilities
   • Ice making units
   • Bakery facilities
5. What kind of businesses in the agricultural sector can avail a MUDRA loan?

   MUDRA offers loans to businesses involved in the following activities that promote livelihood or generate income:

   • Bee keeping
   • Pisciculture
   • Livestock
   • Poultry
   • Fishery
   • Agribusiness centres
   • Agriclinics
6. Can MUDRA loan be availed by businesses in the textile sector?

   Yes, the following businesses in the textile industry can avail MUDRA loans:

   • Powerloom/handloom facilities
   • Chikan work units
   • Zardozi/Zari work units
   • Hand embroidery/computerised embroidery units
   • Facilities involved in dyeing and textile printing
   • Knitting units
   • Facilities engaged in production of non-garment goods such as bags, furnishing accessories, and vehicle accessories
7. Are non-farm income generating businesses eligible for the MUDRA loan?

   Yes, non-farm income generating businesses an avail MUDRA loans up to Rs.10 lakh per borrower. Shops, trading units, and service enterprises are examples of the same.