• Mudra Loan

    What is MUDRA loan?

    Under the Pradhan Mantri MUDRA Yojana scheme (PMMY), the Government of India has designed MUDRA loans to help small business owners in the country and help them meet capital expenses as well as operating costs. The maximum amount that can be borrowed through this loan is Rs.10 lakh. Business owners who require amounts in excess of Rs.10 lakh can avail other business loans offered by banks and financial institutions.

    Types of MUDRA Loan

    There are three schemes, namely Tarun, Kishor, and Shishu.

    • Shishu: scheme offers loans up to Rs.50,000
    • Kishor: scheme offers loans more than Rs.50,000 and less than Rs.5 lakh
    • Tarun: scheme offers loans more than Rs.5 lakh and below Rs.10 lakh

    These schemes are designed to help in meeting the requirements of different business activities and sectors as well as the requirements of entrepreneur/business segments.

    How to apply for MUDRA loan?

    1. Ensure that the necessary documents are kept ready. The main documents you will require are your ID proof, address proof, and business proof.
    2. Approach a lender who is enrolled under the MUDRA scheme and fill up the application form.
    3. Submit the necessary documents.

    Achievements under the PMMY loan scheme

    Graph for Loan Sancitoned under PMMY

    Souce: Mudra

    Purpose

    MUDRA loans can be taken for a variety of reasons that help in creating employment and generating income. Here are the main purposes for which MUDRA loans are taken:

    1. Business loan for shopkeepers, traders, vendors and other activities in the service sector
    2. Equipment finance for small enterprise units
    3. Working capital loan via MUDRA cards
    4. Transport vehicle loans

    MUDRA loan eligibility

    Indian citizens who have their own business plans for service sector activities, or trading or manufacturing activities and require amounts of up to Rs.10 lakh can apply for MUDRA loans. MUDRA loans can be availed from:

    • Public sector banks
    • Private sector banks
    • Regional rural banks
    • Small finance banks
    • Micro finance institutions
    • NBFCs

    Eligibility criteria Scheduled Commercial Banks should meet

    Public Sector Banks Private Sectors/Foreign Banks Regional Rural Banks
    Level of NPA Level of Net NPAs not exceeding 15% Level of Net NPAs not exceeding 10% Level of Net NPAs equal to or less than 3%
    Net Profit
    • Should have earned profits in the last 2 years
    • If they fail to meet the first criteria, the minimum external rating of long-term instrument should not be below A- accredited by credit rating agencies
    Net profit for preceding 2 years.
    CRAR CRAR as stipulated by RBI
    Networth Net-worth above Rs.250 crore Net worth above Rs.50 crore

    Eligibility criteria Small Finance Bank should meet

    • Should be granted final license by Reserve Bank of India for operating as a small finance bank and are already functioning as a small finance bank.
    • The bank before being granted the license to operate as a small finance bank should have earned profits for the last 2 years. The sanctioning committee main provide relaxation to the bank in case they have incurred losses either in the current or previous financial year provided the credit rating accredited by credit rating agencies is at least BBB+.
    Benchmark for sanctions Parameters Benchmark Norm
    Net-worth > or=Rs.100 crore
    CRAR > or = 15%
    Gross NPA < or = 5%
    Net NPA < or = 3%
    External Ratings norm BBB+ and above

    Eligibility criteria Microfinance institutions should meet

    Eligibility Parameter Portfolio (AUM including off balance sheet)
    Small - <Rs.100 crore Medium - Above Rs.100 crore to <Rs.500 crore Large - Above Rs.500 crore
    Type of entity NBFC-MFI, Society, Trust, or any similar registered entity
    Vintage The business must be making profit for the past three years
    Number of borrowers Minimum number of borrowers must be 10,000 Minimum number of borrowers must be 30,000 Minimum number of borrowers must be 1,00,000
    CRAR
    • NBFC-MFI: As stipulated by RBI from time to time. Currently its 15%
    • Other MFIs: 15%
    Minimum loan requirement Minimum loan amount of Rs.50 lakh

    Eligibility criteria Non-Banking Financial Companies should meet

    Parameter for Assets size >= Rs.500 crore for Assets size <= Rs.500 crore
    Track Record
    • Should be in business for at least 5 years and should have earned profits for 3 years
    • If the NBFC is known to finance loans for purchasing of secondhand vehicles, the business should be in existence for 3 years and should have earned profits during the period
    CRAR Minimum of 15% as stipulated by RBI
    Type of NBFC
    • NBFC, ABFC where 60% of the income comes from productive assets
    • Two-tier NBFCs
    • The NBFC should be registered with RBI as Asset Finance Company (AFC) or Loan Company (LC).
    Asset size Minimum Net owned fund of Rs.20 crore and minimum asset size of Rs.500 crore
    • Minimum Net owned fund of Rs.15 crore and minimum asset size of Rs.25 crore
    • Though an NBFC must have done a lending business of at least Rs.20 crore, certain relaxations can be considered by the sanctioning committee
    External rating norms
    • BBB+ and above
    • Relaxations up to BBB- might be considered by the sanctioning committee
    • BB- and above

    Who else can avail this loan?

    • Artisans
    • Small manufacturers
    • Shopkeepers
    • Vegetable and fruit dealers
    • Individuals engaged with agriculture

    What is the interest rate for MUDRA loan?

    There are several banks in the public sector as well as the private sector offering MUDRA loans. Here are some of the top lenders and their MUDRA loan offerings:

    Bank Interest Rate Tenure
    State Bank of India 11.25%% Up to 5 years
    Syndicate Bank 8.60% - 9.85% Based on the bank’s terms
    Bank of India 10.70% onwards 36 - 84 months
    Andhra Bank 8.40% to 10.35% 36 months onwards
    Tamilnad Mercantile Bank 9.90% - 12.45% Up to 84 months

    Documents Required

    Type of loan Documentation
    Vehicle Loans
    • Mudra application form
    • Loan application form
    • Income proof
    • 2 passport-size colour photographs
    • Photo Identity proof
    • Address proof
    • Bank statement for the last 6 months
    Business Instalment Loan
    • Mudra application form
    • Address proof
    • 2 years’ ITR
    • CA certified financials
    • Photo identity proof
    • Bank statement for the last 6 months
    • BIL application form
    • Proof of qualification
    • Establishment proof
    • Ownership proof of residence or office
    • Proof of business continuity
    • Trade references
    Business Loans Group and Rural Business Credit
    • Mudra application form
    • BIL application form
    • Income tax return for the last 2 years
    • Photo identity proof and age proof
    • Address proof
    • Bank statement for the last 12 months
    • Business vintage proof
    • Ownership proof of residence or office

    List of activities which cover MUDRA loans:

    • Community, Personal Service and Social Activities

      The activities/businesses for which MUDRA loans can be availed under this head include medical shops, boutiques, saloons, gymnasiums, dry cleaning, beauty parlours, motorcycle repair shops, tailoring shops, courier services, photocopying and DTP facilities, etc.

    • Transport Vehicle

      MUDRA offers financing for buying transport vehicles for goods as well as personal transport like auto rickshaws, three-wheelers, passenger cars, e-rickshaws, taxis, etc.

    • Food Products Sector

      Under the Food Products Sector, MUDRA loans can be availed for activities like achaar making, papad making, jelly or jam making, day-to-day catering, small service food stalls, cold storages, ice cream making units, cold chain vehicles, bun and bread making, etc.

    • Business Loans for Shopkeepers and Traders

      MUDRA loans under this head can be availed by individuals who require financing for running their shops, service enterprises, business and trading activities, and non-farm activities that generate income.

    • Textile Products Sector

      MURDA loans under this head are available for activities such as powerloom, handloom, chikan/zardozi work, khadi activity, traditional printing and dyeing, knitting, computerised embroidery, apparel design, other textile activities for non-garment products, etc.

    • Agriculture and Allied Activities

      MUDRA loans can also be availed for bee keeping, pisciculture, livestock, sorting, agriclinics, dishery, etc.

    • Equipment Finance Scheme for Micro Units

      MUDRA loans are extended for the setting up of micro enterprises by buying the necessary equipment/machinery.

    Funding Support under MUDRA Loan

    MUDRA offers four types of funding support:

    1. Micro Credit Scheme
      • Loans can be availed to the extent of Rs.1 lakh. The funds can be used for a variety of micro enterprise activities.
      • Targeted primarily at groups such as Joint Liability Groups (JLGs) and Self Help Groups (SHGs).
      • Any Micro Finance Institution (MFI) that wishes to avail a loan should enrol with MUDRA and comply with its requirements.
    2. Women Enterprise Programme
      • Additional facilities are offered to women entrepreneurs to encourage them to follow their dreams.
      • Facilities include the reduction of interest on loans. Currently, MUDRA loans can be availed by Micro Finance Institutions (MFIs) or Non Banking Financial Companies (NBFCs) with a discount of 25 basis points or 0.25% on the interest rates, provided they offer loans to women.
    3. Refinance Scheme for Regional Rural Banks/Commercial Banks/Scheduled Co-operative Banks
      • Various banks such as Scheduled Co-operative Banks, Regional Rural Banks, and Commercial Banks can avail refinance.
      • Refinance amount offered can go up to Rs.10 lakh per unit, and the funds can be availed as working capital loans or term loans. This is applicable to banks that have taken loans under the Tarun, Kishor, and Shishu categories.
    4. Securitisation of loan portfolio
      • MUDRA extends support to NBFCs, MFIs, and banks to fund micro enterprises through participation in securitisation of their loan assets.

    Latest updates as per Budget 2019-2020 1 lakh loan under MUDRA scheme for one woman in every SHG. 70% of beneficiaries under MUDRA scheme are Women

    Benefits of Taking MUDRA Loan

    Here are the key features and benefits of MUDRA loan:

    • Banking and financial services can be availed in both rural and urban areas.
    • Financial backing can be obtained by micro-small businesses and start-ups.
    • Business loans can be taken for small amounts at affordable interest rates.
    • The borrower’s credit guarantee is taken by the government, so if a borrower is unable to repay the amount borrowed, the responsibility for the loss will be borne by the government.
    • Food vendors, shopkeepers and other small business owners can make the most of this scheme.
    • Financial aid is available through this scheme in areas where people have no access to basic banking facilities.
    • The repayment period of the scheme can extend up to seven years.
    • Women borrowers can avail the loan at discounted interest rates.
    • Refinance schemes can also be availed with designated lenders.
    • Individuals who wish to generate income through micro enterprise activities can avail the Micro Credit Scheme.
    • The MUDRA loan scheme is in collaboration with the “Make In India” campaign which the government has initiated to foster innovation, facilitate investment, improve skill development, and build the best manufacturing infrastructure in the country.
    • There is no need for collateral or security to avail this scheme.
    • The funds borrowed through this scheme can only be used for business purposes.

    Frequently Asked Questions

    1. What kind of clients does MUDRA target?

    MUDRA loans are targeted at the Non-Corporate Small Business Segment which consists of millions of partnership firms and proprietorships that operate as service sector units, small industries, small manufacturing units, vegetable or fruit vendors, repair shops, etc. In urban as well as rural regions.

    2. Are there any subsidies under the Pradhan Mantri MUDRA Yojana?

    No. There are no subsidies under the Pradhan Mantri MUDRA Yojana.

    3. Can I avail a MUDRA loan if I have recently graduated from college?

    Yes. College graduates who wish to start their own businesses can apply for MUDRA loans. Based on the kind of business you wish to start and the requirements of the project, MUDRA can help you get your business up and running.

    4. I am a woman entrepreneur and wish to start my own boutique. Can MUDRA help?

    Yes. Women entrepreneurs can make the most of a special refinance scheme offered to women entrepreneurs. The Mahila Uddyami Scheme as it is called, offers an interest rebate of 0.25% when you avail a MUDRA loan from an NBFC or a micro finance institution.

    5. Do I need to have a PAN card if I want to avail a MUDRA loan?

    PAN cards are not mandatory for those who wish to avail MUDRA loans, but you will have to meet the other KYC requirements set forth by the financing institution.

        

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