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

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

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+.

Eligibility criteria Microfinance institutions should meet

Eligibility criteria Non-Banking Financial Companies should meet

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:

Documents Required

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.

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.