What is MUDRA Loan?
The Micro Units Development and Refinance Agency Bank (MUDRA Bank) is an initiative of the Government of India, designed to develop micro units and refinance Micro Finance Institutions (MFIs). This bank offers funds to entrepreneurs in the non-corporate small business sector. As per the MUDRA scheme, which was announced in the FY2016 Union Budget, any Indian citizen can avail loan under Pradhan Mantri Mudra Yojana (PMMY), provided the credit limit is Rs.10 lakh and the fund is for business purposes in the non-farm sector like trading, processing, manufacturing, and services. Citizens can approach a bank, Micro Finance Institution, or a non-banking financial institution (NBFC) to avail MUDRA loans.
What are the Responsibilities of MUDRA?
Micro Units Development and Refinance Agency Bank is responsible for preparing the policy guidelines, registration, and regulation of MFIs. Other responsibilities include running a credit guarantee scheme and creating a good structure to cater to micro businesses by providing financial assistance.
PMMY is a new scheme launched under MUDRA for the purpose of developing and refinancing activities relating to micro units. The scheme’s objective is to provide funds to non-corporate small business sectors.
What are the Products Launched under MUDRA?
Under the PMMY, MUDRA has created interventions called Shishu, Kishor, and Tarun to represent the stages of growth or development and the funding needs of the beneficiary micro unit or entrepreneur.
- Shishu stage offers loans up to Rs.50,000
- Kishor stage offers loans above Rs.50,000 to up to Rs.5 lakh
- Tarun stage offers loans above Rs.5 lakh to up to Rs.10 lakh
Here is a list of some of the products or sector/activity specific schemes launched under MUDRA for business activities in social and personal services, textile product, land transport, community, and food product sectors.
- Micro Credit Scheme (MCS): This scheme offers financial support to MFIs for lending money to borrowers like individuals, self-help groups, etc. to set up and run micro enterprises.
- Missing Middle Credit Scheme: This scheme offers financial support to financial institutions for lending money to individuals for building and managing micro enterprises under the MSMED Act and non-farm income-generating activities. The loan amount per borrower is Rs.50,000 to Rs.10 lakh.
- Equipment Finance for Micro Units: This scheme offers financial support to individuals to help them establish micro enterprises by purchasing necessary machinery or equipment using a MUDRA loan of up to Rs.10 lakh per borrower.
- Business Loan for Traders & Shopkeepers: This scheme offers timely financial support for lending money to individuals for running their shops, trading and business activities, or service enterprises and non-farm income-generating activities.
- Mahila Uddyami Scheme: This scheme offers timely financial support to MFIs for lending money to individual women and groups of women for setting up or running of micro enterprises and non-farm income-generating activities.
- Refinance Scheme for Regional Rural Banks (RRBs) or Scheduled Co-operative Banks: Enhancing liquidity of RRBs or Scheduled Co-operative Banks by refinancing loans extended to micro enterprises in the manufacturing and service sector.
Who are Eligible for MUDRA Loans?
From the non-corporate small business sector - food processors, small industries, machine operators, repair shops, food service units, truck operators, fruit or vegetable vendors, shopkeepers, service sector units, small manufacturing units, partnership firms, proprietorship, and other industries in the urban and rural areas are eligible for MUDRA loans.
How to Apply for MUDRA Loan?
The borrower has to visit a nearby branch of a private or commercial bank and present the business plan with a duly-filled loan application form along with the necessary documents, some of which include:
- Pradhan Mantri Mudra Yojana application form
- Photo identity proof and address proof
- Last 6 months’ bank statement
- 2 passport-size photos of the borrower
- Proof of continuity of business
27 public sector banks, 17 private sector banks, 27 regional rural banks, and 25 MFIs have been enrolled with MUDRA. Borrowers can approach any of the above to avail MUDRA loans for the development of micro enterprises.