Finance Financial Advice

What is Mudra Loan?

Mudra Yojana is a government-sponsored loan scheme that allows individuals and MSMEs to borrow up to Rs. 10 lakh to establish a new business or expand an existing one. Moreover, the Mudra loans are offered without submitting any collateral or security.

What is MUDRA Yojana?

The Micro Units Development and Refinance Agency (MUDRA) Loan Scheme, also known as the Pradhan Mantri Mudra Yojana, is a government of India initiative. It provides loans to individuals and MSMEs from banks and NBFCs. MUDRA Yojana is available in three lending schemes: Shishu, Kishor, and Tarun.

Mudra Loan

Financial institutions offer collateral/security-free loans under the Mudra scheme. Moreover, the payback terms ranging from 12 months to 5 years as well as flexible EMIs option. However, only Individuals, MSMEs, enterprises, or businesses engaged in manufacturing, trading, or services sectors can apply for the Mudra scheme.

Features of Mudra Loan

  • Interest Rate: It varies from bank to bank and the evaluation is according to the business requirements.
  • Mudra Scheme Types: Shishu, Kishor, and Tarun.
  • Minimum Loan Amunt: There is no minimum limit.
  • Maximum Loan Amount: Up to Rs. 10 lakh in maximum loan amount.
  • Collateral/Security: Banks and NBFCs do not require it.
  • Processing Fees: No processing charges.
  • Repayment Tenure: From 12 months to 5 years.

Types of Loan Schemes under MUDRA Yojana

Loans under the Pradhan Mantri Loan Yojana (PMMY) are categorized into three schemes: Shishu, Kishor, and Tarun. The loan amount available under each lending scheme is listed below:

  • SHISHU Loan: The Mudra Shishu Loan scheme offers loans up to Rs. 50,000. This scheme is for start-ups as well as new businesses.
  • KISHOR Loan: Loans ranging from Rs. 50,001 to Rs. 5,00,000 are available under the Kishor Loan Scheme. It is for the purchase of equipment/machinery, raw materials, as well as business expansion for existing businesses.
  • TARUN Loan: The Tarun Loan Scheme provides loans ranging from Rs. 500,001 to Rs. 10,00,000. This scheme is for established industries and organizations.

Advantages of Mudra Loan

  • Individuals, retailers, shopkeepers, traders, vendors, and MSMEs in the manufacturing, trading, and service sectors are the primary recipients of Mudra loans.
  • Mudra program is working under the Government of India’s Credit Guarantee Schemes.
  • Term loans, working capital loans, as well as overdraft facilities can all be used with the borrowed funds.
  • Mudra loans are available to all non-farm enterprises, i.e. small or micro businesses that generate money.
  • People belonging to the SC/ST category can also get Mudra loans with lower interest rates.
  • Mudra card is a form of debit card given to borrowers that can be used to withdraw loan funds according to company needs. Hence borrowers can withdraw the total available loan money in form of installments via Mudra card.

Purpose of Mudra Scheme under PMMY

The following is a list of businesses that are eligible for the Mudra scheme and their income-generating activities:

  • Commercial Vehicles: Mudra loan for machinery and equipment can be used to purchase commercial transport vehicles. Including tractors, auto-rickshaws, taxis, trollies, tillers, goods transport vehicles, 3-wheelers, e-rickshaws, and so on.
  • Service Sector Activities: Starting businesses in the service sector, such as salons, gyms, tailoring shops, medical stores, repair shops, etc.
  • Food and Textile Product Sector Activities: Various activities in the food and textile product sectors, such as papad, achaar, ice cream, biscuits, jam, jelly, and sweets production. As well as agriculture produce preservation at the rural level.
  • Business activities for Traders and Shopkeepers: Business activities, such as setting up stores, service firms, trading and business activities, and non-farm income generating activities are all examples of Business activities for Traders and Shopkeepers.
  • Equipment Finance Scheme for Micro Units: Maximum loan of Rs. 10 lakh
  • Agri-allied Activities: Activities related to businesses in agri-clinics and agri-business centres, food & agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, etc.

How to Apply for Mudra Loan?

how to apply for mudra loan

You can download the application form at mudra.org.in and fill in all of the essential information. However, it’s possible that different banks have slightly different application methods. Thus, it is advisable for you to visit the nearest branch of the bank where you wish to receive the Mudra loan and submit the correctly filled application form along with the necessary bank paperwork.

Documents required for Mudra Loan

  • Application filled with all the required information and passport-sized photos
  • Applicant and Co-applicants’ KYC documents: Passport, voter identification card, Aadhar card, driver’s license, PAN card, as well as utility bills (water/electricity bills)
  • Proof of special categories, such as SC, ST, OBC, Minority, etc (if applicable)
  • The bank statement for the previous six months
  • Documents for business address and tenure proof, if necessary
  • Any other paperwork that the bank requires

Note: In the case of Shishu, the Mudra loan application form must be completed and filed separately, whereas the Kishor and Tarun loan applications are comparable.

What is Mudra Loan for Women Entrepreneur?

mudra loan- women empowerment.

Mudra Yojana, as part of the PMMY, encourages women entrepreneurs. Moreover, the banks and the Micro Finance Institutions (MFIs) bolster this scheme by providing credit facilities for women borrowers at lower or concessional interest rates. Mudra currently offers female businesses a 25 basis point (BPS) discount on financing rates offered by NBFCs and MFIs. The maximum credit amount available to women entrepreneurs under the Mudra Yojana is Rs. 10 lakh. Women’s Mudra loan eligibility is the same as it is for individuals and businesses.

For more such updates, keep watching this space!

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