Mudra Loans

The Pradhan Mantri Mudra Yojana provides MUDRA Loans (PMMY). MUDRA is an acronym that stands for Micro-Units Development and Refinance Agency. Borrowers can apply for business loans ranging from Rs.50,000 to Rs.10 lakh under this scheme based on the Sishu, Kishor, and Tarun categories.

MUDRA stands for Micro Units Development and Refinance Agency.

Pradhan Mantri Mudra Yojana (PMMY) or Mudra loans is a scheme launched in the year 2015 to provide loans of up to Rs 10 lakh to non-farm, non-corporate small or micro-enterprises. The intent of introducing this scheme was to make available easy business loans for small and micro enterprises, as they find it difficult to raise loans.

• These loans can be availed either to start a business or for business expansion.
• Since its inception, Rs 12 lakh crore worth loans have been disbursed under PMMY.

Table of Contents

• List of Businesses under the Mudra Scheme
• Mudra Loan Product Types
• What is the purpose of the Pradhan Mantri Mudra Loan?
• How Do You Apply for a Mudra Loan?
• Eligibility for Mudra Loans
• What is the Mudra loan interest rate?
• Documents Required for Mudra Loan Application
• The Advantages of Taking a Mudra Loan

List of Businesses under the Mudra Scheme

The following businesses are covered by the Mudra scheme to perform income-generating activities:

• Mudra finance for Machinery/Equipment can be used to purchase commercial transport vehicles such as tractors, auto-rickshaws, taxis, trollies, tillers, goods transport vehicles, 3-wheelers, e-rickshaws, and so on.

• Starting businesses in the service sector such as salons, gyms, tailoring shops, medical shops, repair shops, dry cleaning and photocopying shops, and so on.

• Food and textile product sector activities include the production of papad, achaar, ice cream, biscuits, jam, jelly, and sweets, as well as the preservation of agricultural produce at the rural level.
• Setting up shops, service enterprises, trading and business activities, and non-farm income-generating activities are also eligible for MUDRA loan
• Micro Unit Equipment Financing Program: Maximum loan amount of Rs. 10 lakh
• Agri-allied Activities: Activities related to agri-clinics and agribusiness centers, food and agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, grading, aggregation agro-industries, dairy, fishery, and so on.

Mudra Loan Product Types

Mudra loan schemes are classified into three types: Tarun, Kishor, and Shishu.

Scheme

Amount

Shishu

Kishor

Rs.50,000 to Rs.5 lakh

Tarun

Rs.5 lakh to Rs.10 lakh

What is the purpose of the Pradhan Mantri Mudra Loan?

Yojana MUDRA loans can be used for a variety of purposes, including job creation and income generation. The following are the primary reasons why Mudra loans are obtained:

• Business loans for shopkeepers, traders, vendors, and other service-related activities
• Equipment financing for small business units
• MUDRA cards are used to obtain a working capital loan.
• Loans for transportation vehicles

• Agri-allied non-farm income-generating activities such as poultry farming, beekeeping, pisciculture, and so on are eligible for a Mudra Loan.

• People who use tractors, tillers, or two-wheelers for commercial purposes are eligible for a Mudra Loan.

Activities Covered Under Mudra Loan

The following are the activities that are covered by the Mudra Loan:

• Food products industry
• Transportation vehicles that transport both goods and passengers
• Community, social, and individual service activities
• Shopkeeper and trader business loans
• Textile industry and activities
• Agriculture-related pursuits
• Micro Units Equipment Financing Scheme

How Do You Apply for a Mudra Loan?

The application form is available at mudra.org.in, where you can download it and fill in all of the required information. Different banks' application processes may differ slightly. You must go to the nearest branch of the desired bank and submit the duly completed application form, as well as complete the bank formalities.

You can also apply online on the bank's official website by submitting the duly completed application form along with the lender's specified documents. Once the lender is satisfied with the submitted documents, the loan will be approved and the loan amount will be deposited into your specified bank account within 7-10 working days.

Step 1: Make sure all necessary documents are on hand. The main documents you'll need are proof of identification, proof of address, and proof of business

Step 2: Go to a lender who is part of the MUDRA scheme and fill out an application form

Step 3: Submit the required documents

Eligibility for Mudra Loans

Mudra loan is available to Indian citizens who have their own business plans for the service sector, trading, or manufacturing activities and require amounts of up to Rs.10 lakh. It is available from public and private sector banks, regional rural banks, small finance banks, and microfinance institutions (MFIs).

An applicant for a MUDRA Loan must meet the following criteria:

Minimum age of eligibility

Maximum age of eligibility

Who can avail of a Mudra Loan

Loans can be availed by new and existing units

Security or collateral

No collateral or third-party security is required

Institutions eligible to offer Mudra Loan

Public Sector Banks, Private Sector Banks, Micro Finance Institutions, and Regional Rural Banks

Proof of identity, proof of residence, application form and passport size photos

What is the Mudra loan interest rate?

The interest rate for a Mudra loan is determined by the applicant's profile. MUDRA loans are available from a number of banks in both the public and private sectors. All lenders follow certain guidelines, and the final rate of interest at which a loan is provided to an applicant is determined by the lender. This is done after thoroughly reviewing the applicant's business requirements.

Documents Required for Mudra Loan Application

Documents

Type Documents

Duly filled up an application form on the basis of the loan category

Proof of Identity

Aadhaar card, Voter’s ID card, driving license, passport, etc.

Proof of Address

Utility bills (electricity bills, telephone bills, and so on), Aadhaar cards, Voter’s ID cards, passport, etc.

2 passport-sized photographs of the applicant

Quotation of the commodity or items which are to be bought and used for the business

The Advantages of Taking a Mudra Loan

The following are the key features and benefits of a Mudra loan:

• Both rural and urban areas have access to banking and financial services
• Micro-small businesses and start-ups can obtain financial assistance
• Small-dollar business loans with low-interest rates are available
• The government assumes the borrower's credit guarantee, so if the borrower is unable to repay the amount borrowed, the government will bear the loss
• Food vendors, shopkeepers, and other small business owners can benefit from this program
• This scheme provides financial assistance in areas where people do not have access to basic banking services
• The scheme's repayment period can last up to seven years
• Women borrowers can get loans at a lower interest rate
• Refinance programs are also available through designated lenders

• The Micro Credit Scheme is available to individuals who want to generate income through micro-enterprise activities
• The Mudra loan scheme works in tandem with the government's "Make in India" campaign, which aims to foster innovation, facilitate investment, improve skill development, and build the best manufacturing infrastructure in the country

• This scheme does not require any collateral or security
• The funds borrowed under this scheme can only be used for commercial purposes
• The Indian government recently announced that the Mudra Shishu category will be eligible for certain benefits under the Atmanirbhar Abhiyan. The advantages are as follows:
  • Borrowers in the Mudra Shishu category will be eligible for relief of up to Rs.1,500 crore.
  • Mudra Shishu borrowers will receive an interest subsidy of Rs.1,500 crore.
  • The Government of India will give fast recipients a 2% discount on their interest rate for a year.

  What Exactly is the Pradhan Mantri Yojana?

  The Pradhan Mantri Yojana was launched in 2015 with the goal of assisting small businesses in expanding and succeeding. Companies from both the profit and non-profit sectors can apply for a loan under this scheme, with a loan amount of up to Rs.10 lakh available to help them get started.

  The following companies are eligible for a loan under the Pradhan Mantri Yojana scheme:

  • RRBs (Railway Recruitment Boards)
  • Institutions of Microfinance (MFIs)
  • Banks, commercial
  • Non-Banking Financial Corporations (NBFCs)
  • Small Finance Banks

  Women Entrepreneurs Can Get Mudra Loans

  Mudra Yojana under PMMY encourages women's entrepreneurship by providing collateral-free business loans at reduced or concessional interest rates to private and public sector banks, NBFCs, and Micro Finance Institutions (MFIs).

  The maximum loan amount available under the Mudra Yojana for female entrepreneurs is Rs. 10 lakh, with a repayment period of up to 5 years. Mudra loan eligibility for women is the same as it is for individuals and businesses. For women entrepreneurs, nil to nominal processing fees and foreclosure fees are charged on the sanctioned loan amount.

  Mudra Loan Related FAQs

  Mudra Loans are a type of term loan in which a group or an individual can obtain funds for business expansion, inventory purchases, and other purposes.
  

  The maximum loan amount that can be obtained from a bank is Rs.10 lakh.
  

  Yes, if you want to apply for a Mudra Loan, you must provide your income tax returns (ITR) for the previous two years.
  

  No, if you want to apply for a Mudra Loan, your Cibil Score will not be considered.
  

  MUDRA loans are aimed at the Non-Corporate Small Business Segment, which includes millions of partnership firms and sole proprietorships in both urban and rural areas that operate as service sector units, small industries, small manufacturing units, vegetable or fruit vendors, repair shops, and so on.