Pradhan Mantri Mudra Yojana is the government’s loan initiative targeted at small and medium enterprises. Under this scheme the government makes funding available to non-farm sector medium, small and micro enterprises through loans, commonly referred to as Mudra loans Read on to get a thorough understanding of the scheme and overall Mudra loan details, eligibility criteria, interest levels and other frequently asked questions. We’ll also explain the specific channels and process that the government utilizes to get these funds for you.
What is Pradhan Mantri Mudra Yojana?
India runs on medium, small and micro enterprises, and yet these businesses together account for only 8% of the country’s GDP. Pradhan Mantri Mudra Yojana, abbreviated as PMMY aims to assist deserving medium, small and micro enterprises (MSMEs) in meeting their potential by giving them what they need most – access to credit.
MSMEs have historically fallen prey to neighborhood loan sharks because they do not maintain books of accounts and other documentation that would make them eligible for a loan from a bank. They have no choice but to approach unregulated sources of credit. On many occasions, MSMEs are unable to repay their debts because of inordinately high interest rates, resulting in a vicious cycle of inadequate capital and bad debts.
PMMY has been in action for 5 years. It was launched in 2015. It is well on it’s way to meeting its goal of providing funds to MSMEs at various stages in their development curve for a variety of purposes. Funds are dispersed via the Mudra Bank. Mudra itself is an acronym that stands for micro units development and refinance agency. Mudra bank is incidentally a fully owned subsidiary of the Small Industries Development Bank of India – that’s where Mudra Bank receives the capital that is then dispersed as loans.
What kind of loans can small and medium size enterprises expect from the Scheme?
There are three types of loans that are disbursed under the PMMY scheme. The Mudra loan details are as follows:
- Shishu, translated as new-born, is for newly-established enterprises. The maximum loan amount that can be availed is Rs 50,000.
- Kishor, translated as a teenager, targets businesses that are off the ground but continue to need financing as they are still in a very early stage of growth. MSMEs in this category may opt for a Mudra loan ranging from Rs. 50,000 to Rs. 500,000.
Tarun, which means young man is suitable for MSMEs, has been running for some time. They may be well-established and might have the financial capability to run ongoing business but may require additional funding for expansion financing as they are still in a very early stage of growth. MSMEs in this category may opt for loans ranging from Rs 5 lakh to Rs 10 lakh
What kind of Businesses are Eligible?
MSMEs operating in manufacturing, processing trading and service sectors may opt for such loans. You can read more about Mudra Yojana for Women Entrepreneurs.
How does the Government distribute the funds? Where can one Apply?
Commercial Banks, Co-operative Banks, Regional Rural Banks, Micro Finance Institutions (MFIs) and Non Banking Financial Institutions get what is known as refinancing from the government to provide these loans to the public. The financial institution has to have specifically signed up and qualified in order to offer the facility of Mudra Loans.
Is the scheme working out for people? What are the chances of getting financial assistance?
PMMY has seen a ton of applicants and a sizable amount of loans have been approved. The largest chunk of loans are issued under the shishu category. This is actually a great place for the government’s enabling to begin because with the financial support given, nascent companies can launch and pay back their loans and then if needed also opt for loans in the next category. For example a small business can opt for a Shishu loan and open its doors and then go on to pay off its loan. Thereafter, in order to upgrade it may even apply for a Kishor loan and once established the small business can opt for a Tarun loan to grow from a small business into a medium sized business.
More than Rs 10 lakh crore has been disbursed to small and medium enterprises since the scheme’s launch in 2015 until the tail end of 2019.
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