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MUDRA scheme: Guide to Avail the Mudra Scheme

By Finserv MARKETS - Mar 28,2020
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MUDRA scheme

What is Mudra Yojana Loan?

A flagship scheme under MUDRA Ltd was launched by the Government known as ‘Pradhan Mantri MUDRA Yojana’ also known as PMMY or the MUDRA scheme. The MUDRA scheme provides refinance support to micro-business with the goal of funding the developing phase of the microbusiness sector across the country. Under PMMY, MUDRA has formulated a basket of products named ‘Shishu’, ‘Kishore’ and ‘Tarun’ that give out Mudra Yojana loans.

These stages signify the developmental stages of a business. Microbusinesses can opt for them based on their financial needs. They also serve as a reference point from which one can look forward to graduating to the next phase of development. Here are the details regarding the differences between each of these schemes.

  • Shishu Scheme: Provides loans up to ₹50,000.
  • Kishor Scheme: Provides loans ranging from at least ₹50,000 up to ₹5 lakh.
  • Tarun Scheme: Provides loans ranging from at least ₹5 lakh up to ₹10 lakh.

MUDRA scheme

Source: The True Picture

MUDRA Loan Eligibility

In order to secure a loan one have to fulfill certain Mudra Loan (PMMY) eligibility criteria set towards it which are highlighted below:

  • The reason behind applying for a MUDRA loan needs to be allied to one’s income-generating or livelihood promoting activities. Loans can be availed for activities that are undertaken with the goal of making a profit. In short, the MUDRA scheme does not extend towards any non-business related activity.
  • Any non-farming activities or businesses that are generating incomes are eligible for the MUDRA Yojana loan. Repair workers, manufacturing workers, handicrafts and textile workers and agri-allied activities, among other non-farm activities, will be covered under this scheme.
  • The MUDRA loan process requires that any entities before approaching MUDRA banks with the goal of securing a loan must get themselves registered as a micro business. This is to be done by the ‘Ministry of Micro, Small and Medium Enterprises’, which certifies companies with an ‘MSME status’. Any organizations that are large-scale or unregistered will not be eligible.
  • Under MUDRA Yojana loans it’s mandatory that any entity who comes with a business proposal has to present the vision and plan to the banks. In addition, the financial requirement should be within ₹10 lakhs to be eligible for the loan because the MUDRA scheme can grant a maximum amount of ₹10 lakhs.

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MUDRA Loan Process

While different banks that offer the MUDRA scheme have specific requirements the general process for availing the MUDRA Yojana loan are as follows:

1. Prepare Business Plan and Documentation

Applicants must initially create a business plan with financial needs within ₹10 lakhs which they will present to the banks who are offering the MUDRA loan. Additionally, they are required to submit a loan application with the necessary piece of identity proof such as an Aadhar card, proof of address, and passport size photo. You needn’t furnish any collateral or processing charge to avail of the loan. You just have to publish them a quotation of the equipment, machinery or items for which you’re applying for a loan.

2. Approach Banks or FIs for Your Loan

One can approach a bank of their choice but to choose among different lenders, do inquire about the terms and conditions on MUDRA Yojana loans. Parameters like rate of interest, collateral security, and repayment method will vary from bank to bank ranging from 8.40% to 12.45%. Refinance assistance under PMMY is offered for a maximum duration of 3 years. Here are some of the banks that offer MUDRA Yojana loans:

  • State Bank of India
  • Bank of India
  • Punjab National Bank
  • Andhra Bank
  • Bank of Baroda

3. Loan Processing in Accordance with Terms and Conditions

Different banks have different processes for the MUDRA Loan so the processing time may vary. Your bank will review your application, credit score, quotations, ID proof, and depending on how strict their criteria are for lending, chances are you may or may not be approved for the loan. This processing time can take anywhere between one day to a few weeks depending on your requirement, the lender, and the time at which you apply.

4. Loan Sanctioning and Disbursement

If your application is approved for the MUDRA Yojana loan, your lender will issue an official sanction letter which serves as proof of certificate that you have been accepted as eligible for a loan. The next is loan disbursement which is how the loan is to be paid to your business. Your loan can be paid to you as a lump sum or in installments of your choice. Similarly, repayment guidelines must be fixed at this stage as well. EMIs can be monthly, annual or even weekly.

Calculate EMI

The MUDRA loan has proved to be a miracle for small business units. But there might be instances, one may not meet the eligibility criteria for the MUDRA loan or find the loan amount insufficient. In such cases, one can easily apply for a loan on Bajaj Finserv Business Loan available on Finserv MARKETS. You can avail of a Business loan up to ₹30 lakhs with minimal documentation and instant approval. Secure your business with Bajaj Finserv Business Loan only on Finserv MARKETS.

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