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Mudra loan Coming as Saviour During Lockdown

By Finserv MARKETS - May 20,2020
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Mudra loans beat COVID-19 Blues

The number of people infected in India is all set to touch the 50,000 mark even as the country has begun to ease restrictions across several states, as it enters the third phase of nationwide lockdown. This was a much needed step given that economic activity had almost come to a halt. GDP growth for April to June 2020 quarter is being predicted at a meagre 1 to 2%. Businesses have been struggling to stay afloat. The pandemic has dealt a big blow to the small and medium industries sector which contribute 25% to the country’s GDP. However, there is some good news.

Loans sanctioned to small businesses by the Pradhan Mantri Mudra Yojana have registered a sharp increase for FY 2020 standing at 3,23,574 crores. So much so, that they have gone beyond Rs. 3,21,723 crores, the loan amount doled out during the previous financial year ending March 2019. What is to be noted is that a considerable chunk of Mudra loan approvals happened between the period from February 2020 till the announcement of the lockdown by the Prime Minister. As much as Rs. 1.25 lakh crores was disbursed to small and micro enterprises in just 45 days to help them tide over the financial crisis in the businesses.

Mudra loans beat COVID-19 Blues
Mudra loan growth in the first three quarters of 2020 was quite unimpressive pushing the Banker’s Committees of several states to develop strategies in order to boost the lending process. Loans worth Rs 1,97,816 had been registered under the Pradhan Mantri Mudra Yojana by January 2020. The scheme was also grappling with concerns about increased non-performing assets in 2019 as compared to the previous year. However, despite all these hiccups, a record Rs. 3.16 lakh crores were given to borrowers in FY 2020 as opposed to Rs. 3.11 lakh crores for FY 2019.

This has come as a relief to the MSME sector which has perhaps been the hardest hit due to this crisis. With most of the migrant workers employed by these enterprises having moved back to their villages, manufacturing has stopped.  According to the Annual Report of Department of MSMEs(2018-19), India is home to 6.34 crore MSMEs which employ more than 11 crore people.  51% of these are located in rural areas while 55% of the employment happens in urban MSMEs. Not only this, the MSME sector contributes 33% to the Indian manufacturing sector as well.

Read more on how mudra scheme helps small businesses.

Genesis of Mudra Loans

Pradhan Mantri Mudra Yojana, a government-backed scheme was introduced in 2015 to extend financial support in the form of loans. Businesses not falling under the corporate or farming sector including small and micro enterprises can avail up to Rs. 10 Lakhs without paying any collateral in order to finance their business needs. Commercial banks, non-banking financial institutions, small finance banks as well as micro finance institutions have been  engaged for speedy approval of loans. However the majority of disbursals happen through banks in the public sector, which form a major chunk of the distribution channels in force.

There are three categories of Mudra loan under the Yojana. Loan amount of upto Rs. 50,000 is classified as Shishu loan, while that between Rs. 50,000 to Rs. 5 Lakhs is termed as Kishore loan. Those above Rs. 5 Lakhs up to Rs. 10 Lakhs fall in the category of Tarun loans. With the formal banking system not even able to supply one-third of the credit required by MSMEs, Pradhan Mantri Mudra Yojana is a step to ease the liquidity woes of the sector and enable access to finance to give it a new lease of life. Learn Mudra Loan application process and apply for mudra scheme easily with the help of Finserv MARKETS.

Financing the MSME sector

The sector is struggling to survive in the wake of the pandemic with decreased or no revenues and the lack of cash to wait and watch till businesses can return to normal. The unavailability of labour further complicates the situation. In such trying times, collateral free loans such as Mudra loans available on Finserv MARKETS are a huge relief to small businesses with the government taking the credit guarantee assuring the financial institution of repayment even if the loan amount cannot be paid by the MSME.

The success of loans under PMMY can be gauged by the fact that a bulk of them for FY 2020 fell under the Shishu category with most beneficiaries being women. Not only this, had the loan duration for FY 2020 not been cut short by the countrywide lockdown, an estimated Rs 3.50 lakh  crore would have been sanctioned as a part of the scheme. As small businesses rethink their strategies of coping with the current crisis, they will require financing in order to revive and reboot their fledgling enterprises.

Bajaj Finserv Business loan available on Finserv MARKETS is the right choice to give a fillip to your business during these uncertain times. You can get credit up to Rs. 30 Lakhs without any collateral and that too with minimal documentation. Pay flexibly as per your comfort anywhere between 12 months to 5 years and enjoy complete transparency. Not only this, Bajaj Finserv Business loans available on Finserv MARKETS  are customised as per your requirements and approved within 3 minutes. Money is credited within 24 hours of approval to make sure you do not have to wait! So secure your future today!

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Read more on Mudra Loan Application Form

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522