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The Purpose of Pradhan Mantri Mudra Yojana (PMMY)

By Finserv MARKETS - Apr 16,2020
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Purpose of Pradhan Mantri Mudra Yojana

The Medium, Small and Micro Enterprises (MSME) sector provides the country with all sorts of conveniences. Corporations are supported by courier agents across the country. All the medical stores and neighborhood grocery shops that provide people with great convenience fall under the MSME category. Between the farm and the table, toil a whole chain of handlers that perform various necessary functions. Even the transport that most urbanears utilize to get to work and get around is the work of the MSME industry. Yet, MSMEs contribute to less than 10% of GDP despite the fact that a large chunk of Indian businesses fall under this category. Given the dependence on all of the facilities and conveniences supplied by the MSME industry there is huge potential for growth, employment and a higher contribution to GDP. It is therefore in the government’s interest to support MSMEs provided these businesses fall in the right categories.

The PMMY, that is Pradhan Mantri Mudra Yojana scheme was launched by the government in 2015. Its purpose is to supply financing to MSMEs in need of financial support with the promise of competitive rates of interest. The scheme has so far shown great demand and has responded well with a steady supply of financial capital to borrowers. In 5 years, Rs 10 lakh crore has been disbursed to MSMEs under PMMY scheme.

A Mudra loan may be availed of by borrowers in several business categories, for a variety purposes. However these purposes are limited to a list specified by the government. If you are looking for Mudra loan details you have come to the right place. Read on to get a clear picture of what purposes a Mudra loan may be availed for.

1. Activities allied to agriculture

As the name suggests this category does not include crop loans or loans aimed at facilitating agriculture or in other words loans taken for the development of canals, irrigation and wells. Instead it specifies that the business activity must be allied to agriculture. Activities that are included in this category include

  • Agri-business centers
  • Agricultural produce processing, sorting and grading centers
  • Bee-keeping, honey-farmers and apiculturists
  • Dairy
  • Fisheries and pisciculture
  • Livestock-rearing

2. Business loans for traders and shopkeepers

The Mudra loan details about business purpose are rather specific for this category. Under this category a loan of up to Rs 10 lakh may be availed of for the running of a shop, or a trading business or even a service business.

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3. Community, social and personal service activities

A boon to female entrepreneurs, this category covers a whole host of businesses that are often (not to be stereotypical) the brainchild of a female entrepreneur. These include:

  • Beauty salons
  • Beauty parlours
  • Boutiques
  • Dry cleaners
  • Tailoring shops

If also includes businesses that are either family-run or one-man-shows such as

  • Cycle Repair Shops
  • Motorcycle repair Shops
  • Photocopiers
  • Medical stores

Additionally, this category under approved purposes for Mudra loans also includes courier businesses and the mushrooming sector of gymnasiums.

4. Equipment finance  to micro units

The prevailing norm – according to msme.gov.in – for a business to be a micro enterprise is that its investment in production plants and machinery should not exceed Rs 25 Lakhs. Under the PMMY scheme micro enterprises may apply for financial support towards purchasing machinery that will be used to run their business. The maximum amount for such loans is Rs 10 Lakhs.

You can also avail a mudra loan for women and enjoy lower interest rates.

5. Food products enterprises

With such a large population there is a correspondingly large potential for food products and food processing businesses. The scope of the sector is incredibly wide and includes

  • Small food stalls
  • Bread and bun making units
  • Jelly and jam making units
  • Pickle makers
  • Papad makers
  • Biscuit makers
  • Day to day caterers
  • Canteen services
  • Ice making units
  • Sweet shops
  • Cold storages
  • Cold chain vehicles
  • Agricultural produce processing centers

Of course, there are small and large companies, even international players who dabble in this space but to be eligible a company must fall in the MSME sector.

6. Textile products 

This category is considerably wider than the name suggests and it would be safe to say that it covers a lot of items that are sewn, embroidered, dyed or made by hand. Like the previous category, the scope is incredibly wide and as such it makes sense to divide it into garment and non garment businesses. In the garment category, it includes

  • Chikan work
  • Zari and zardozi work
  • Traditional embroidery
  • Stitching including hand needlework and hand embroidery
  • Knitting
  • Cotton ginning
  • Handloom
  • Power loom
  • Khadi work
  • Clothing and costume design
  • Traditional dyeing and printing
  • Computerised embroidery

In the non garment category, the businesses approved include those producing

  • Bags
  • Car accessories
  • Furnishing

7. Transport vehicles

Everything that makes the larger section of the country move comes under this category. This includes

  • Rickshaws
  • Two wheelers used for commercial purposes
  • Tractors, trolleys and power tillers
  • Tempos or small goods transport vehicles
  • Any other vehicle used for commercial transportation of passengers or goods, provided the business is an MSME.

PMMY is a laudable initiative by the government but there are several other popular businesses that fall under the MSME category whose business purpose may not be included under the categories that are covered in the above Mudra Loan details.  For example social media marketing agencies are a popular choice for young Indians looking to launch start-ups. For those whose dream businesses do not fall under the categories supported by PMMY and for others who need higher capital amounts to launch or expand their businesses there are a host of other options on the market. For example, on Finserv MARKETS, a business loan can be obtained with minimal documentation and with a quick turnaround time of 24 hours. Moreover loan amounts can be availed of up to Rs. 30 Lakhs and flexible tenures for repayment are also an option.

Read more everything about Pradhan Mantri Mudra Yojana

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