Mudra Loan - Pradhan Mantri Mudra Yojana Loan

What is Mudra Loan? 

India is home to many micro, small, and medium enterprises (MSME). While these organisations have a sizable workforce, it has historically been a challenge for them to acquire funding. To aid these growing enterprises, the Government of India launched the Pradhan Mantri MUDRA Yojana (PMMY) on April 8, 2015. MUDRA, an acronym for Micro Units Development and Refinance Agency, aims to fund the growth activity in the non-farming and non-corporate sectors. The scheme enables eligible entrepreneurs/enterprises to borrow up to ₹10 Lakhs.

Achievements Under PMMY Since Inception

*Provisional Data

The Mudra loan has several defining features that distinguish it from other financial products offered by the government. Some of the features of Pradhan Mantri MUDRA Yojana (PMMY) are as follows:

• It is targeted at businesses engaged in trading, manufacturing, or providing services.

• The loan amount can be used to fulfill working capital requirements.

• The funds can be employed for a diverse group of purposes such as the purchase of machinery, growth expansion, business restructuring, and meeting extended working capital requirements, among other things.

• Both new and existing enterprises can apply for a Mudra scheme.

• The loan repayment tenure ranges between 3 to 5 years.

• One can apply for a Mudra Loan through the official www.mudra.org.in portal.

Products Offered Under PMMY

The PMMY scheme offers three products namely Shishu, Kishore, and Tarun to eligible entities. The details of these three products can be found below.

1.  Shishu 

Shishu loans provided under the Mudra scheme allow entrepreneurs on the threshold of starting a business to borrow up to ₹50,000. The following details need to be furnished to avail the Mudra Shishu loan.

• Quotation of the machinery being purchased and other items that need to be purchased.

• Details of the plant and machinery that has been purchased.

• Details of the supplier who is providing the plant and the machinery.

2. Kishore 

Kishore loans stay within the range of ₹50,001 and ₹5,00,000. They are ideal for business people who require additional monetary resources for expanding their trade. Here is the checklist of the documents needed:

• The balance sheet of the business goes back two financial years

• Income Tax and Sales Tax returns

• Bank account statements going back 6 months

• Estimated balance sheet for the next 1 year or the duration of the loan sought

• Memorandum of Association (MOA) and Articles of Association (AOA), if applicable

• A report exploring the technical and economic sustainability of the applicant’s business

3. Tarun

Tarun loans under the PMMY scheme range from ₹5,00,001 to ₹10,00,000. Business owners who wish to avail of a Tarun loan need to furnish these documents listed below,

• Proof of address

• Proof of identity

• Certificate of SC, ST, OBC, if applicable

Purpose of Mudra Loan

The Micro, Small, and Medium Enterprises (MSMEs) industry has contributed significantly to the ever-growing Indian economy. In addition to that, MSMEs also play a crucial role in generating jobs all over the nation. Keeping all these factors in mind, the Indian government established the Micro Units Development and Refinance Agency (MUDRA) to offer financial support to small businesses and start-ups in India.

Public and private banks and NBFCs registered under this scheme approve and disburse Mudra loans. The primary benefit of such a loan is that it is provided without any collateral. The capital obtained from the Mudra finance scheme can be utilised to grow and even expand the businesses.

Eligibility for Mudra Loan

Citizens within the non-corporate/non-farming micro, small, and medium enterprises (MSMEs) that reside in rural and urban India can apply for the Mudra scheme. The loan can be availed through participating institutions like banks, NBFCs (non-banking financial companies), and MFIs (micro-finance institutions). The eligibility for MUDRA Loan is listed below.

• Small manufacturer

• Artisan

• Shopkeeper

• Trader

• Startup businessman

• Fruit and vegetable dealer

• Individuals occupied in agriculture.

Mudra Loan Interest Rates and Charges 

Interest Rates: The Pradhan Mantri Mudra Yojana allows eligible applicants to borrow funds up to ₹10 Lakhs. The interest rate on the Mudra loan varies depending upon the applicant’s profile and business requirements as well as the discretion of the lending institution.

Processing Charges: No processing fee is applicable on a Mudra loan for amounts up to ₹50,000. For amounts ranging between ₹50,001 and ₹10 Lakhs, an interest rate of 10% and a processing fee of 0.50% are applicable in addition to GST.

Documents Required to Apply for MUDRA Loan 

Before you go ahead and apply for a Mudra loan, you must ensure that a handful of documents are at your disposal. To apply for Mudra Yojana, you will need:

• Two photographs

• Proof of identity: Aadhaar card, PAN card, Voter’s ID, passport, bank passbook, driving license

• Proof of address: Aadhaar card, Residence Certificate, Electricity Bill, Water Bill, government-issued documents

• Copy of your bank statement for the past 3 months

• Copy of your caste certificate. This document will be crucial if you are from a reserved caste

• Business Address Certificate that will count as your business identity and address proof. 

• Copy of Inventory Purchase Bill if you are taking a PM Mudra loan for the purpose of expanding your business

Benefits of Taking Mudra Loan 

The Mudra loan scheme offers several benefits that should help your business objectives. Some of the most notable benefits are as follows:

• No Collateral: It can be difficult for a new/upcoming business to provide collateral, and this is where financing through a Mudra loan can come to the rescue.

• Nominal Interest Rates: The interest rate on a Mudra loan does not exceed more than 1% per month. The interest rate is heavily driven by individual banks and dependent upon the type of borrower.

• Easy Withdrawal: Once the loan is approved, the loan amount can be withdrawn using the Mudra Loan card at any given point in time, which negates the need for a beneficiary to visit the bank. The benefits of the Mudra loan are notable; hence, you must carefully go through the eligibility criteria before applying. Staying well-informed about the offerings will help you avoid any inconveniences you may face during the application process.

What is a MUDRA Card

The Mudra card is an innovative product that makes credit easily accessible to small businesses while providing flexibility to the card owner at the same time. It can be used as a credit card with an overdraft (loan) limit and can also be used as a debit card for making withdrawals at an ATM. As such, the borrower can use a Mudra card to make multiple withdrawals and credits. Such cards also help with the digitalisation of Mudra transactions, which would be instrumental in creating a credit history for the borrower.

With the PMMY scheme, you can borrow up to ₹10 Lakhs. If your business needs more capital or funds, or if you don’t qualify to borrow under the PMMY scheme, you could always avail of a business loan at %$$BrandName$$%. At %$$BrandName$$%, you can apply for business loans as high as ₹75 Lakhs without the need of any collateral. The application process is online, making the procedure quite simple and easy, from approval to disbursal.

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