MUDRA or Micro Units Development & Refinance Agency Ltd. is set up by the Government of India to refinance and develop micro units enterprises. It primarily aims to provide funding to the non-corporate small business sector through banks, microfinancing institutions, and NBFCs. MUDRA Yojana is envisaged to combat the shortage of credit facilities faced by small-scale industries or the Non–Corporate Small Business Sector (NCSBS).
Small businesses and entrepreneurs in the MSME sector who are in financial need can enjoy the benefits for industries under the MUDRA Yojana and save themselves from abuse by money lenders. They can avail of loans under the MUDRA scheme at lower interest rates.
MUDRA is an entirely owned subsidiary of Small Industries Development Bank of India(SIDBI). The micro-units must have availed loans from banks and microfinancing institutions for their development and are unable to repay them in time. In such conditions, the MUDRA scheme provides refinancing facilities against the loans to these banks and other financial institutions.
MUDRA Yojana aims to help over 1.5 Crore new entrepreneurs in developing small businesses. Loans offered under MUDRA Yojana are collateral-free and grant up to Rs. 10 Lakhs to eligible companies. The interest rate is not fixed and varies depending on the risk involved and the profile of the customer. Generally, the rate of interest is 1% to 7% added to the base rate.
MUDRA loans can be availed from Commercial Banks, NBFC, MFI, RRBS, Cooperative Banks, etc. You can either directly visit the nearest branch of these lenders or apply for a MUDRA loan online.
The MUDRA scheme is being hailed as the most beneficial scheme for MSMEs. Here are the benefits for industries under MUDRA Yojana for you to check out.
It provides microfinance funding to the country's micro-enterprise sector.
Promotes financial inclusion and gives financial aid and banking services to remote places.
Disburses collateral free loans whose responsibility will be assumed by the government in case of payment default.
It caters all banking services such as savings accounts, loans, and credit cards to deserving beneficiaries.
To facilitate higher funds available for lending, it gives refinance support to banks and NBFCs.
Sanctioned MUDRA loans can be used by business entities for agriculture and allied activities, manufacturing, trading, tractor financing, servicing and repairing machines, purchasing two-wheelers, etc.
Women entrepreneurs can avail loans at a lesser interest rate.
Maximum tenure of MUDRA loan can be extended up to 7 years
MUDRA loan also allows you to take advantage of the overdraft facility balance of up to Rs. 5000.
In addition to financial assistance, MUDRA Yojana educates and empowers MSMEs to develop financial literacy.
Provides other social support services in addition to disbursing credit facilities.
Three different loan schemes with varying loan amounts; Shishu loan up to Rs. 50,000, Kishore loan up to Rs. 5 Lakhs and Tarun loan up to Rs. 10 Lakhs, which can be availed depending on the purpose.
The MUDRA Yojana offers different schemes under different categories. They are:
1. Micro-credit scheme: Micro-finance institutions provide loans up to Rs. 1 Lakh to micro-enterprises, self-help groups, and joint-liability groups.
2. Refinance Scheme for Banks: If the borrowers such as commercial banks, scheduled cooperative banks, and regional rural banks, have provided micro-enterprises credit based on requirements, they get refinance loans up to Rs. 10 Lakhs under this scheme.
3. Mahila Uddyami Yojana: Also known as the Women Enterprise Program, it offers interest rate concessions of up to 0.25% on MUDRA loans to women business owners and entrepreneurs.
4. Equipment Finance Scheme: Businessmen can buy and update their machinery under this scheme. It provides limited equipment financing.
5. Credit Guarantee Fund: This fund was created to provide finance to increase accessibility and ease of lending to micro-units.
6. Mudra Card Overdraft: The overdraft facility acts as a mechanism for cash-credit to access working capital financing. This card allows debit transactions and withdrawals from ATMs. It provides beneficiaries to make the most of overdraft facilities.
At present, the authorised capital of MUDRA Yojana is a whopping amount of Rs. 1000 Crores. Of which Rs. 750 Crores is fully subscribed by SIDBI and utilised for the development of MSMEs including agriculture and allied services, textile industry including handloom and khadi, food production and packing industry, personal services, transportation facilities, etc. To enhance the functioning and effective implementation of the MUDRA Yojana, more capital must be allocated for granting more MUDRA loans.