Mudra Loan in Lockdown

Mudra Loan Emerging as a Saviour During Lockdown

Check how mudra loan have helped different businesses during lockdown

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PMMY or Pradhan Mantri MUDRA Yojana is a scheme launched by the Central Government of India to provide collateral-free loans of up to Rs. 10 Lakhs to non-corporate, non-farm small/micro-enterprises. The PMMY aims to combat the shortage of credit facilities faced by the MSME sector.


Small businesses and entrepreneurs in the MSME sector who are in financial need can save themselves from abuse by money lenders. They can avail of loans under the MUDRA scheme at lower interest rates. MUDRA loans are also provided to banks and microfinancing institutions to refinance the loans they have provided to small businesses to promote the development of micro-units.


The interest rate of these collateral-free MUDRA loans is not fixed and varies depending on the risk involved and the profile of the customer. Generally, the rate of interest is 1%-7% added to the base rate. Women entrepreneurs can avail of loans at a lesser interest rate. Three different MUDRA loan schemes with varying loan amounts; Sishu loan (loan amount of up to Rs. 50,000), Kishore loan (loan amount of up to Rs. 5 Lakhs), and Tarun loan (loan amount of up to Rs. 10 Lakhs), which can be availed depending on the purpose.


The MUDRA loans under PMMY 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.

How MUDRA Loans Helped MSME Sector During Lockdown?

MUDRA Loans in lockdown remained comparatively unaffected and surpassed 2019’s fiscal figure. Compared to ₹3,21,723 Crores registered during the financial year 2019, ₹3,23, 574 Crores worth loans were sanctioned in 2020. Out of the sanctioned amount, ₹3.16 lakh Crores was disbursed in 2020, as against the ₹3.11 lakh Crores disbursed in the previous financial year.


Majority of Mudra loans are under the Shishu category, with a significant number of beneficiaries being women. On June 24, 2020, the Government sanctioned a 2% interest subsidy for all the Shishu loan account holders under PMMY to help MSMEs overcome the difficulties created by the pandemic and lockdown.


The subsidy for MUDRA Loans in lockdown was formulated as a specific response that aims to alleviate financial stress for the ailing borrowers by reducing their cost of credit. These loans and the scheme have supported small businesses to continue functioning during lockdown. Along with that, it left a positive impact on the Indian economy and supported its revival. This resulted in generating more employment opportunities.


MUDRA loans, during lockdown and after lifting it, have helped many set up small businesses and trades. This includes sectors like agriculture and allied services, textile industry including handloom and khadi, food production and packing industry, personal services, transportation facilities, etc. These loans helped revive the once disrupted businesses too.


Let us take an example. Even though all businesses were closed during the lockdown, many new food and delivery services opened up at that time. Food and medicines are essentials and can’t be kept on hold. Many people who lost their jobs started small food stalls, restaurants and online food delivery services during and post lockdown period. MUDRA loans played a significant part in implementing their plans.


The small scale industries which fall under the unorganized sector employ around 12 crore people in India. But, they are the ones that face the most credit shortage. MUDRA loans under PMMY have several provisions that will fully meet customer needs and promote financial inclusion by providing financial aid and banking services to remote places. Such a scheme of immense potential should have more capital to dispense to become more effective.