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What is a MUDRA Loan?

One of the most common problems that micro and small-scale enterprises face in India is a lack of funding. Banks are often unwilling to lend money to small businesses while private money lenders tend to charge exorbitantly high-interest rates.

Keeping in mind the hurdles faced by such firms, Prime Minister Narendra Modi introduced the Pradhan Mantri Mudra Yojana (PMMY), which is an abbreviation for the term ‘Micro Units Development and Refinance Agency’ or MUDRA, in April 2015. MUDRA is an institution that was set up by the Indian government to provide loans to enterprises working in the non-corporate and non-agriculture sectors. However, those looking to purchase a commercial vehicle, such as a taxi, passenger car, or an autorickshaw are also eligible for a loan under the PMMY. 

The MUDRA loan is a part of the Pradhan Mantri Mudra Yojana and allows organizations to borrow loans of up to Rs. 10 Lakhs. A MUDRA loan provides working capital and term loans, which can be repaid over a period ranging from three to five years. Funding is made available to enterprises who want to expand or modernize their business, and the MUDRA Yojana interest rate is charged according to the prevailing Pradhan Mantri Mudra Yojana interest rates. Generally, for those who have borrowed up to Rs. 50000, the MUDRA Yojana interest rate is zero, while those who have taken a loan ranging between Rs. 50001 to Rs. 10 Lakhs, the MUDRA Yojana loan interest rate is ten percent.

MUDRA Loan Interest Rates on Different Types of Loans

Under the PMMY scheme, mainly three categories of loans are offered to new and existing business units. The MUDRA Yojana loan interest rate for these categories varies depending upon the amount borrowed and how it will be used. These are known as Shishu, Tarun, and Kishore. Let us look at each one of them in detail.

Shishu Loan - 

Under the MUDRA scheme, Shishu loans offer proprietors to borrow up to Rs. 50000 with a repayment period of five years, to start their business. The MUDRA loan interest rate for this type of loan ranges from 1 percent per annum to 12 percent per annum. 

Tarun Loan -

The Tarun loan is offered to those entrepreneurs and organizations who wish to further expand their business. This loan allows enterprises to borrow between Rs. 5 Lakhs up to Rs. 10 Lakhs. Generally, the MUDRA loan interest rate for such a loan ranges between 11.5 to 20 percent, although the MUDRA loan interest, as well as the tenor, can vary from lender to lender depending upon the borrower’s credit history. 

Kishore Loans -

For those who already have established their business but need capital to sustain it, Kishore loans are the solution. Under this loan type, entrepreneurs can borrow between Rs. 50000 and Rs. 5 Lakhs. The MUDRA Yojana interest rate for such a loan can range between 8.60 to 11.15 percent, though the interest rates can go higher depending upon existing guidelines and the credit ratings of the borrower. 

Other loans offered by the PMMY scheme include credit for micro-enterprises, where loans of up to Rs. 1 Lakh are offered by microfinance institutions, the Mahila Udyami Yojana for women who wish to set up their own businesses, and the refinance scheme for banks, where the PMMY scheme refinances loans to registered banks up to Rs. 10 Lakhs extended by them to micro and small firms in the manufacturing and service sector.  

Features of a MUDRA Loan

  • A MUDRA loan, which is a part of the PMMY specifically caters to businesses engaged in the manufacturing, trading, or service-providing sector. 

  • In order to avail of a MUDRA loan, individuals or enterprises should not have undertaken borrowings from any other schemes of the central or state governments. 

  • Additionally, borrowers must have a strong credit rating, although this is not a mandatory criterion, have not defaulted on a loan in the past, and possess the skills and experience required to start or expand their business. 

  • Applying for a MUDRA loan is quite simple. You are only required to produce the required documents such as address proof and ID proof, find a lender under the MUDRA scheme, and fill out your MUDRA loan form, which can be done at any well-known financial institution in India. 

Advantages of a MUDRA Loan

There are various benefits of undertaking a MUDRA loan over a bank loan or a loan from any other financial institution:

  • No Collateral Required - The loans offered under MUDRA scheme are unsecured, which implies that no collaterals are required

  • MUDRA Yojana loan Interest Rate - Usually, the MUDRA loan interest rate does not exceed 1 percent per month and is dependent upon the base lending rates of the creditor

  • Mudra Offerings - MUDRA loans can be obtained not only from banks, but also from non-banking financial institutions and microfinance institutions. 

In case you don’t qualify for a loan under the MUDRA scheme or want to borrow more than Rs 10 lakhs, you can get a business loan of up to Rs. 30 Lakhs from Finserv MARKETS. The Bajaj Finserv Business Loans available on Finserv MARKETS are customised for your needs and can be easily applied for online, along with no collateral and a loan disbursal in less than three minutes. 

However, in case you are looking to acquire a business loan from other sources, Finserv MARKETS is here to help. Be it for starting a new business or upgrading an existing one, Finserv MARKETS provides all kinds of loans of up to Rs. 30 Lakhs. Unlike many other loan providers, the process to apply for a business loan through Finserv MARKETS is quite simple and hassle-free, as it is completely online and requires minimal documentation.

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