When we talk about India’s industrial growth, the contribution of small and medium enterprises has been phenomenal. While contributing to almost 40% of the country’s GDP, the MSME sector is instrumental in creating multifarious sources of income and employment. But when it comes to financial standing, things are a little complicated for MSMEs. While most big companies and industries are able to manage secured credit, things haven’t been very easy for the small scale ones. Shortage of credit has been a major block for most budding entrepreneurs. To help combat this financial crunch, the Micro Units Development & Refinance Agency Ltd scheme was launched by the Government of India.
Better known as the MSME Mudra loan, this scheme was announced by the then Finance Minister Shri Arun Jaitley during the annual Union Budget for the financial year 2015-16. The scheme was then finally introduced on April 8, 2015, by Prime Minister Shri Narendra Modi.
The Pradhan Mantri MSME Mudra loan encompasses three financing loans:
Tarun - With the Tarun Mudra loan, you can borrow a higher loan amount than you could with other options. You can get up to Rs. 5 Lakhs to 10 Lakhs. In addition, you can choose from 3 to 5 years as the loan term. The Tarun loan option is available for emerging small-scale businesses and startups who need a fund of up to Rs. 10 Lakhs.
Kishore - The Kishore loan option is available to businesses that already have established operations and want to expand further but cannot do so due to a lack of funds. The Mudra loan scheme for MSME provides a loan of up to Rs. 5 Lakhs under the Kishore Mudra Loan.
Shishu - Shishu loan is an excellent option for small capital requirements. Small businesses that require some financial aid up to Rs. 50,000 can apply for this loan. For the loan application to be approved, they must provide their business and supplier details.
The Pradhan Mantri Mudra Scheme is an excellent initiative by the Government of India to provide financial aid for small and micro-businesses. The loan options available under the scheme are pretty reasonable. The benefits of Mudra loans MSME are as follows :
Low and affordable interest rates vary from 10 - 12 per cent per annum
The loan is available to small businesses across India, regardless of whether they are in the city or the rural areas
Women owning a small or micro-enterprise can also apply
There is no collateral required, so there is no risk for the applicant
Select from flexible terms plans; you can also shorten the loan term to reduce the monthly premiums
Loans for emerging startups can help entrepreneurs secure the funding they need
You will also receive a Mudra debit card, so you can manage your finances without having to go to the bank
As the scheme comes under the Pradhan Mantri Jan Dhan Yojana, you can get an overdraft of Rs. 5,000
The government is responsible for paying the loan in the event of default
Business owners can set up, flourish, and grow their businesses to new heights with these loan facilities
Here is the list of documents that you have to submit when applying for the Mudra Loan for MSMEs
A self-attested copy of the application form
Identity proof documents
An attestation from a legit financial institute providing information about the applicants, such as their past economic history and the proposal
Two recent photographs of the loan seeker
A valid Trade Licence or certificate
Details of the business, machinery used, and suppliers
Business Documents stating ownership and business address
Applying for the loan scheme has been purposely simplified so that aspiring applicants can easily receive the loan benefits.
Step 1: Identify the loan category (Shishu, Kishore, Tarun) that you fall into:
Step 2: Visit https://www.mudra.org.in/ and download the Application Form. Fill it out and submit it with your preferred bank/ financial institute with your personal and KYC details and the required documents.
Step 3: Once you complete the formalities, the bank will verify the paperwork. The loan amount will then be transferred into your bank account.
In case you want to apply offline, you can physically visit your preferred bank. Fill in the mudra loan application form and attach the needed documents. The bank will then get in touch with you to go ahead with the proceedings.
Budding enterprises and entrepreneurs often find it difficult to arrange funds for their dream startups and businesses. Mudra loans have empowered MSMEs not just with financial support but also with financial literacy. With loan options from Rs. 50,000 up to Rs. 10 Lakhs, Mudra loans aim to offer financial aid to even the most remote places. Hailed as a great scheme for micro, small and medium enterprises, the response to this scheme has been remarkable.