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The Union Cabinet recently gave the nod for an interest subsidy of 2 per cent for loans availed under the Mudra loan scheme. This has come as a huge relief for many who have opted for loans as part of the Shishu Yojana, which is a category of Mudra loans, under the Pradhan Mantri Mudra Yojana or PMMY.
According to media reports, the Shishu Yojana scheme has benefited a cumulative number of over nine crore small borrowers thus far. The announcement of subsidy on interest will cost the government Rs. 1,540 crore and will be applicable from June 1 this year to May 31, 2021. This reduction of interest rate was earlier announced under the Rs. 20 lakh crore Atma Nirbhar Bharat relief package by the Finance Minister. The announcement and subsequent nod by the Centre is estimated to benefit three crore borrowers.
The interest rate subvention was announced in the wake of a nationwide lockdown that was imposed as part of the government’s efforts to curb the spread of the pandemic. Many small businesses were suddenly affected, and the announcement has come as a relief. This move is also said to act as an incentive to borrowers to repay loans promptly and regularly.
Apart from the announcement of interest rate subvention, the Finance Minister had also announced a special Rs. 20,000 crore package as subordinate debt for MSMEs that were strained or declared NPAs.
Mudra is an acronym for Micro Units Development & Refinancy Agency. The Pradhan Mantri MUDRA Yojana was launched in 2015. As part of the PMMY, loans can be availed under three schemes. The Tarun Yojana allows borrowers to opt for loans up to Rs. 10 Lakhs. The Kishore Yojana allows borrowers to avail loans in the range of Rs. 50,000 to Rs. 5 Lakhs, while the Shishu Yojana lets borrowers opt for loans up to Rs. 50,000. All these loans are zero-collateral loans and are given by small finance institutions, non banking financial companies (NBFCs), regional rural banks (RRBs) and commercial banks. The repayment tenure for a Mudra loan is in the three-five year range.
Mudra loans are affordable because of their relative low rate of interest. The RBI directives ensure that commercial banks or FIs providing Mudra loans do so at MCLR or base interest rate. Similarly, for Regional Rural Banks orRRBs that extend Mudra loans, there is a 3.5 per cent cap over the refinance rate of Mudra. For NBFCs, this cap is at 6 per cent over and above Mudra refinancing (**). The recent announcement ensures that loans are cheaper for small borrowers who have opted for loans up to Rs. 50,000. According to news reports, Shishu loans make up for nearly 45 per cent of all loans availed under the Mudra loan scheme. Reports also point out that loans to the tune of Rs. 3.3 lakh crore have been sanctioned under the PMMY scheme.
Any small businessperson who needs working capital can opt for a Mudra loan. The loan could be used for buying new equipment or machinery for small businesses, renovation or even boosting production of a certain product. As part of the Mudra loan scheme, any business that is into trading, manufacturing, allied agricultural activities (non farming) or providing some services can opt for this loan. Financing is also provided for commercial vehicles, tillers and tractors used for agricultural activities.
If you are a small business owner or a micro unit, you could opt for a loan under PMMY. You could even look up Finserv MARKETS and opt for a business loan of up to Rs. 30 Lakhs at an attractive interest rate and repayment tenures that are flexible. What’s more, these business loans are also zero collateral loans.
Know more about Pradhan Mantri Mudra Yojana application form.
If you are a self proprietor, service sector firm, owner of trucks or food services, or a micromanufacturing firm, you can avail the Mudra loan online. You would need to provide documents that show proof of identity and residential address, business address and identity, apart from details of machinery or other items for which you are raising a loan. You would also be required to furnish our licenses or certificates of your trade, and for which you are seeking a loan. If you are a woman and wish to opt for a loan, you could look up loans tailor made for you under the Mudra loan scheme.
If you need higher loans than the Mudra loan scheme offers, you can apply for a business loan for your MSME, available on Finserv MARKETS. The zero-collateral loans can be availed online. All you need to do is provide a few basic documents, and the loan is approved in quick time.
The micro, small and medium enterprises (MSMEs) sector in India is an important contributor to India’s GDP, making up 29 per cent. According to a 2019 report (*) from the Ministry for MSMEs, micro units or enterprises make up for a major chunk of the MSME sector. Accordingly, there are 6.3 crore micro enterprises out of the overall 6.33 crore MSMEs.
The Mudra loan scheme, also known as PMMY, comes as a shot in the arm for many micro enterprises interested in growing their businesses or raising fresh capital for equipment. Incentives like the interest rate subvention could make the loans get even more affordable, and help millions of beneficiaries.