MUDRA loans or ‘Micro Units Development and Refinance Agency’ loans are offered by many financial institutions like the commercial banks, cooperative banks, small financial banks, non-banking financial companies, micro finance institutions, and Regional Rural Banks and so on. MUDRA loans are offered under Pradhan Mantri MUDRA Yojana (PMMY), a scheme that was launched on 8th April, 2015 in an effort to support micro, small and medium businesses.
The non-corporate, small businesses and the start-up businesses in India suffer from fund shortage. Getting a regular business loan from banks and other financial institutions become difficult for these small businesses due to lack of collateral or the insufficient fund available to the business entities. MUDRA loan will help these small businesses to grow, thus contributing to the overall growth in the Indian economy.
Though broadly similar, but the requirements of MUDRA loan documents slightly vary based on the type of loans, type of business and the category of MUDRA loans.
Documents Required for MUDRA Loan
The general documents required for MUDRA loans along with the application form are:
- Identity Proof – Any of: Driving License, Voter ID Card, PAN card, Passport, Aadhaar card, any Photo ID issued by any government authority or signature identification of proprietor or partner from the present banker
- Proof of Residence – Any of: Recent telephone bill (dated within last 3 months), recent electricity bill (dated within last 3 months), passport, recent tax receipt of the property, voter ID card, Aadhaar card, Recent bank statement that is duly attested by the bank officials
- 2 Recent passport-size photos of the loan applicant
- Identity proof and address proof of the business establishment – Copies of most recent business license or registration certificate of the business. Other documents containing the owner’s name and the business address also could be furnished for this
- Rental agreement if business establishment is in a rented facility/premise
- Clearance certificate from pollution control board, in case applicable
- Small Scale Industry (SSI) registration from Ministry of Micro, Small and Medium Enterprises is required for certain businesses
- For the loan amount above 2 lakh, audited balance sheets of the units for the most recent three years is required along with the returns of income tax or sales tax
- For all loan amounts above 2 lakh, the projected balance sheets for the next 2 years for working capital limits and projected loan period for term loans to be furnished
- For a company, need the memorandum as well as the Articles of Association
- For a partnership business, partnership deed is required
- Guarantors and Promoters need to furnish assets and liabilities statements as well as the latest income tax return
- For the properties offered as ‘Primary’, the copies of Title deeds or lease deeds has to be furnished
- Furnish pertaining documents in case applicant belongs to SC/ ST/ or any other special category and intends to avail loan under those categories
Specific Documents Required for MUDRA Bank Loan:
Apart from the general guideline for MUDRA loan documents, there are a certain specific set of documents for specific purposes. These are:
(1) For applying a vehicle loan under MUDRA loan, the following documentation is to be submitted:
- Duly filled Application Form of Pradhan Mantri Mudra Yojana
- Duly filled application form for vehicle loan
- Borrower’s passport size photos – 2 photos
- Address Proof
- Identity Proof
- Income Proof
- Bank statement for most recent past six months
(2) For applying a business instalment loan, under PMMY scheme, the following MUDRA loan documents are required:
- Duly filled Application Form of Pradhan Mantri Mudra Yojana
- Duly filled application form of Business Instalment loan
- Address Proof
- Photo ID Proof
- Proof for the establishment
- Proof of ownership of office and/ or residence
- Proof of business continuity
- Trade references
- Proof of qualification
- Bank statement for most recent past six months
(3) For applying business loans, for group and for rural business credits, the following documents are needed:
- Duly filled Application Form of Pradhan Mantri Mudra Yojana
- Duly filled application form of Business Instalment loan
- Duly filled application form for Rural Business credit
- Address Proof
- Photo ID Proof
- Age proof
- Proof of ownership of office or residence
- Continuity of business proof
- Bank statement for past 12 months
- Income tax return documents for most recent 2 years
Various loans come under business loan category. For example, raising the working capital, equipment financing for micro units. Vehicle loans for personal and business use vehicles like auto rickshaw, vehicles for small goods transport, taxis etc. Food products sectors like setting up small eateries and sweet shops, cold storage, ice making etc. Agriculture and related business including livestock, poultry. Textile sectors like handloom, power loom and hand-made textile products and so on. Hence, based on the type of business, required documentation needs to be furnished along with the standard set of MUDRA loan documents.
Types of Loans Provided under MUDRA Loan are:
- Car Loan
- Commercial Vehicle Loan
- Loan for two-wheelers
- Loan for the requirements of Working capital
- Overdraft facility for small business and rural businesses
- Loan for business space renovation
- Loan for purchasing machineries and plants
- Loans for Agriculture related Activities
Types of Business Segments who can avail MUDRA Loan
- Self-proprietor business
- Partnership business
- Service sector firms
- Small Industries
- Small manufacturing units
- Machine operators
- Repair shops
- Truck operators
- Food processors
- Fruit and vegetable vendors
- Food service businesses
Categories of MUDRA loan Available
Based on the growth phase and development stage of the business as well as the funding requirement, MUDRA loans are available in three categories as follows.
(1) Shishu Category – Under this category, loan is given to those who are just initiating their business and looking for financing. Maximum loan amount of Rs. 50000 rupees is given under this category. Interest rate being 10% to 12% annually with up to 5 years of repayment period.
(2) Kishor Category – Under this category, loans are offered when the business already started but not established yet. The loan amount offered under this category ranges from Rs. 50000 to Rs. 5 lakh. Rate of interest varies based on the lending institution. The business scheme as well as the credit history of the applicant plays an important role to determine the interest rate. Repayment period decided by the bank.
(3) Tarun Category – This category of MUDRA loan is offered when the business is established and there might be need of fund for expansion and to procure assets, etc. The loan amount is between 5 lakh and 10 lakh. Interest rate and the repayment period is based on the scheme and the credit history of the applicant.
In the financial year of 2018-19, total number of PMMY loans sanctioned till date is: 33217471. The amount sanctioned is: 180035.57 crores. The emphasis of this scheme is towards the starting of business or entrepreneurship by women, tribal communities, Dalits, and all the backward section of the society. The MUDRA loan is directed to these particular segments and will enable faster growth of small business and assist people who are in lower income bracket to achieve financial support and reach the better livelihood, and thus contributing positively towards overall economy of the country.