Micro-Units Development and Refinance Agency (MUDRA) Scheme is an initiative by Government of India under Pradhan Mantri Mudra Yojana (PMMY) to promote small businesses, micro units and MSMEs by providing funding support with the help of various banks for their business expansion and growth. The maximum loan amount offered under MUDRA scheme is up to Rs. 10 lakh with repayment tenure up to 5 years. Further, let’s discuss some of the key factors of Mudra Loan Eligibility.
Mudra Loan Eligibility Criteria
- Applicants with minimum age of 18 years and maximum 65 years
- Applicants with good financial and repayment history
- Individuals, Startups, Small business owners, micro units, MSMEs
- Traders, Artisans, Manufacturers, Startups, Retailers, etc. are also eligible
- Applicants with no loan defaults or irregular repayment history
- Indian Citizens with no criminal background
MUDRA Loan Scheme has been one of the crucial steps taken by the Government to ensure that self-employed professionals, small business owners, micro units and MSMEs do not have to rely only on personal networks and private lenders. These small business owners, micro units and MSMEs can avail the Mudra loan from eligible Government recognized financial institutions at comparatively lower interest rates. Another benefit is that borrowers are not required to submit any collateral / security or any third party guarantee to apply for a Mudra loan.
Must Read: MUDRA Loan Interest Rates of Popular Banks
Types of Mudra Loans
Mudra loans are divided into three categories, named as Shishu, Kishor and Tarun to cater to different funding requirements of micro business units and MSMEs at different stages of business development. The Mudra loan amount offered under each loan scheme is mentioned below:
Maximum Loan Amount: Upto Rs 10 Lakh
Under SHISHU Category: Loans upto Rs. 50,000
Under KISHOR Category: Loans from Rs. 50,001 to Rs. 500,000
Under TARUN Category: Loans from Rs. 500,001 to Rs. 10,00,000
- Shishu Loan: The Shishu loan is the child category of the Mudra loan and is perfectly suited for small start-ups. A micro business owner can apply for a loan of amount up to Rs. 50,000. The Shishu loan can help a business owners get a small capital to get started in the MSME sector
- Kishor Loan: The Kishor loan in the Mudra loan category is best suited for small business owners who have already started a business and need capital to establish it as a larger enterprise. The business owners can apply for a loan amount starting from Rs. 50,000 up to Rs. 5 lakh under this category
- Tarun Loan: The Tarun loan is targeted towards small businesses that have been established for some time and need capital for expansion, as well as micro units that need funds for the purpose of set up. The business owners can apply for a loan of Rs. 5 lakh to Rs. 10 lakh.
The loan amount is fixed for each category of Mudra loans, however, there can be a slight variation in the interest rates of different financial institutions.
Also Read: Documents Required for Mudra Loan
Frequently Asked Questions
Q. Who is eligible for Mudra Loan?
A. Mudra Loan can be availed by applicants who fulfil the eligibility criteria as mentioned below:
- Minimum age of 18 years and maximum up to 65 years
- Indian Citizen with no criminal record
- Should not have defaulted in any loans or credit cards in past, if any
- No minimum loan amount criteria and maximum loan amount up to Rs. 10 lakh
- No collateral or security required
Q. How do I apply for a Mudra Loan?
A. Mudra loan has a simple application procedure even though the exact procedure varies from one bank to another. Since all the banks and financial institutions cannot offer Mudra loans, you must first check if the nearest bank is eligible to offer Mudra loans. Once you find the right bank, you must inquire about their application procedure and Mudra loan eligibility criteria before you fill the Mudra loan application form.
Q. Do I need to have an account in the same bank to get a Mudra loan?
A. No, it is not mandatory to apply for a Mudra loan from a bank where you hold an account. However, having a bank account in the same bank might improve your chances of getting a Mudra loan approval.
Q. I want to start a business, which Mudra loan should I apply for?
A. The Shishu loan is the best option for start-ups. All you need to do is present your business idea along with the application form and relevant documents to meet the Mudra loan eligibility requirements and apply for the loan.
Q. What are the documents that I need to apply for a Mudra loan?
A. You need to go to the bank of your choice that offers mudra loan to get the application form. Here are the documents that you need to provide if you apply for a mudra loan and want to meet all Mudra loan eligibility prerequisites.
- Business Plan
- Duly filled application form
- 2 recent passport size photographs
- Proof of Identity of the applicant
- Proof of Residence of the applicant
- Proof of belonging to a special category such as SC, ST, OBC, Minority, etc.
- Proof of Identity, Address, Licences of the Enterprise (if any)
- Quotation of items to be purchased for business use (if any)
- Registration and Licenses along with valid Certificates
Q. What is the contribution of recent scheme named as ‘Atmanirbhar Bharat Abhiyan’by Government of India?
A. As per ‘Atmanirbhar Bharat Abhiyan’ or ‘Self-reliant India Scheme’, Government of India introduced various benefits under MUDRA Shishu Category:
- Relief of Rs. 1500 crore to MUDRA Shishu loan borrowers
- Rs. 1500 crore Interest subsidy for MUDRA Shishu Loan category
- Government of India shall provide Interest discount of 2% for fast recipients for a period of 12 months