MUDRA Bank Loan Yojana or Pradhan Mantri MUDRA Yojana is a business loan scheme tailored specifically for small-scale businesses. MUDRA, which stands for Micro Unit Development and Refinance Agency, was launched on 8th April 2015 to provide support to small business owners in the country. The scheme operates across three stages – Shishu, Kishore, and Tarun. In the first stage or Shishu, loans are provided amounting up to Rs. 50,000. In the second stage Kishore, loans are provided up to Rs. 5 lakhs and in the third stage Tarun, loans are provided up to Rs. 10 lakhs. The tenure of each loan cannot last for more than 36 months and the loan has to be paid within the given time.
The MUDRA loan scheme is not just about supporting small business owners but also about creating an efficient credit delivery and recovery system. An additional purpose of this scheme is to encourage banks to use efficient credit recovery methods to create a justified credit recovery system.
To achieve its objectives, the funding support offered by MUDRA is classifiable into four kinds, viz.,
- Micro Credit Scheme for loans up to Rs. 1 lakh. The lending is done through microfinance institutions
- Refinance scheme for commercial banks, regional rural banks and scheduled cooperative banks
- Mahila Uddyami Scheme or Women Enterprise Programme
- Loan portfolio securitisation for lending institutions
MUDRA Loan Interest Rates of Top Banks
Here is a brief overview of current interest rates under MUDRA Loan Yojana offered by various banks. Even though the banks offer different interest rates but these rates are monitored on a regular basis by MUDRA and vary only by a few basis points from each other.
|Bank||Interest Rate||Processing Fee||Loan Amount||Loan Tenure|
|HDFC Bank||12.75-20%||As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years|
|ICICI Bank||As per the credit amount and financial profile||As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years|
|SBI||11% p.a.||NIL for SHISHU||Up to Rs.10 lakh||Up to 5 years|
Punjab National Bank
|8.55% – 10.80%
(As per the credit score and financial profile of the loan applicant)
|As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years|
|Bank of Baroda||9.20% onwards||NIL||Up to Rs.10 lakh||Up to 5 years|
|Bank of India||As prescribed by the bank||As per the guidelines of the bank||
Up to Rs.10 lakh
|Bank of Maharashtra||9.7% – 11.7%||0.50% of the loan amount||Up to Rs.10 lakh||Up to 5 years|
|Syndicate Bank||Up to Rs 1 lakh : 8.75%
Above Rs.1 lakh to Rs10 lakh and up to one year : 9.75% onwards
More than one year : 10% onwards
|As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years|
|Union Bank of India||9.65% – 11.15%||As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years|
|Corporation Bank||11% – 11.9%
|As per the credit amount and financial profile||Up to Rs.10 lakh||Up to 5 years
|Andhra Bank||9.75% – 11.75%||NIL for SHISHU
50% concession on the applicable processing for Kishor and Tarun
|Up to Rs.10 lakh||Up to 5 years
|Allahabad Bank||9.7% – 11.7%||As per the credit amount and financial profile||Up to Rs.5 lakh||Up to 5 years
In addition to setting up detailed guidelines to provide oversight to banks participating in the scheme, RBI has also provided guidelines on MUDRA loan interest rates for banks availing MUDRA refinance. The central bank has put a cap on MUDRA loan interest rates by pegging it at the Base Rate or MCLR for finance provided to micro units by commercial banks who avail MUDRA refinance. The Regional Rural Banks and Scheduled Cooperative Banks have been prescribed to lend at a rate of not more than 3.5% over and above the MUDRA refinance rate.
Stages of MUDRA Loan Scheme
The interest rates of MUDRA loans vary depending on the category of loans. MUDRA categorises these loans into three segments, as mentioned earlier, viz., Shishu, Kishore, and Tarun. The interest rates that banks offer are meant to suit each segment based on their needs and prescribed guidelines.
The three categories are:
|Shishu||Rs. 50,000||This stage caters to the needs of entrepreneurs who are yet to start their businesses or whose enterprises are at an early stage.|
|Kishore||Rs. 5 lakh||This stage helps the businesspersons who have started their business but are in a need of funds to sustain it in the market. This segment is also for those entrepreneurs who need a larger sum of money than what Shishu loan offers for starting their businesses.|
|Tarun||Rs. 10 lakh||This is the highest level of the scheme and an entrepreneur is eligible for a loan of up to Rs. 10 lakhs. These loans are meant for business owners who need to set up a large business or need funds to expand the enterprise.|
MUDRA Shishu Yojana
The loans under this category are small and usually meant for people setting up or expanding micro enterprises. Since the loan is available for up to Rs. 50,000, the risk to the lender in case of any default is quite small. Moreover, as this category of loans is meant for micro businesses, MUDRA helps them get equitable MUDRA loan interest rates. The rate for these loans is the lowest among the three categories.
MUDRA Kishore Yojana
The loans, up to Rs. 5 lakh, provided under this segment are on the higher side and increase the risk profile of banks somewhat. Also, these loans are usually taken by established micro or small enterprises or to set up somewhat larger businesses than what can be set up under a Shishu loan. As such, the MUDRA loan interest rates for this segment are higher.
MUDRA Tarun Yojana
These loans (up to Rs. 10 lakh) are the largest of the MUDRA loans and are meant for businesses that are established or setting up larger small business units. The MUDRA loan interest rates for Tarun scheme are on the higher side in comparison to the other two categories.
Must Read: How to Apply for Mudra Loan Online?
Schemes Offered Under MUDRA Loan Yojana
The MUDRA Loan Yojana has a variety of sub-schemes designed for specific business needs. These schemes include:
- Credit for Micro Enterprises: This is in line with the most basic motive of the scheme. It focuses on maximising the involvement of the population so that there can be more benefits and an increasing number of beneficiaries. The segment of the population which is involved in land transport, food production, textile and community services can take advantage of the scheme and start their own small business unit to become self-dependent.
- Mahila Uddyami Scheme: This sub-scheme has been designed keeping women entrepreneurs in mind. It has an objective to encourage women, groups of women, joint liability groups, and self-help groups of women to setting up micro business entities. Under this scheme, special interest concessions are also offered to enterprising businesswomen.
- Refinance Scheme for Banks: The MUDRA Yojana also refinances loan amounts of up to Rs. 10 lakhs extended by the banks to borrowers. However, refinancing can only be provided for manufacturing and service sector micro and small enterprises. As per RBI guidelines for the scheme, scheduled commercial banks have to lend to the ultimate borrowers at their base rate to avail MUDRA refinance. Also, regional, rural and cooperative banks need to cap their MUDRA loan interest rates margins at 3.5% above their loan refinance rate.
- Micro Credit Scheme: The micro-credit scheme focuses on Micro Finance Institutions (MFIs) and provides them the financial support they need. The scheme makes funds available to individuals, group of individuals, and micro business entities.
- MUDRA Card: This extraordinary product helps create easy credit accessibility and provides exceptional flexibility to the cardholder. It can be used as a credit card for the assigned overdraft limit and also as a debit card for ATM withdrawals.
- Credit Guarantee Fund: The credit guarantee fund has been created to reduce the risk for lending institutions. It can provide loans worth more than Rs. 1 lakh crores to manage the risk of lending institutions.
- Equipment Finance Scheme: This scheme is designed to help microenterprises in their expansions. With the help of this scheme, qualified equipment can be purchased through finance. It can greatly help organisations in increasing their production and expand their horizons of profitability and sustainability as well.
Frequently Asked Questions (FAQs)
Some of the frequently asked questions regarding MUDRA Loan Scheme are explained here.
Q. What are the roles and responsibilities of MUDRA?
A. MUDRA is responsible for refinancing all the last mile financiers including non-banking companies, societies, trusts, section-8 companies, co-operative societies, small banks, scheduled commercial banks, and regional rural banks that lend to small and micro entities engaged in manufacturing, trading, and service activities. MUDRA also works with state and regional level financial intermediaries that offer finance to last mile financers.
Q. Who are the target clients of MUDRA? Who is eligible for a MUDRA Loan?
A. MUDRA focuses on NCSB or non-corporate small businesses segment that includes small manufacturing units, service producing units, shopkeepers, fruit/vegetable vendors, food service units, truck operators, repair shops, machine operators, small industries, artisans, food processors and many more in both rural and urban areas. However, the eligibility criteria for MUDRA loan is not that complicated as any individual who has a bank account and willing to start a small or micro-business is eligible for such a loan.
Q. Can a college graduate apply for a MUDRA loan?
A. Yes, any college graduate who wishes to set up a business and requires finance can apply for a MUDRA loan.
Q. How is the implementation of MUDRA Yojna monitored?
A. At the state level, monitoring is done by the SLBC forum and at the national level, the scheme is monitored by MUDRA or Department of Financial Services. All the banks and lending institutions feed their details about their work under the scheme. This data is consolidated by the system and reports are generated for analysis and further action.