MUDRA (Micro Unit’s Developments and Refinances Agency) loan scheme was launched under Pradhan Mantri MUDRA Yojana (PMMY) with an aim to provide financial support through loans to non- corporate, non-farm small and micro-enterprises. To avail the MUDRA loan scheme, the interested applicants can approach the nearest branch of any of the Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Cooperative Banks and Micro Finance Institutions (MFIs). Under MUDRA loan scheme only loans are offered to the customers and there is no subsidy.
Types of MUDRA Loans
Based on the current stage of growth or development of an enterprise, the MUDRA loan is provided under three categories:
- Shishu: This loan scheme is best suited for businesses that are at the initial stage of their business or are looking to start one. The maximum amount offered under Shishu loan is Rs. 50,000
- Kishor: For an individual who has already established his/her business, but needs additional funding to enhance his/her business can opt for Kishor loan scheme. It offers minimum loan amount of Rs. 50,000 and maximum of Rs. 5 lakh
- Tarun: Tarun loan scheme covers the business expenses ranging from a minimum of Rs. 5 lakh to a maximum of Rs. 10 lakh. However, this loan too has a certain norms and requirements to be fulfilled before getting the loan sanctioned
Must Read: How to apply for Mudra loan online
Rate of Interest and Repayment period
The rate of interest for Shishu, Kishor and Tarun loan schemes is directly dependent upon the bank, its various schemes and services and lastly, the applicant’s credit history. The maximum repayment tenure is 5 years but it also depends upon the disposition of the bank.
This loan is available to applicants who comply with the specific guidelines under this loan:
- MUDRA loans will be offered to small business owners, such as fruits and vegetables vendors, skilled workers (artisans), service sectors, small enterprises and shopkeepers
- Corporate entities are not eligible for the MUDRA loan
- MUDRA loans will also not be given to companies involved with non-farm income generating activities
Also Read: Documents Required for Mudra Loan
Activities covered under MUDRA Scheme:
The primary objective of a MUDRA loan is to extend credit to Small and Medium Enterprises (SMEs) at all the stages of growth. To ensure this, the products offered under the MUDRA Yojana are designed in a way to suit and meet the requirements of various businesses. MUDRA loans are extended to cover the following activities:
- Transport vehicle: MUDRA Yojana extends credit under which purchase of transport vehicles for transport of goods and for personal use that will generate income. Vehicles such as auto-rickshaws, small trucks, three wheelers, passenger cars, taxis, etc. can be purchased
- Community, social and personal service activities: Businesses under the service industry such as salon, beauty parlour, gym, tailoring shop, clothing store, cycle, car, motorcycle garage, stationery store, phone booth, medicine store, local courier facilities, and so on can be started
- Food and processing units: Small and micro enterprises engaged in papad making, jelly and jam making, achaar making, ice making, buns and bread making, cold storages, small storages for preserving local agricultural produce, small canteens and door to door catering services and so on can be undertaken
- Textile sector: MUDRA Yojana provides support to enterprises engaged in traditional zari, chikan, zardozi and handmade embroidery as well as dyeing, printing, designing of apparels. Enterprises engaged in handloom, power loom, computerized embroidery etc. are also supported
Purpose of the MUDRA loans
- By financially including the lesser developed sections of the society, MUDRA Yojana is on the path of achieving not only the goal of providing credit to the small and micro-entrepreneurs but also in uplifting the other sections of the society
- The mission of MUDRA Yojana is to create an inclusive, sustainable based entrepreneurial culture that will boost employment and create opportunities in the market
- MUDRA Yojana also focuses on empowering women engaged in small and micro enterprises
- The micro financial institutions under MUDRA Yojana extend credit to micro and small women entrepreneurs with a lower rate of interest to encourage taking up of self-employment
- It also aims to promote business literacy that will help the micro entrepreneurs in running and managing their business more efficiently
The Pradhan Mantri MUDRA Yojana provides this assistance to Small Scale Industries (SSIs) and entrepreneurs by offering loans at low rate of interests and also provide MUDRA cards with a pre-decided credit limit. Until now, there is no statement made by the Prime Minister or the Ministry State of Finance on a subsidy being provided on MUDRA loans.
There have been an immense growth in the demand for small business loans in the market and to cater to the diverse financial requirements of these businesses various new business loan schemes have been introduced. Despite all this, a major section of micro-enterprises is still unable to find funding for their businesses. To provide the financial support to such businesses MUDRA loans were introduced. These loans, through money, assist the micro-enterprises in entering the mainstream market.