MUDRA stands for Micro Unit’s Developments and Refinances Agency. Pradhan Mantri MUDRA Yojana (PMMY) is a government scheme that was launched on April 8, 2015 by our Prime Minister, Mr. Narendra Modi. The scheme was launched with an aim to provide financial support through loans to non- corporate, non- farm small and micro-enterprises. To avail the loan scheme, the interested individuals can approach the nearest branch of any of the commercial banks, RRBs, small finance banks, cooperative banks, MFIs and NBFCs. There is no MUDRA loan subsidy given under PMMY. However, if the loan proposal is linked to some government scheme in which the government is offering some capital subsidy, then it will also be eligible under PMMY.
There has been an immense growth in the demand for business loans in the market and to cater to the diverse financial requirements of these businesses various new business loan schemes have emerged. Despite all this, a major section of micro-enterprises is still unable to find funding for their businesses. Even if they found a perfect loan scheme to support their business, its interest rates were extremely high. 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.
Types of loans
Based on the current stage of growth or development of an enterprise, the MUDRA loan provides three different types of loans:
- 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 business, but needs a monetary push to enhance his business, can choose a Kishor loan. It offers a minimum of Rs. 50,000 and a maximum amount of Rs. 5 lakhs.
- Tarun: Tarun loan covers the business expenses ranging from a minimum of Rs. 5 lakhs to a maximum of Rs. 10 lakhs. However, this loan too has a certain norms and requirements and will be given to those who fulfill it.
Must Read: How to apply for Mudra loan online
Rate of interest and Repayment period
- The interest rates for a Shishu loan is 1% per month and 12% annually. The repayment period is of 5 years.
- The rate of interest for Kishor and Tarun loans are directly dependent upon the bank, its various schemes and services and lastly, the applicant’s credit history. The repayment tenure also depends upon the disposition of the bank.
This loan is available to Indian applicants who comply with the specific guidelines under this loan:
- The loans will be given to small business owners such as fruit vendors, vegetables vendors, skilled workers (artisans), service sectors, small enterprises and shopkeepers.
- Corporate entities are not eligible for the MUDRA loan.
- The loan 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 Loan:
The primary objective of a MUDRA loan is to extend credit to small and micro enterprises 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 saloon, beauty parlor, gym, tailoring shop, clothing store, cycle, car, motorcycle garage, Xerox store, phone booths, medicine store, local courier facilities, and so on can be started.
- Food and processing unit: 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 provibudes this assistance to small scale industries 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. But, if there is a government subsidy on the capital amount under any scheme, then the subsidy can be availed by merging the MUDRA yojana with the existing one.
In conclusion, with the MUDRA yojana, the emphasis is on the development of the small and micro enterprises that for long has been avoided. MUDRA yojana focuses on the overall development and promotion of healthy competition to the medium and big enterprises. It helps the economy of the country grow too.