MUDRA is a wholly-owned subsidiary of Small Industries Development Bank of India (SIDBI) that is responsible for developing and refinancing all SME units by helping them with the necessary finance and related support.
What is a Mudra Loan?
Micro-Units Development and Refinance Agency (MUDRA) loan is one of the key measures that the Government of India has initiated to promote Micro, Small and Medium Enterprises (MSMEs) nationwide. Mudra Loan Scheme, under Pradhan Mantri Mudra Yojana (PMMY) is an initiative by Government of India that offers loan schmes under three main categorises named as Shishu, Kishor, and Tarun. The loan amount offered under this scheme starts from Rs. 50,000 and exceeds maximum up to Rs. 10 lakh to start-up enterprises, small business units and MSMEs. The credit products offered by MUDRA, popularly known as Mudra loans, help micro units or small businesses to grow and expand their businesses or manage operational needs through easy finance schemes.
Mudra Loan Eligibility
Mudra loan can be availed by the following entities:
- Applicants with minimum age of 18 years and maximum 65 years
- Business owners
- Small Industrialists and Manufacturers
- Individuals involved with Agricultural activities
- Startup entrepreneurs
Further mentioned are the lending institutions that are eligible to provide Mudra Loan:
- Public Sector Banks
- Private Sector Banks
- Regional Rural Banks (RRBs)
- Small Finance Banks (SFBs)
- Micro Finance Institutions (MFIs)
Mudra Loan Interest Rate
The interest rate offered under Mudra loan depends on applicant’s profile and business requirements of the enterprise. However, it varies from bank to bank, as they follow their defined guidelines to finanlize on the interest rate to be offered to various applicants.
Types of Mudra Loans
Mudra loans have been classified into three different categories based on the funding requirements and the amount of loan for which business owners are eligible. The three main categories of Mudra loans are briefly discussed here:
- Shishu Category: This is the first category of the Mudra loan that is suited for micro units or small business owners. The owners can apply for a loan up to Rs. 50,000 under this loan scheme. This category of loans is targeted at small start-ups where the owners need small capital to get started. Borrowers must present their business idea when they are applying for this loan to get approval on their loan application
- Kishor Category: This category is targeted at small businesses that have already started their business and want to establish it as a viable enterprise. A loan cover of Rs. 50,000 to Rs. 5 lakh is offered under this scheme. Many businesses can use this to strengthen their foundation. The borrower must fill the application form and present the relevant documents to showcase the current position of their enterprise
- Tarun Category: All small businesses that have been set up and established but need capital for expansion can apply under the Tarun category. The business owners are eligible for a loan of up to Rs. 10 lakh. This type of loan offers the maximum loan amount that a sole proprietor or a micro enterprise can apply
Applying for a Mudra loan does not require collateral security or third-party guarantee. The application criteria for this loan vary from one bank to another. Applicant needs to check with the desired bank about the interest rates they offer, in addition to clarify any query on the application form to apply.
Not all banks and financial institutions offer Mudra loans to their customers. There is an eligibility criteria set by the government that the banks have to meet to offer the Pradhan Mantri Mudra Yojana (PMMY). Nonetheless, there are several commercial public and private-sector banks, regional rural banks, scheduled urban co-operative banks, state cooperative banks in addition to micro financial institutions that are eligible to offer these loans. Applicant can ask also ask from his/her present bank whether they offer Mudra loans or not.
Purpose of Mudra Scheme
To ensure a balance in the employment creation, Mudra Loan is directed to vendors, shopkeepers, provide working capital loan through the Mudra Cards, provide equipment financing for micro units along with transport vehicle loans.
Mudra for Business vendors and Shopkeepers
This loan scheme can be of a big help for vendors and shopkeepers by availing loan amount up to Rs.50,000 up to Rs.10 lakh for different business and entrepreneurial activities, and trading and non-farming activities.
Food Production Sector
Entrepreneurs dealing in Tiffin services, food stalls, cold storage, small food practices can avail this Loan scheme and scale up their business with the help of Mudra funding.
Textile industry can avail great monetary benefits like the handloom sector, fashion designing, apparel designing, khadi work or any traditional or modern textile work with the help of this loan scheme.
Some agricultural activities like poultry farming, dairy farming, fishing, livestock rearing, improvement of long and small canals and wells come under the loan scheme of Pradhan Mantri Mudra Yojana (PMMY) and can avail a good funding under this loan scheme.
Most of the small business units and entrepreneurs have to depend on private money lenders and financiers who charge high interest rates. Mudra loan can now help small business units get a loan from government recognised financial institutions easily and at lower interest rates. This will help in promoting the Non-Corporate Small Business Sector (NCSBS) immensely.
Right from its inception, MUDRA and PMMY have already helped millions of micro-entrepreneurs access credit from the standard financial system. This has made a lasting impact to the development of the MSME sector and helped fuel the economic growth of the nation.
The micro enterprise sector in India comprises a large number of micro, small and medium units catering to processing, manufacturing, trading, and services sectors. These include fruit and vegetable vendors, small fleet operators, food-service joints, repair and maintenance shops, artisans, etc. The standard banking measures and products have not been effective to meet the financial requirements of this sector since these micro units are predominantly sole proprietorship or own account enterprises, a segment that usually fails to meet the stringent checks of banks for loans.
The application process for a Mudra loan is similar to any other business loan. Typically, the documents that borrowers need to submit along with the application form are listed here.
- Proof of Identity (Aadhar card / Voter’s ID card / Passport / Driving License, etc.)
- Proof of Residence (Aadhar Card / Voter’s ID card / Passport / Telephone Bill / Bank Statement, etc.)
- Proof of belonging to a special category, such as SC, ST, OBC, Minority, etc. (if applicable)
- Proof of Identity, Address, Licenses of the enterprise (if any)
- Quotation of items to be purchased for business use (if any)
- Recent 2 passport sized photographs of the applicant
Benefits & Features of Mudra Loan
- No minimum loan amount under Mudra scheme
- No security or collateral is required of the applicant, for availing the scheme
- Do not levy any processing charges
- All non-farm enterprises, i.e. small or micro firms engaged in the generation of income can avail of this loan
- Acquired by an applicant can be used for different purposes, since the loan facility is extended under the Pradhan Mantri Mudra Yojana (PMMY) for any type of fund or non-fund based needs
Mudra card is a debit card that is issued to the loan applicants who wish to apply for Mudra loan. When a loan applicant applies for this loan and if it gets approved, the bank or the lender opens a Mudra loan account and issues the card along with it. The amount is disbursed into the Mudra account so the applicant can debit the amount from their Mudra account. This process also helps in keeping a credit history for the borrower who has applied for this scheme.
Here are a few common questions that people have about these Mudra Loans and detailed answers to them to help you.
Q. How to Apply for a Mudra Loan?
Ans. The application form is available at mudra.org.in, so you can download the form and fill in all the required details. Different banks may have slightly different application procedures. You must visit the nearest branch of the desired bank from where you want to get the loan and submit the filled downloaded form and complete the bank formalities. It is advisable to start with the bank where you already have an account to get the approval easily.
Q. Which banks offer a Mudra Loan?
Ans. Commercial banks in both private and public sectors are eligible to offer Mudra loans. There are a few Regional Rural Banks (RRBs) that are also eligible to grant Mudra loans. Since the interest rates and eligibility criteria vary slightly from one bank to another, you must gather the information you need from a few different banks, before you apply for the loan.
Q. What is the repayment tenure of the Mudra Loan?
Ans. The repayment tenure of Mudra loan is maximum up to 5 years
Q. What is the loan amount offered under Mudra Loan?
Ans. The minimum loan amount offered under Mudra loan is Rs. 50,000, whereas the maximum loan amount sanctioned is up to Rs. 10 lakh.
Q. Can people from metropolitan cities apply for a Mudra Loan?
Ans. Absolutely! All sole proprietors and the owners of Micro, Small and Medium Enterprises (MSMEs) engaged in non-agricultural services and activities across the country, including metro, urban, semi-urban and rural areas can apply for a Mudra loan.
Q. Is there any special Mudra loan scheme for women?
Ans. Yes there is. United Mahila Udhyami Yojana is a part of the Mudra scheme. Under this, women engaged in production, manufacturing or service-related economic activities can apply for a loan. This scheme is specially formulated to empower women entrepreneurs and encourage them further. Women with more than 50% financial holdings in a company can also apply for a Mudra loan under this category.
Q. I want to start my own business. Can MUDRA help me?
Ans. Definitely! MUDRA offers loans to start-ups in the manufacturing, trading and other non-agricultural sectors. To get a Mudra loan for your start up, you need to present your business plan along with the duly filled application form. Thousands of budding entrepreneurs have already availed Mudra loans to realise their dreams.
Q. I own a bakery business and want to expand it. Can I get a Mudra Loan?
Ans. Yes, you can avail assistance under the “Shishu” or “Kishor” category of Micro Credit Scheme of MUDRA to expand your business. Contact your nearest Micro Finance Institution (MFI) to know the application procedure and eligibility criteria.
Q. Is there any reservation system in place for Mudra loans?
Ans. No. Any micro enterprise or sole proprietor can apply for a Mudra loan. Anyone who is eligible for a Mudra loan and completes the application formalities properly can get the loan. Hence, there is no reservation system applicable for a Mudra loan.
Q. What is a Mudra Card?
Ans. The Mudra Card, is a card that offers cash credit services and can also be used overdraft by small business owners. It can also act as a debit card that owners can swipe at Points of Sale (PoS) with merchants or use to withdraw cash from an ATM. The Mudra card works on the RuPay platform, as well.