Mudra Loan (PMMY Loan Scheme)

No, Mudra loan is not interest-free. Designated lenders charge an interest rate on Mudra loans based on their internal policies.

To repay a Mudra loan, you need to pay your EMIs regularly as per the repayment schedule given by your lender. The tenure usually ranges from 1 to 5 years based on the loan amount and your business cash flow. If you have an Overdraft (OD) or Cash Credit (CC) facility, it must be cleared on demand and renewed every year.

Any individual, including women, proprietary concern, partnership firm, private limited company or any other entity, is an eligible applicant for e Mudra loans.

Mudra loans, offered under the PMMY loan scheme, are collateral-free business loans extended to micro enterprises to support their business growth. The scheme is a good option for small businesses struggling to expand their business due to lack of funds.

The loan tenure is determined based on the economic life of the assets created and/or the cash flows generated through the Mudra loan. While the maximum tenure of Mudra loans can go up to 3 years, the repayment tenure of the Mudra Shishu loan can go up to 5 years.

CIBIL score is usually not checked by lenders before offering a Mudra loan. However, it is recommended to maintain a good CIBIL score of 750 and above.

The interest rate of a Mudra loan of Rs. 50,000 is determined by the lender offering the loan. However, the interest rate charged must be reasonable.

The turnaround time for Mudra loan approval primarily depends on the time taken by the loan applicant to provide complete information to the lender and the lender’s own loan processing procedures. However, the Mudra agency has claimed on its website that the turnaround time for processing the Shishu loan proposals usually takes 7 to 10 days.

To apply for a Shishu Mudra loan, prospective borrowers can visit the UdyamMitra portal at www.udyamimitra.in. Alternatively, borrowers can also visit designated cooperative banks, RRBs, public and private sector commercial banks, foreign banks, microfinance institutions, and NBFCs that offer Shishu Mudra loans online.

Mudra loan applications can be rejected for various reasons. The most common among them are poor credit score/history, failure to submit the required documents, low/ non-viability of the business project, default in previous loans, inadequate repayment capacity and lack of required licenses to continue business operation.