India is one of the most highly populated countries globally and is highly driven by small and medium scale enterprises. They are the backbone of our country that help it sustain itself by contributing significantly to its GDP.
However, these sectors often face financial crunches due to inadequate capital for various purposes. Keeping the same in mind, the central government launched a scheme in 2015 called Pradhan Mantri Mudra Yojana, also commonly referred to as MUDRA loans.
What is a MUDRA Loan?
MUDRA stands for Micro Units Development and Refinance Agency. It was launched on the 8th of April, 2015 and is specifically available for micro, small and medium scale enterprises (MSMEs). It aimed to provide a helping hand to the liquidity issues faced by the MSME sector.
This scheme provides loans up to INR 10 lakh to non-corporate, non-farming small/micro enterprises under Pradhan Mantri Mudra Yojana (PMMY). Commercial banks, Regional Rural Banks (RRBs), small finance banks, financial institutions and Non-Banking Financial Companies (NBFCs) provide these loans.
Categories Under MUDRA Loans
1. Shishu category loans – MUDRA
The Shishu category loans are available for a maximum amount of up to INR 50,000. It is available for start-ups and persons having a business to purchase hardware or machinery for the first time.
2. Kishore category loans – MUDRA
It is available for existing businesses to purchase assets for the expansion of their businesses. The minimum amount of loan that one can avail of under this category is INR 50,000, and the maximum amount is INR 5,00,000.
3. Tarun category loans – MUDRA
Tarun Loans are available for businesses that meet specific criteria and experience for an amount of INR 5,00,001 to up to INR 10,00,000.
Features of the MUDRA Loan Scheme
The features of the MUDRA loan scheme are as follows –
|1.||Loan Amount||1. Shishu – No minimum Limit, Maximum up to INR 50,000. Kishore – Minimum INR 50,001, Maximum INR 5,00,000. Tarun – Minimum INR 5,00,001, Maximum INR 10,00,000|
|2.||Eligibility Criteria||1. Non-corporate, non-farming enterprises2. Existing and New Businesses|
|3.||Processing Fee||1. Shishu – Nil2. Kishore – Nil 3. Tarun – 0.5%|
|4.||Loan Repayment Period||The loan can be repaid in the time limit of 3 years to 5 years.|
|5.||Age Limit||The minimum age of individuals should be 18 years and the maximum age should be 65 years.|
|6.||Collateral Security||Collateral Security is not required.|
Benefits of Taking a MUDRA Loan
1. It is a government scheme that provides loans for up to INR 10 lakhs, thereby helping to finance the business’s assets.
2. Under MUDRA, one is not required to give collateral security which is a huge relief to small businesses.
3. The interest rates under this scheme are nil or significantly lower, which helps cut down the cost of finance.
4. The payment duration under this scheme is flexible, and one can repay the loans for up to 5 years.
Documents Required to Avail MUDRA Loans
1. Duly filled application form of the appropriate loan category with recent passport size photographs
2. Identity proofs of the applicant such as Passport, Aadhar card, PAN card, Voter ID card, Driving License, Birth Certificate, utility bills (water & electricity)
3. Proof of belonging to a special category such as SC, ST, OBC, Minorities etc
4. Business establishment certificate, if applicable
5. Business address proof
6. Income proof – Last year’s income tax returns, if applicable
7. Any other document required by the bank
Purposes for MUDRA Loan to be Availed
One can avail of a MUDRA loan for the following purposes.
1. Purchase of vehicle for business purposes.
2. Service sector activities such as salons, boutiques, gyms, medical shops, photocopy shops etc.
3. Food product sectors such as papad making, achaar making, jams making, or any such food products, for their business activities.
4. The textile activities enterprises such as zari work, handlooms, power looms, khadi, weaving, sewing, cotton ginning etc
5. Financing of administrative expenses of the business.
6. Purchase of hardware, machinery or equipment.
7. Activities allied to agriculture such as pisciculture, agro-processing units, poultry, beekeeping, livestock rearing, dairy, fisheries, etc.
Micro Credit Scheme Under MUDRA
It is a scheme under MUDRA through which financial credit is available to individual entrepreneurs up to INR 1 lakh through Micro Finance Institutions.
MUDRA Refinance Scheme for Banks/NBFCs
This is another scheme under MUDRA that provides financial credit facilities to applicants. The loan credits under this scheme can be availed through commercial banks, regional banks, or NBFCs. The maximum loan credit available under this scheme is INR 10 lakh and is open to all those qualified under Shishu, Kishore or Tarun.
How to Apply for a Loan Under MUDRA?
1. Get a MUDRA application form from any financial institution, such as public sector banks or any other place.
2. Fill in all the details correctly and attach the necessary documents.
3. Consider the loan amount you wish to apply for and submit the required form.
4. Once the form is successfully submitted and all the requirements of the lender are met, the loan will be sanctioned.
Where Can You Apply for MUDRA Loans?
These loans can be availed through
1. Commercial banks
2. Regional Rural Banks (RRBs)
3. Small finance banks, finance institutions
4. Non-Banking Financial Companies (NBFCs)
In its essence, it is preferable to make optimised use of the scheme. While the government is putting so much effort into the upliftment of the small and micro sector enterprises, it is our duty as citizens to be aware of it, be informed, and utilise these resources to leverage our businesses to the fullest. Additionally, it is advisable to use small-term debts to amplify the business rather than let the finance blockage hamper the business.