What are Mudra Loans?

What are Mudra Loans?

A large number of micro, small, medium and large companies are located in India. More than ever, it is growing rapidly, which, if successful, can contribute greatly to the country’s economy. However, many of these get closed and get stuck due to paucity of funds. To be able to allow smooth flow of money with the help of money, the Government of India has launched a scheme called Pradhan Mantri Mudra Yojana (PMMY). Enterprises working under this scheme can get monetary help in the form of Mudra loan and fulfill their career related dreams.

What is Mudra Loan in Hindi ?

As stated above, the Pradhan Mantri Yojana scheme was launched only to help Indian small-scale companies to grow and reach ultimate success. The scheme was officially launched on 8th April, 2015 and is dedicated to finance a number of such enterprises. The name Mudra is an acronym for Micro Units Development and Refining Agency and mainly helps companies in financing from both profit as well as non-profit sector.

Under Mudra Yojana, Mudra loan scheme is being provided to non-corporate and non-farm small and micro enterprises/businesses. Loan up to Rs 10 lakh can be taken under Mudra Yojana. Micro Units Development and Refinance Agency Limited (MUDRA) is an NBFC supporting the development of small business owners in India.

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Mudra loan scheme is to be provided for income generating small business business activities in manufacturing, processing, services or trading sector and includes all individuals/proprietary entities/partnership firms/private limited companies/shopkeepers operating as artisans Any self-help groups, manufacturing units, hawkers, professionals, service providers and entities of other legal forms will be included.

Mudra Full Form

Micro Units Development and Refine Agency

Mudra Full Form in Hindi

Mudra Ka Full Form – The full form of Mudra is – Micro Units Development and Refining Agency

Which industries can apply for Mudra loan?

Types of Industry Who Can Apply for Mudra Loan

Below mentioned industries can apply for Mudra loan;

  • shopkeeper
  • Trade seller
  • food production industry
  • agricultural sector
  • small scale manufacturer
  • Restoration and Repair Shops
  • handicrafts
  • service based companies
  • truck owner
  • self employed entrepreneur

What are the products under Mudra Loan?

Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has created three products namely ‘Shishu’, ‘Kishore’ and ‘Tarun’ as per the development and funding requirements of the beneficiary micro unit. These plans cover the following loan amounts:

baby plan up to Rs.50,000
juvenile scheme 50,000 to Rs. 5,00,000
tarun yojana Rs. 5,00,000 to Rs. 10,00,000

What are the objectives of the Mudra loan?

Micro, Small and Medium Enterprises (MSMEs) play an important role in contributing to the economy of the country. Mudra loan helps MSMEs by fulfilling the following mentioned objectives;

  • starting a new business
  • Expansion and growth of existing business
  • Training as well as recruitment of competent staff
  • purchase of machinery
  • Getting working capital for business
  • purchase of commercial vehicles
  • equipment purchase

What are the benefits of Mudra Yojana?

There are many such inaccessible places in our country where poor are unable to access normal and ordinary banks. The main objective of the Mudra Yojana is to provide financial assistance to such remote places and serve the people who are in dire need of banking service. This scheme will provide all banking services like savings accounts, loans, credit cards and some other special benefits to the eligible beneficiaries. Presently, the authorized capital of MUDRA is Rs 1000 crore and the paid-up capital is Rs 750 crore, fully subscribed by SIDBI. More capital is expected to enhance the functioning of the currency.

Micro finance is an economic development tool that seeks to provide income generating opportunities to the people. It includes a number of programs that, in addition to providing credit, include many other credit plus services, financial literacy, and other social support services.

Some benefits of Mudra loan scheme –

  • The Mudra Yojana scheme offers the following advantages over other MSME financing schemes in the market:
  • This loan requires no collateral, so you can borrow without losing any personal or business assets.
  • In the event of a default, the government takes the responsibility of repayment of the loan.
  • This loan is most beneficial for those entrepreneurs who want to set up their own micro enterprise.
  • You can use this loan to fund, grow and expand your company with funding up to Rs 10 lakh.
  • Mudra Yojana scheme is available for small businesses in both urban and rural areas.
  • Women borrowers can get better benefits due to lower interest rate.
  • The loan tenure can also be extended up to 7 years, or you can choose to repay your loan in a shorter period of time.
  • Helps you meet your company’s working capital needs.
  • Being a part of Pradhan Mantri Jan-Dhan Yojana, this loan also allows you to avail overdraft facility up to Rs.5000.
  • One can apply for Mudra Debit Card which gives them instant access to funds without any hassles.

What is the interest rate on Mudra loan?

Reasonable interest rates are charged on Mudra loans as per the guidelines of Reserve Bank of India. Interest will not be charged more than 1% on monthly basis. However, it is largely dependent on the credit and repayment history of the borrower.

Mudra Loan Interest Rate:

The interest rate applicable on MUDRA loans is based on RBI defined MCLR (Marginal Cost of Lending Rate) with the following break-up.

Mudra Loan RBI Defined MCLR
Up to Rs.50000:
micro enterprise MCLR + SP
small scale enterprise (MCLR + SP) + Bank Load
50000 to 2 Rs. up to lac:
micro enterprise (MCLR + SP) + Bank Load
small scale enterprise (MCLR + SP) + Bank Load
2 lakh to 10 Rs. until:
micro enterprise (MCLR + SP) + Bank Load
small scale enterprise (MCLR + SP) + Bank Load

What are the documents required to apply for Mudra Loan?

Documents Required to Apply for Mudra Loan

  • Though the documents may vary by the type of product chosen, the following mentioned documents will be the common requirement while applying for Mudra loan;
  • Identity Proof like Aadhar Card, PAN Card, Driving License, Voter ID Card etc.
  • Address Proof like Aadhar Card, Passport, Utility Bill, Bank Statement etc.
  • Passport size photographs of the borrower/applicant
  • Address proof of enterprise, if applicable
  • Identity proof of the license of the enterprise, if applicable
  • Quotation proof of goods/equipment/plant to be purchased

What is the application process for Mudra loan?

Many banks provide this loan facility and Mudra loan application can be applied by following the following steps;

  • Visit the official website – https://www.mudra.org.in/ and then download the application form.
  • Fill the exact details in this form like name, address, number and KYC.
  • The required Mudra loan documents then need to be submitted along with the application letter
  • It also includes certain additional procedures required by banks that need to be completed. (This process may vary slightly from bank to bank)
  • After this the selected bank will verify these documents.
  • Then after verification, the loan amount gets deposited in the account.

Is CIBIL Score Required for Mudra Loan?

No, CIBIL score is not required to get Mudra loan as the government has launched this scheme to help people to start a new business or develop an existing business.

Is PAN card mandatory for Mudra loan?

No, PAN card is not mandatory to get Pradhan Mantri Mudra Yojana. However, banks may ask for KYC documents for sanctioning the loan.

What is Mudra Card?

Mudra Card is a debit card issued for Mudra Loan Account for the working capital portion of the loan. To manage the working capital limit in a cost-efficient manner and keep the interest burden to a minimum, the borrower can use the Mudra card in credit for multiple needs.

Mudra card also helps in digitization of Mudra transactions and creation of credit history for the borrower. Mudra Card can be operated across the country to withdraw money from any ATM/Micro ATM and to make payments through any ‘Point of Sale’ machines.

Mudra Loan FAQs:

Is there any offline way to get Mudra loan?

Yes. Many banks provide this facility. You can go to any private or commercial bank and an executive will explain the process to you.

If the borrower is physically handicapped, can he/she still apply for MUDRA loan?

There is no discrimination against physically handicapped people and anyone within the eligibility criteria can apply for this loan.

Can I apply for a Mudra loan to buy a vehicle?

Yes. However, this is not applicable for private vehicles. Any car, taxi, bus or truck purchased with the money received from the Mudra loan will need to be used for public transport only.

For the application process for any of the three products under Mudra Loan, is there any specific format?

Yes. There is a one page form for Shishu Yojana while there is a three page form for Kishor Yojana and Tarun Yojana.

To avail Mudra Loan, do I have to deposit anything as collateral against the loan amount?

No. No collateral or third party security is required to take loan under PM Mudra Yojana

If I am above 65 years of age, can I get a Mudra loan?

The maximum age to avail Mudra loan is 65 years. In addition, you will not be eligible.

What are the various food products in the food industry that can be eligible for availing the benefits of Mudra loan scheme?

Units making pickles, jam, ice cream, papad, bakery, sweet shop, cold storage and agricultural produce center are eligible.

Can Mudra loan be taken for setting up a beauty parlor?

Yes, Mudra loan can be availed for setting up a beauty parlor and salon. It can also be availed for other services like opening of gym, sewing shops, dry cleaning business etc.