Mudra Loan can be seen as a form of term financing that allows groups or individuals to secure funds for business expansion, inventory acquisition, and other purposes.
The Pradhan Mantri Mudra Yojana (PMMY) provides MUDRA Loans, where MUDRA stands for Micro-Units Development and Refinance Agency. Through this program, individuals can access business loans ranging from Rs.50,000 to Rs.10 lakh, categorized as Sishu, Kishor, and Tarun.
Launched in April 2015, the Pradhan Mantri Mudra Yojana (PMMY) is a key initiative of the Indian government aimed at offering financial assistance to small and micro-enterprises. As part of the broader Mudra initiative, PMMY's main goal is to extend loans to individuals, especially those from underprivileged and economically weaker sections, enabling them to initiate or expand their small businesses.
PMMY classifies loans into three segments: Shishu, catering to micro-enterprises with loans up to Rs 50,000; Kishor, serving enterprises with loans ranging from Rs 50,000 to Rs 5 lakh; and Tarun, designed for more established businesses with loans ranging from Rs 5 lakh to Rs 10 lakh.
Fostering Entrepreneurship: The fundamental aim of the Mudra scheme is to promote entrepreneurship, especially among individuals belonging to underprivileged and economically weaker sections of society.
Facilitating Job Creation: Empowering small businesses through Mudra Loans play a crucial role in creating employment opportunities, thereby contributing to a decrease in unemployment rates.
Stimulating Economic Growth: Providing support for the growth and expansion of small enterprises directly contributes to overall economic development and prosperity.
Food products sector
Transport vehicles used for the transportation of goods and passengers
Communities, social, and personal service activities
Business loans for shopkeepers and traders
Textile products sector and related activities
Agriculture-related activities
Equipment finance scheme for Micro Units
Business Plan: Begin by crafting a comprehensive business plan detailing your business model, funding requirements, and anticipated outcomes.
Eligibility: Ensure that your business aligns with the eligibility criteria for Mudra loans, typically falling within the micro and small enterprise category.
Loan Application: Approach participating financial institutions such as banks, NBFCs, or microfinance institutions, and complete the Mudra loan application form. Be ready to furnish information about your business, the desired loan amount, and your repayment strategy.
Loan Approval: The financial institution will assess your application and creditworthiness. Mudra loans are often collateral-free, making them accessible to a diverse range of entrepreneurs.
Loan Disbursement: Upon approval, the loan amount is disbursed to your account, allowing you to utilize it for business growth or initiation.
Visit authorized public and private sector commercial banks, cooperative banks, regional rural banks (RRBs), microfinance institutions, and non-banking finance companies under PMMY
Individuals can also opt for an online application through the UdyamMitra portal at www.udyamimitra.in.
Step 1: Ensure you have the required documents ready. Essential documents include your ID proof, address proof, and business proof.
Step 2: Approach a lender enrolled under the MUDRA scheme and complete the application form.
Step 3: Submit the necessary documents for processing.
Indian citizens with independent business plans in the service sector, trading, or manufacturing activities, seeking loans up to Rs 10 lakh, are eligible to apply for Mudra loans. These loans are available through various channels, including public sector banks, private sector banks, regional rural banks (RRBs), small finance banks (SFBs), and microfinance institutions (MFIs). According to the eligibility criteria for a MUDRA loan:
Age Range: Minimum 18 years; Maximum 65 years
Accessibility for new and existing units
No requirement for collateral or third-party security
Acceptance by Public Sector Banks, Private Sector Banks, Micro Finance Institutions, and Regional Rural Banks
Documents Needed: Proof of identity, proof of residence, completed application form, and passport-sized photos.
Interest Rates On Mudra Loans: The interest rate applicable to Mudra loans is contingent upon the applicant's profile. Numerous banks, both in the public and private sectors, extend MUDRA loans. While all lenders adhere to specific guidelines, the ultimate interest rate for a loan is determined by the respective lender. This decision is reached after a careful examination of the applicant's business requirements.
To apply for a MUDRA loan, the necessary documents include:
Application Form: A completed application form based on the loan category.
Identification Verification: Aadhaar card, voter's ID card, driver's license, passport, and similar documents.
Proof Of Address: Utility bills (electricity, telephone, etc.), aadhaar card, voter's ID card, passport, etc.
Photographs: Two passport-sized photographs of the applicant.
Caste Certificate: If applicable.
Other Documents: Quotation for the commodities or items intended for purchase and use in the business.
Explore the prominent features and advantages of Mudra loans:
Financial Inclusion: Mudra loans offer a chance for individuals who were previously excluded from the formal banking sector to gain access to credit.
Collateral-Free: Mudra loans do not require collateral, alleviating the need for borrowers to pledge assets as security.
Interest Rate Subsidy: The government provides interest rate subsidies, ensuring the affordability of borrowing costs.
Entrepreneurship Promotion: Mudra loans contribute to the promotion of entrepreneurship by supporting small businesses and assisting individuals in realizing their business aspirations.
Understanding The MUDRA Card: Upon applying for a Mudra loan, you receive a Mudra card, essentially a debit card. Upon successful loan application, you must open an account, and the Mudra card is issued in conjunction with it. This card allows you to withdraw the disbursed loan amount from your Mudra account.