Mudra Loan
Mudra Loan- Pradhan Mantri Mudra Yojana (PMMY)
Pradhan Mantri Mudra Yojana (PMMY) provides loans to non-farming and non-corporate micro and small enterprises. Micro Units Development & Refinance Agency (MUDRA) was launched by the Government of India on 8 April 2015, to provide loans of up to Rs 10 lakh and these loans are classified as MUDRA loans under PMMY are offered by Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, Micro Institution (MFIs) and Non-Banking Financial Companies (NBFCs). The NBFC also offers MUDRA Card for Working Capital Loans, cash withdrawals from any ATMs and making purchases through POS machines.
Key Highlights of Mudra Loan
| Loan Facility | Cash Credit, Overdraft Term Loan |
| Interest Rates | Depends on the bank’s policy decision |
| Processing Fee | Nil for Shishu and Processing fee depends on the financial institution for Kishore and Tarun |
| Eligibility Criteria | New and Existing units |
| Tenure | Depends on the bank’s policy decision |
Table of Contents
Mudra Loan Interest Rates
Mudra does not set the interest rates of PMMY loans or interest rate depending on the profile of the applicant. There are several banks in the public as well as the private sector offering MUDRA loans. The agency has given freedom to lending institutions over setting interest rates of MUDRA loans. The prospective borrowers planning to avail MUDRA loan should contact the concerned Bank/NBFC/MFIs for their MUDRA loan interest rates.
Features of PM MUDRA Yojana
Loan Amount : Under PMMY, MUDRA has introduced three products: ‘Shishu’, ‘Kishore’ and ‘Tarun’, to represent the stages of development and funding needs of the beneficiary micro-unit/entrepreneur.
Shishu Category
Up to Rs 50,000
Kishore Category
Above Rs 50,000 to Rs 5 lakh
Tarun Category
Above Rs 5 lakh to Rs 10 lakh*
*Note: The ‘Tarun’ category limit under the Mudra loans to be increased to Rs 20 lakh from the current Rs 10 lakh for those entrepreneurs who have successfully repaid previous loans under the same category.
Collateral: The loans are collateral free and are covered under Credit Guarantee Fund for Micro Units (CGFMU) operated by National Credit Guarantee Trustee Company Limited (NCGTC).
Repayment Tenure: MUDRA has not specified any repayment tenure for the loans refinanced through the PMMY scheme. The agency has given a free hand to the lending institutions offering MUDRA loans to set their loan tenures as per their own rules and the regulations set by RBI.
Objectives of Pradhan Mantri Mudra Yojana (PMMY)
The establishment of Mudra Yojana was done keeping in mind several objectives to be fulfilled the implementation of this yojana. Some of them are:
- The primary goal of the Mudra scheme is to encourage entrepreneurship, particularly among individuals from underprivileged and economically weaker sections of the society.
- For laying down policy guidelines for financing SMEs.
- Getting all the Microfinance Institutions and related entities registered and then regulating the same.
- By empowering small businesses, Mudra loans help to generate employment opportunities, contributing to reduced unemployment rates.
- Supporting the growth and expansion of small enterprises directly contributes to economic development and prosperity.
- To assist in creating easy access to finance for unbanked and help in lowering their cost of finance.
- To provide SC/ST lending options.
- For regulating all Microfinance Institutions that are dealing with trading, manufacturing and service.
Click here to compare Business Loan Interest Rates Offered by Top Banks/NBFCs.
Types of Mudra Loan Facility
The loans under the PMMY scheme are offered in the form of term loan, overdraft and Cash Credit (CC).
Upfront Fee/Processing Charges
In accordance with their internal policies, banks may think about imposing an upfront fee. However, most lenders waive the upfront fee or processing charges for loans under the Shishu category.
Registration Process of PM Mudra Yojana
Prospective business loan borrowers can visit authorised Public and Private Sector Commercial Banks, Cooperative Banks, Regional Rural Banks (RRBs), Micro Finance Institutions Foreign Banks and Non-Banking Finance Companies for availing loan under PMMY. Individuals can also apply for MUDRA loans online through UdyamMitra portal – https://www.udyamimitra.in/
Enrollment Process
- Visit the PM MUDRA official website: Navigate to the UdyamMitra portal.
- Initiate Application: Click on the “Apply Now” button under the Mudra loan section. Choose your category: New or Existing Entrepreneur or Self-employed Professional.
- Provide Basic Information: Enter the Applicant’s name, email and mobile number, then generate an OTP for verification.
Post- Registration Process
- Complete Personal and Professional Details: Fill in the required personal and professional information.
- Choose Loan Category: Select the desired loan category: Mudra Shishu, Mudra Kishore, Mudra Tarun
- Enter Business Information: Provide details such as business name, activity, and industry type (Manufacturing, Service, Trading or Agriculture-related).
- Provide Additional Information: Enter owner details, current banking/credit facilities, proposed credit needs, future financial estimates and preferred lender.
- Submit Required Documents: Attach all necessary documents, including ID proof, address proof, photograph, signature and business identity/address proof.
- Submit Application: After submission, an application number will be generated. Keep this number for future reference.
Eligibility Criteria of PM Mudra Loan
MUDRA Loans can be availed by the micro enterprise sector in manufacturing, service, processing, sector or trading including activities associated with agriculture. The prospective applicant should not be a defaulter to any bank or financial institution and a satisfactory credit track record will be a great addition.
The applicant should have the necessary skills, experience or knowledge to undertake the proposed activity. Furthermore, the educational qualification (if any) of an applicant can also be assessed depending on the nature of the proposed activity and its requirement.
Also Read: Business Loan eligibility criteria in India
Eligible Borrowers of PMMY
Individuals
Proprietary Concern
Partnership Firm
Private Ltd. Company
Public Company
Any Other Legal Forms
Eligible activities covered under MUDRA Loans
1. Transport Vehicle
- Purchase of transport vehicles for transportation of goods and passengers such as auto rickshaws, small goods transport vehicles, 3 wheelers, e-rickshaws, taxis, etc.
- Tractors/Power Tillers/Tractors Trolleys/Two Wheelers used only for commercial purposes.
2. Community, Social & Personal Service Activities
Salons, gymnasium, boutiques, DTP and photocopying facilities, tailoring shops, dry cleaning, medicine shops, beauty parlours, cycle and motorcycle repair shops, courier agents, etc
3. Food Products Sector
Papad making, biscuit/bread making, jam/jelly, ice cream making units, agricultural produce preservation at rural level, achaar making, cold storages, small service food stalls and day to day catering or canteen services, cold chain vehicles, ice making units, sweet shops, etc.
4. Textile Products Sector
Handloom, chikan work, traditional embroidery and hand work, computerised embroidery, traditional dyeing and printing, zari and zardozi work, powerloom, khadi activity, apparel design, knitting, cotton ginning, stitching and other textile non-garment products such as vehicle accessories, bags, furnishing accessories, etc.
5. Equipment Finance Scheme for Micro Units
Individual setting up micro enterprises by purchasing required machinery or equipment with per beneficiary.
6. Business loans for Traders and Shopkeepers
- Loans to individuals for running their shops
- Trading and business activities/service enterprises
- Non-farm income generating activities with beneficiary
7. Activities allied to Agriculture
Poultry, Pisciculture, livestock-rearing, bee keeping, aggregation agro industries, food, dairy, fishery, grading, sorting, agri-clinics and agribusiness centres, etc. and services supporting mentioned activities that promote livelihood or are income generating. Crop loans, land improvement such as irrigation, canal and wells are excluded from the activities allied to agriculture.
Benefits of PM Mudra Yojana
PMMY aims to bring MSMEs into the formal financial system and help them grow their businesses. Some of the benefits are:
- Financial Inclusion: Giving individuals who were previously left out of the formal banking system a chance to get credit.
- No Collateral Requirement: The loans are collateral-free and do not require any processing or upfront charges.
- Interest Rate Subsidy: The loans are available at reasonable interest rates as per the policy of the lenders.
- Encouraging Entrepreneurship: By providing support to small businesses, Mudra loans promote entrepreneurship and help individuals realise their business potential and goals.
Also Read: Unsecured Business Loans
What is MUDRA Card?
When you apply for a Mudra Loan, you are issued a Mudra Card which is a debit card. After you successfully apply for the loan, you will be required to open an account along with which the card is issued.
MUDRA Card is RuPay debit card, which offers working capital loan in the form of an overdraft facility. The card allows multiple withdrawals and credits, digitalizing transactions and creating credit history for the borrower.
A MUDRA card is issued against a MUDRA loan account and can be used across the country for cash withdrawals from ATM or make purchases using any Point of Sale (POS) machines. The borrower can repay the amount anytime, depending on the availability of surplus cash.
Documents required for availing PM Mudra Loans under different category:
1. Documents Required for Shishu Category
- Identity proof in the form of Self attested copy of Driving Licence/PAN Card/Voter ID Card/Aadhaar Card/Photo IDs issued by the government/Passport, etc.
- Residence proof in the form of latest telephone bill/property tax receipt/Voter ID Card/Electricity Bill/Aadhaar Card/Domicile Certificate/Passbook of proprietor or partners or latest bank account statement attested by bank officials/Passport/Certificate issued by local panchayat or government authority or municipality etc.
- Latest photograph (at least 2) of an applicant, not older than 6 months.
- Quotation of Machinery or other items to be purchased.
- Name of supplier or price and details of machinery or items to be purchased.
- Proof of Identity and Address of the Business Enterprise such as copies of registration certificates/relevant licences/other documents related to the ownership, address, identity of business unit, if any.
- Proof of category like ST/SC/OBC/Minority, etc.
2. Documents Required for Kishore and Tarun Category
- Identity proof in the form of Self attested copy of Driving Licence/PAN Card/Voter ID Card/Aadhaar Card/Photo IDs issued by the government/Passport, etc.
- Residence proof such as latest telephone bill, Property tax receipt, Voter ID Card, Electricity Bill, Aadhaar Card and Passport of Proprietor/Partners/Directors.
- Proof of category like ST/SC/OBC/Minority, etc.
- Proof of Identity and Address of the Business Enterprise such as copies of registration certificates/relevant licences/other documents related to the ownership and address of the business unit.
- Account statement of the last 6 months from the existing banker, if any
- Balance sheet of the units of the last 2 years along with income tax or sales tax return etc. (Applicable for all cases from Rs 2 lakh and above).
- Projected balance sheets of 1 year in case of working capital limits and for the loan duration in case of term loan (Applicable for all cases from Rs 2 lakh and above)
- Sales achieved during the current FY up to the date of submission of application.
- Project report having details of economic and technical viability.
- Articles and Memorandum of Association of the Partnership Deed of Partners/company/etc.
- In the absence of a third party guarantee, asset and liability statements from the applicant including directors and partners can be asked to know the net-worth.
- 2 photocopies of Partners/Proprietor/Directors
Mudra Loans for Women Entrepreneurs
Equipped with Mudra Loans, women entrepreneurs have not only driven economic expansion but also ushered in a surge of women empowerment, questioning established norms and making significant contributions to the socio-economic fabric of the country. Such moves serve as another evidence of the close relationship between gender parity and financial inclusion, where financial institutions also extend Mudra Loans for women to encourage women entrepreneurs.
Also Read: Small Business Ideas with Low Investment
Eligibility for Mudra Loans for Women
- Female applicants must fall within the age limit of 18-65 years.
- Applicants must be Indian citizens to be eligible for Mudra Loans.
- The loan can be utilised to support non-corporate, non-agricultural businesses in the trading, services, or manufacturing sectors. Women can apply for Mudra loans for various purposes, such as phone repairing, tailoring, spa services and beauty parlours.
- Special consideration is given to women with artistic or weaving skills and those who have received training from institutions likE R-SETIs or other professional organisations. Applicants involved in retail trade are not eligible.
- Applicants are expected to maintain a favourable credit history and have no criminal record associated with their name.
- Having a well-documented business plan is often necessary to secure Mudra financing.
FAQs
Full form of MUDRA is Micro Units Development & Refinance Agency.
No, your CIBIL score will not be taken into consideration if you are looking to apply for a Mudra Loan. Check your cibil or credit score to avail loan.
Yes, college graduates who wish to start their own businesses can apply for MUDRA loans. Based on the kind of business you wish to start and the requirements of the project, MUDRA can help you get your business up and running.
PAN Cards are not mandatory for those who wish to avail MUDRA loans, but you will have to meet other KYC requirements set by the financing institution.
Designated cooperative banks, public/private sector commercial banks, Regional Rural Banks (RRBs), foreign banks and NBFCs provide MUDRA Loan.
Yes, OneNDF helps in assisting borrowers and small businesses in availing Mudra Loans by providing a streamlined application process, guidance and support. By leveraging expertise and resources, OneNDF helps in making the process of obtaining a Mudra Loan easier and more accessible for borrowers.
MUDRA offers a loan of up to Rs 10 lakhs without collateral security. The collateral is covered under Credit Guarantee Fund for Micro Units (CGFMU) operated by National Credit Guarantee Trustee Company Limited (NCGTC).
MUDRA has not specified the repayment tenure of the MUDRA loan. The lending institutions are free to determine the repayment tenure of their MUDRA loan borrowers based on the cash flow of their enterprise and the terms & conditions set by the lender.
Yes, you will have to produce your income tax returns (ITR) for the past two years if you are looking to apply for a Mudra Loan.
The maximum limit of Mudra Yojana is Rs 10 lakhs (Up to Rs 20 lakhs proposed in Budget 2024)
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