Mudra Loan

Mudra Loan Business Loan

Years

Apply Mudra Loan Business Loan

About Mudra

Social and economic development is only possible when there are more employment options available to the citizens of a country. In order to ensure that more businesses flourish and there are more opportunities for employment across sectors of the society, the Indian Government launched Mudra Loans in April 2015 under the leadership of Hon'ble Prime Minister, Narendra Modi.

MUDRA or Micro Units Development and Refinance Agency was introduced under the Prime Minister Mudra Yojana to facilitate the establishment and sustenance of entrepreneurial ventures. It is through these ventures that a value-based and inclusive entrepreneurial culture can be introduced in the country.

About Mudra Loans

MUDRA is not a lending institution by itself. It is a scheme that is provided to the people of India through partner banks and non-banking financial companies (NBFCs). The loan is designed to provide financial support using the best possible standards and global practices. The goal of these loans is to aid social and economic development by providing an easy option to obtain financing for various sectors, including manufacturing, retail, service, and allied agricultural activities. These loans are provided to small and micro enterprises that are non-agricultural and non-corporate in nature.

There are different provisions under this scheme, depending upon the requirement of the business and the loan amount. These units can be partnership firms or even single ownership firms. To make sure that financial security is ensured for anyone who wants to set up a new business venture, they do not require any collateral either.

Features and Benefits of Mudra Loans

The features of these loans are specially designed to make sure that they are easily available through banks and institutions that have collaborated with MUDRA.

Here are the most important features of these loans:

  • Flexible loan amount: These loans are designed to support faster development of the micro-enterprises in the country which are currently the largest providers of employment. The loan amount provided as per this scheme is extremely flexible. Any non-corporate or non-agricultural firm that is classified as a small or micro-industry can get financing up to 10 Lakhs based on the requirements for setting up and functioning of the business.
  • They can be used for different business purposes: MUDRA finances various business sectors and can be applied for a variety of purposes to ensure that these businesses run smoothly. You can get finance for equipment purchase, transport vehicle purchase, trading, and even allied agricultural activities. The loans are extended to manufacturing, retail, and even service sectors. Some industries that are eligible for these loans are the food products sector, textile sector, personal services, community and social service ventures, traders, retail stores, and a lot more.
  • Term loan and working capital available: Besides a term loan up to 10 Lakhs, these loans also provide working capital to finance day to day activities of businesses. The working capital is available in the form of a Mudra debit card. This card enables business owners to withdraw cash multiple times at ATMs across the country. It can also be used to make any purchase through POS machines in stores. The aim of this card is to digitalise all the solutions provided by the Mudra scheme. It also enables business owners to manage the working capital, which is provided more efficiently. They are able to avoid the burden of increasing repayments towards interest on the working capital as well.
  • Developmental support: Besides credit challenges, lack of skilled employees is another major issue that most micro and small business faces. MUDRA helps entrepreneurs overcome this issue as well by providing support and development services. The goal is to build up an ecosystem that provides skilled workers and employees to enable businesses to grow and flourish. These programs include business literacy, finance counselling, skill development programs, and a lot more to help business development at the grass-root level.
  • Collateral-free loans: Arranging for necessary collateral is certainly a big challenge for young entrepreneurs. In order to make sure that the lack of necessary collateral does not stand in the way of their entrepreneurial ventures, the loans provided are completely collateral-free. They are secured by a credit guarantee scheme that only requires them to pay an affordable annual fee.
  • Affordable loans:The interest rates of various loan plans make repayment challenging for new businesses. Mudra Loans are available at the lowest possible interest rates and also have a reasonable cap on the interest that is chargeable based on the business profile and the industry.
  • Flexible repayment period: These term loans come with a repayment tenure that is flexible. This allows the borrowers to choose a repayment period as per their convenience to make the monthly installment more affordable. This helps manage finances better and also leaves them with ample capital to run the business smoothly.

Types of Mudra Loans

Depending upon the loan amount that is required, there are three types of Mudra Loans that you can apply for.

The different kinds of Mudra Loans are:

Name of the Loan Loan Amount

Mudra Shishu

Up to 50,000

Mudra Kishore

50,001 - 5 Lakhs

Mudra Tarun

5,00,001 - 10 Lakhs

Terms and Conditions of Mudra Loans

The terms and conditions of Mudra Loans are as mentioned below:

  • Mudra Loans are provided by banks, MFIs, NBFCs, and other intermediate financial organisations
  • Overdraft facility of 5,000 provided by the PMJDY is also classified under the Mudra Loans
  • All advances that are granted under the Shishu, Kishore, or Tarun scheme on or after April 2015 are classified as Mudra Loans under the PMMY.
  • The applicant of the loan must not be a defaulter to any banking or financial institution and should have a good credit track record.
  • All individual borrowers should have the skills, knowledge, and experience that are necessary in order to undertake the activity proposed.
  • Education qualification, if required, is based on the nature of the activity proposed
  • Mudra Loans are provided to any income-generating small business activity that falls under the trading, service, processing, or manufacturing sector.
  • The project cost is determined on the basis of the investment and the business plan provided
  • Mudra Loan cannot be used for any personal requirements
  • The margin on the loans is as per the internal policy of the bank of financial institution. This is based on an overall guideline set by the RBI.
  • There may not be any margin requirement on Shishu Loan
  • The interest rate charged is as per the policy and the decision of the lending institution
  • Upfront fees or processing fees may be charged as per the internal policy of the bank
  • The first charge on any asset that is created out of the loan extended can be used as security
  • CGTSME cover is provided as security wherever applicable
  • As per the RBI guidelines issued through the Master Circular about MSME Loans, banks cannot accept any collateral security for loans up to 10 Lakhs that are extended to the MSME Sector.
  • The tenure of the loan depends upon the discretion of the bank and also the cash flow and assets created. The maximum tenure of assistance for Mudra Loans is 36 months which may be aligned as per RBI guidelines from time to time.

Top 5 Banks Offering Mudra Loans

Mudra Loans can only be availed through partner banks and financial institutions.

Here are the top 5 banks that provide Mudra Loans in India:

Name of the Bank Loan Terms Details

SBI

Quantum of Loan

Up to 10 Lakhs

Margin

  • For loans up to 50,000: Nil
  • For Loans above 50,000 up to 1,00,000: 10%

Interest Rate

Competitive Interest Rates that are linked to MCLR

Collateral

Loans to be covered under CGTSME Scheme. Primary security to be obtained in the form of hypothecation of assets, stocks, and receivables.

Repayment Tenure

Between 3 to 6 years with a moratorium period of 6 months.

Processing Fees

NIL for Shishu and Kishore Loans. 0.50% of loan amount plus taxes for Tarun Loans.

 

UCO Bank

Quantum of Loan

Up to 10 Lakhs. No minimum loan amount margin.

Margin

NIL up to 50,000. For higher loan amounts, as per the discretion of the bank.

Interest Rate

One year MCLR + 0.15%

Collateral

Primary security required in the form of hypothecation of assets. No collateral or third-party guarantee is required as the loan is covered by CGTSME guarantee.

Repayment Tenure

The repayment tenure of the loan is between 60 to 84 EMIs with a moratorium period of 3 months or as per the requirement of the business.

Processing Fees

NIL up to 50,000. For above than that, 1.1236% of the loan amount, subject to a minimum of 600.

 

Bank of India

Quantum of Loan

Up to 10 Lakhs

Margin

No Margin up to 50,000. 15% margin is necessary for loans between 50,000 and 10,00,000.

Interest Rate

The rate of interest is as prescribed to the institution and is linked to MCLR.

Collateral

Primary security is obtained in the form of hypothecation of assets built from the loan provided and personal guarantee of promoters. Collateral security is not required as loans are covered under CGFMU guarantee.

Repayment Tenure

The repayment period is between 36 months and 84 months, including the moratorium period.

Processing Fees

NIL for loans up to 1,00,000. For loan amounts higher than this, 250 in rural and semi-urban branches and 300 in urban and metro branches per Lakh, subject to a maximum of 1 Lakh and 1.5 Lakhs, respectively.

 

Syndicate Bank

Quantum of Loan

Up to 10 Lakhs

Margin

As per discretion of the bank based. For details contact customer care of Syndicate Bank.

Interest Rate

·         For loans up to 1 Lakh, 1 Year MCLR

·         For loans above 1 Lakh up to 10 Lakhs: MCLR + 1% for one year and MCLR + 1.25% for above one year.

Collateral

Primary security in the form of hypothecation of assets. No collateral required for loans covered by credit guarantee.

Repayment Tenure

Maximum 7 years

Processing Fees

Processing fees applicable above loans of 5 Lakhs at the rate of 400 per lakh.

 

Bank of Baroda

Quantum of Loan

Up to 10 Lakhs

Interest Rate

Loan amount

Micro Enterprises

Small Enterprises

Up to 50,000

MCLR + SP

(MCLR+SP) + 0.5%

50,000 to 2 Lakhs

(MCLR+SP) + 0.5%

(MCLR+SP) + 0.7%

Above 2 Lakhs

(MCLR+SP) + 0.7%

(MCLR+SP) + 0.85%

Collateral

NIL

Repayment Tenure

Up to 7 years

Processing Fees

NIL

Documents Required for Mudra Loans

With Mudra Loans, the documentation not only includes personal detail verification but also the project details. Make sure that you obtain a checklist from the bank that you apply for the loan with.

Here is a list of documents required for this loan:

Name of Loan List of Documents Required

Shishu

  • Proof of identity: A self-certified copy of Driving license/ Voter's ID/ PAN Card/ Passport/ Photo IDs issued by any Govt. authority
  • Proof of residence: Recent Phone bills/ Electricity bill/ Property Tax Receipt/ Voter's ID Card/ Aadhaar Card/ Passport of the individual/ Certificate issued by Government Authority
  • 2 recent passport sized photographs
  • Statement of accounts from the current bank
  • Quotation of Machinery or other items to be purchased
  • Proof of SC/ST/ OBC if applicable
  • Proof of business enterprise

Kishore

  • Proof of identity: A self-certified copy of Driving license/ Voter's ID/ PAN Card/ Passport/ Photo IDs issued by any Govt. authority
  • Proof of residence: Recent Phone bills/ Electricity bill/ Property Tax Receipt/ Voter's ID Card/ Aadhaar Card/ Passport of the individual/ Certificate issued by Government Authority
  • 2 recent passport sized photographs
  • Statement of accounts from the current bank
  • Quotation of Machinery or other items to be purchased
  • Proof of SC/ST/ OBC if applicable
  • Proof of business enterprise
  • Last two years of unaudited balance sheets of the existing unit with IT or sales tax returns for loans above 2 Lakhs
  • Projected balance sheet for ay start-up or existing unit for one year to obtain working capital and as per the term of the loan in case of term loan
  • Proforma invoices or quotations of equipment or items to be purchased and estimation of any civil work if applicable
  • Sales achieved in the present financial year until the date of application submission
  • Asset and liability statement from the borrower
  • Articles of association for the company such as the partnership deed

The applicant may be required to provide additional documents as deemed necessary by the bank that you are applying for the loan with.

Why Apply for Mudra Loans through MyMoneyMantra?

Mudra Loans are offered by several associated banks and NBFCs. MyMoneyMantra connects customers with all these Mudra partners and is one of the easiest options to apply for a loan.

There are several benefits of applying for a loan through MyMoneyMantra:

  • Compare products easily: MyMoneyMantra brings together almost 90 Banks and NBFCs under one portal. This allows you to read in detail about all the products that are offered by these financial institutions. It also makes it easier for you to compare the different options that are available to you so that you can choose one that is most affordable and applicable as per your requirements.
  • Get complete assistance for a loan application: Besides connecting you with the best loan and finance providers, MyMoneyMantra also helps you increase your chances of getting an approval on your loan. From the time you raise a request for a loan application, you will be assisted by the team at MyMoneyMantra through the documentation process and application with the bank. They also have a 24x7 system in place that helps you get a quicker turnaround time on your loan application. Until the loan is disbursed, you have complete assistance from over 2500 relationship managers across the country as well as a board of financial advisors.
  • Innovative products: The goal of MyMoneyMantra is to make sure that customers are able to get timely assistance for any loan that they need. This urges them to create new products on a regular basis to provide the best financial services. For their continued innovation, they have even received several banking awards.
  • Specially designed loan plans: The loan quotations provided by MyMoneyMantra are specially designed to suit your requirements. Once you have provided all your personal details and the exact requirement, the best loan plans are picked out for you. This ensures that you not only have a higher chance of getting an approval on loan but also helps you keep your credit score high by only applying for loans that are applicable for your profile.
  • Easy accessibility: MyMoneyMantra is an online platform that is easily accessible for most customers. In addition to this, you also have the presence of the company in over 500 cities across India, providing you with the best services.
  • Finance tools available: You have the advantage of EMI calculator and other tools which make it a lot easier for you to plan your finances easily. These tools are easy to use and are extremely convenient for you to use as well.

Eligibility Criteria for Mudra Loan

In order to apply for a Mudra Loan with any bank, the candidate has to fulfill certain eligibility criteria.  This loan is available to Non-Coroporate Small business segments that can be a proprietorship or partnership firm. This includes service sectors, manufacturing and retail sectors as well.

Eligibility Criteria for Mudra Loan

In order to apply for a Mudra Loan with any bank, the candidate has to fulfill certain eligibility criteria.  This loan is available to Non-Coroporate Small business segments that can be a proprietorship or partnership firm. This includes service sectors, manufacturing and retail sectors as well.

How to Calculate EMI?

When you are looking at applying for loans, especially for business, you need to make sure that you're able to repay the EMI given the several expenses that you incur each month. The best way to do this is by calculating your EMI beforehand.

An EMI Calculator is a simple financial tool that is available online for absolutely no cost. They save you the trouble of manual calculations and are also more accurate. All you need to do is provide details of your loan such as the loan amount, interest rate, and the tenure of the loan. Based on this the tool applies the formula mentioned above to calculate your EMI.

What to Check After Calculating EMI?

When you are borrowing a loan for your business, you need to make sure that you are able to make regular payments on the same. This ensures that your credit score is high, which is very important for entrepreneurs. That way, even if you need any financial assistance in the future, you will be able to get it without any hassles.

After you have calculated your EMI, the next step is to list all the mandatory expenses. This includes salaries, rent, EMIs towards other credit facilities, and more. Once you have consolidated these expenses, deduct it from the average income of your business and make sure that you have enough funds to make repayments on your loan.

If you are unable to fit it into your budget, you can look for additional sources of income. You also have the option of negotiating the interest rate or the repayment tenure of the loan to ensure that your EMI fits into the monthly budget of your business.

Customer Care - Mudra Loan

To get any information about Mudra Loans, you can contact these numbers:

  • 1800-180-1111
  • 1800-11-0001

Alternatively, you can also get in touch with the bank that you choose to avail the loan from in order to get any specific information about the loan with respect to the guidelines of the bank.

FAQs- Mudra Loan

What are the specific roles and responsibilities of MUDRA?

MUDRA is responsible for partnering with financial institutions at the state and regional level in order to provide any financial assistance to small or micro business enterprises. They also refinance NBFCs, MFIs, and other last mile financiers to make lending possible for small and micro industries.

Is a PAN Card mandatory to obtain a Mudra Loan?

No. It is not mandatory to have a PAN Card in order to apply for a Mudra Loan. However, the individual is required to fulfill all the KYC documentation as applicable under the guidelines of the financial institution.

What is CGTMSE or CGFMU?

This is a credit guarantee scheme offered by the Government of India that acts as an insurance for the loan that is obtained under the Mudra scheme. The borrowers will not have to provide any collateral against these Mudra Loans because of this credit guarantee.

Can a bank or financial institution still insist on collateral on these loans?

No. Banks and other lending institutions may not ask for any collateral on these loans. They may request for primary security in the form of hypothecation of the assets created by the loan that is obtained. In case the bank does insist on a collateral, the customer may raise a complaint to the Regional Head, Zonal Head or the Head office of bank that you are applying for the loan with. You can also get in touch with the grievance redressal department of the bank.

Do I have to obtain life insurance for this loan?

There is no life insurance required for a candidate to avail this loan.

What are the repayment terms of this loan?

You can obtain Mudra Loans for a maximum period of 7 years. For most banks, the repayment is made through ECS or auto-debit on the specified due date. The due date is based on the loan agreement between the lending institution and the borrower of the loan.

Is PMMY applicable in every bank across India?

Yes. As per the Department of financial services, every RRB, PSB and small finance bank have been advised to issue Mudra Loans up to 10 Lakhs. These loans are provided as per the guidelines provided by the DFS to these institutions.

What if a bank does not offer Mudra Loans?

You can escalate this matter to the higher authorities of the bank in order to avail the necessary financial services.

What is the Mudra Card?

Working capital is provided to all businesses under the Mudra scheme in the form of a Mudra Card. This allows them to get cash from any ATM across the country and also make purchases through POS machines. 

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