Mudra Loan

MUDRA Loan is offered by Government of India under the Pradhan Mantri Mudra Yojana (PMMY). MUDRA stands for Micro Units Development & Refinance Agency Ltd. Under this scheme, borrowers can avail of business loans ranging between Rs. 50,000 and Rs. 10 Lakhs under three categories, i.e. Sishu, Kishor, and Tarun.

What is 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

  • Flexible loan amount: Any non-corporate or non-agricultural firm that is classified as a small or micro-industry can get financing up to Rs. 10 Lakhs based on the requirements for setting up and functioning of the business.
  • Loan for different purposes: MUDRA loans can be used for equipment purchase, transport vehicle purchase, trading, and even allied agricultural activities. 
  • Loan available for all: These loans are extended to manufacturing, retail, service sector, food products sector, textile sector, personal services, community & social service ventures, traders, retail stores, and so on.
  • Term loan and working capital available: Besides a term loan up to Rs. 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, which enables business owners to withdraw cash multiple times at ATMs across the country and make any purchase through POS machines in stores. 
  • Developmental support: MUDRA helps entrepreneurs overcome the issue of lack of skilled employees 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. 
  • Collateral-free loans: 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 and secured by a credit guarantee scheme that only requires them to pay an affordable annual fee.
  • Affordable loans: 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. 

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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 LoanLoan Amount
Mudra ShishuUp to Rs. 50,000
Mudra KishoreRs. 50,001 - Rs. 5 Lakhs
Mudra TarunRs. 5,00,001 - Rs. 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 Rs. 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:

  • SBI: SBI offers Mudra Loans up to Rs. 10 Lakhs at competitive interest rates. The margin requirement varies from nil to 10%, depending on the loan amount. These loans are collateral-free and covered under CGTSME Scheme. Tenure for the loan ranges from 3 to 6 years with a moratorium period of 6 months. SBI charges nzero processing fee for Shishu and Kishore Loans, and 0.50% of loan amount plus taxes for Tarun Loans.
  • UCO Bank: UCO Bank offers Mudra Loans up to Rs. 10 Lakhs at competitive rate of interest with no minimum loan amount margin. Margin for loan up to Rs. 50,000 is nil and as per the discretion of the bank for higher loan amounts. Primary security is required in the form of hypothecation of assets. The repayment tenure ranges from 60 to 84 EMIs with a moratorium period of 3 months or as per the requirement of the business. The bank charges nil processing fee for loan up to Rs. 50,000 1.1236% of the loan amount (minimum of  600) for above than that.
  • Bank of India: Get Mudra Loans up to Rs. 10 Lakhs from Bank of India at affordable interest rate and tenure of 36 to 84 months, including the moratorium period. No margin required for loan up to Rs. 50,000 and 15% for loans between Rs. 50,000 and Rs. 10,00,000. Collateral security is not required as loans are covered under CGFMU guarantee. A processing fee of Rs. 250 per lakh will be charged for loans above Rs. 1,00,000 in rural and semi-urban branches and Rs. 300 per lakh in urban and metro branches per Lakh.
  • Bank of Baroda: Bank of Baroda offers Mudra Loans up to Rs. 10 Lakhs at low interest rates without any collateral. The repayment tenure is up to 7 years and no processing fee is involved.

Documents Required for Mudra Loans

Here is a list of documents required for Mudra Loan:

Name of LoanList 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 2 years of unaudited balance sheets of the existing unit with IT or sales tax returns for loans above Rs. 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

How to Apply for Mudra Loan?

  • Keep all the necessary documents ready, such as your identity proof, address proof, and business proof, etc.
  • Approach a lender who provides MUDRA Loan and apply for the loan by filling up the application form.
  • Submit the required documents.

Eligibility Criteria for Mudra Loan

In order to apply for a Mudra Loan with any bank, the candidate must be fulfill mudra loan 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.

Mudra Loan Customer Care

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.

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Mudra Loan FAQs

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.