Mudra Loan

Mudra Loans are present under PMMY that is Pradhan Mantri Mudra Yojana. The businesspersons owning a shop or small-scale business are provided with Mudra Loans in the form of a mudra card. A borrower can get credit without any difficulty via RuPay card. A borrower can get Shishu loan, Kishore loan, and Tarun loan, depending on the financial support that a borrower or an entrepreneur needs. 

Prime Minister of India, Mr. Narendra Modi, has issued a new policy focusing on developing Indian economy and several schemes have been made under this policy. For instance, Jan Dhan Yojana and later the launch of MUDRA have taken place through this policy in India.

Benefits of Applying for Mudra Loans

There are numerous benefits that you can derive after applying for Mudra Loans and some of them are discussed as follows:

  • Mudra Loan has been created by the Government of India as a business promotion scheme in India. The Mudra Loan will offer empowerment and financial support to those business owners, who are doing micro-level and small scale business. This step would improve the economic condition of India in the future as small business dealers would be able to earn more money and business opportunities.
  • The remote areas of India are not suitable to open a new company and run it successfully. In addition, people living in remote areas do not get seamless banking services. The people, who need money to run their small scale businesses and for other matters, take loans from those money lenders present in remote areas by paying a high-interest rate. The poor people do not get beneficial facilities from these money lenders that Mudra Loans can provide. In order to lower the exploitation of the poor people in terms of business, borrowing of money, and for uplifting India's small business sector, Mudra Loans are the best.
  • The facility of credit guarantee is provided to the borrowers under the loan scheme of MUDRA. The borrowers under the credit guarantee get risk sharing. Risk sharing is provided to customers for a wide range of homogenous loans and risk sharing is not offered to customers on a loan guarantee just for a single debt.
  • The funding support comprises of micro-credit schemes just to refinance schemes, small loans for commercial banks, scheduled co-operative banks, regional rural banks, securing of loan assets and programmes for women's enterprises.
  • Through Mudra Loans, both development and promotional support are offered to customers. The borrowers get the chance of improving their financial literacy, skill development, sectoral development, institution, and entrepreneurship development.
  • A small scale business owner can get a Mudra Loan within a range of 50,000 to 10 Lakhs. Therefore, a person can get the ability to borrow the low or high amount of money to support their partnership firm, a new startup, and so on.
  • A mudra card is offered to the customers, who apply for Mudra Loans and this mudra card acts as a debit card. You can utilise your mudra card to derive money in the times of emergency.
  • Mudra Loan is useful to reduce employment and the loan is provided to those poor people and vendors of fruits, who do not have any bank account.
  • The hawkers, SC/ST enterprises, new startups, and business people belonging to the low-income groups, can apply for a Mudra Loan from banks and other financial organisations.

Documents Required for Mudra Loans

There are the following significant documents amongst others, which business owners must provide to the bank, in order to apply for the Mudra Loans:

  • Promoters and guarantors are required to submit both - Statements of Liabilities, Assets, and the recent Income Tax Return.
  • If your property is offered as 'Primary', you have to submit the copies of either Lease or Title Deeds to the bank.

There are three kinds of loans that a person can apply for under Mudra Loan -Vehicle Loans, Business Installment Loans, and Loans for Group and Rural Business Credits.

The documents for getting loans in these three categories are discussed as follows:

The documents required for a vehicle loan under Mudra Loan:

  • Application form of PMMY (Pradhan Mantri Mudra Yojana) for a vehicle loan
  • 2 passport size photographs of the borrower
  • Address proof documents
  • Identity proof documents
  • Income proof documents
  • Bank statement for the last six months

The documents required for a business installment loan:

  • Application form of PMMY (Pradhan Mantri Mudra Yojana) for a business installment loan
  • Address proof documents
  • Identity proof documents
  • Income proof documents
  • Proof of establishment
  • Trade references
  • Qualification proof
  • Business continuity proof
  • Bank statement for the past six months

The documents required for a loan for the group and rural business credits:

  • Application form of PMMY (Pradhan Mantri Mudra Yojana) for a loan for the group and rural business credits.
  • Address proof
  • Photo id proof
  • Age proof
  • Bank statement for the last 12 months is mandatory
  • Business vintage proof
  • Proof of ownership of office or residence: GST registration, the receipt of the tax paid, trade license
  • Income tax return for the past 2 years

FAQs - Mudra Loan

How can I apply for Mudra Loan for my small business?

The application process of Mudra Loan is simple. However, the application process differs in distinct banks. You have to keep in mind that every bank is not able to offer you a Mudra Loan. You must check out if the banks in your locality provide Mudra Loans or not. After finding out a right bank, just find out the application process of the bank and the eligibility criteria to get a Mudra Loan before filling up the application form.

Do I have to open a bank account in the same bank from where I want to get the Mudra Loan?

No, it is not required to have a bank account in a bank, which you have chosen to get your Mudra Loan. However, your chances of getting the Mudra Loan can increase if you have a bank account in the same bank.

I have a business idea to start my company, so which Mudra Loan should I apply?

If you want to get a loan for your startup business, you should take the Shishu Loan. You just have to submit the details of your business idea after filling the application form. In addition, you have to provide relevant documents, meet the eligibility requirements for getting approval on your Mudra Loan afterward.

Which banks are offering Mudra Loans to the entrepreneurs?

The private sector banks, such as HDFC Bank, Axis Bank, ICICI Bank, and others, as well as the public sector banks like the Bank of India, State Bank of India, UCO Bank, Punjab National Bank, etc. give Mudra Loans to artisans, vendors, and startup companies. In addition, MFI (Micro Finance Institutions), regional rural banks, and foreign banks also provide Mudra Loans.

Do I need to deposit any collateral or security to get a Mudra Loan?

No, you do not have to provide any security or collateral to a bank for receiving a Mudra Loan.

Does any subsidy is present under Pradhan Mantri Mudra Yojana (PMMY)?

No. There is no subsidy under PMMY scheme. If a loan is associated with any kind of government scheme and the government is offering a subsidy, the subsidy would be present under PMMY scheme.

Can I apply for a Mudra Loan to purchase a taxi, tempo or an auto?

Yes, you can apply for Mudra Loan for purchasing a taxi or an auto if you are going to use your vehicle for public transportation only.

Does the application form of Mudra Loan have some specific format?

Yes, there is a difference in the format of the application form of Shishu, Tarun, and Kishore Loan schemes. The application form of Shishu Loan has a one-page format, whereas the application forms of Kishore and Tarun Loans have three-page format. All these forms are posted on the mudra website.

Is a differently-able person eligible to apply for a Mudra Loan?

If any Indian citizen has a business plan to accumulate income and they are meeting the criteria for Mudra Loan, they can get the Mudra Loan.

What is the repayment period of Mudra Loan?

The applicants of Mudra Loan can get a repayment time of five years. The best part of Mudra Loan is that the applicants would not face any difficulty to pay instalments to the bank as the interest rates are low.

Can an entrepreneur living in urban areas be eligible for Mudra Loan?

Yes, the entrepreneurs of the urban areas are eligible to get Mudra Loan for improving their business.

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