Mudra Loan Eligibility

MUDRA or Micro-Units Development and Refinance Agency was started in April 2015 just to offer financial assistance to micro and small business units under PMMY, also known as the Pradhan Mantri Mudra Yojana. The scheme first began with a total budget of 20,0000 Crores. Mudra is also called Mudra Bank Scheme or Mudra Loan Yojana. All the credit products are provided to borrowers by MUDRA and these credit products all called Mudra loans.

The Mudra loans are categorised into three kinds depending on the requirements of businesses in the small, micro, and medium enterprises (MSME). The three kinds of Mudra loans are Shishu loan, Kishore loan, and Tarun loan. The slight differences are present in the application process and eligibility criteria of banks to apply for these loans. You have only 5 years of repayment tenure to payback the borrowed amount. Small-scale business owners can easily repay the loan amount, as the interest rates are not very high. One of the objectives of developing the Mudra scheme is to improve India's economic condition and growth of India's MSMEs in the future.

Mudra Loan Eligibility Criteria

The eligibility criteria to avail for Mudra loan are given as follows:

  • Mudra loan is provided to the citizens of India only. The Indian citizens of remote, urban, and rural areas can get Mudra loan to run their small-scale company or partnership business. In addition, MSMEs belonging to the urban and rural areas can get this loan.
  • You can get 50, 000 as a minimum loan amount for your startup business
  • If you require money for expanding your existing business, you can receive the maximum loan amount of at least 10 Lakhs and not more than that.
  • All your documents ought to have authenticity and validity at the time of submission
  • You have to provide security or collateral to banks in case of other loans. However, when you are applying for a Mudra loan to NBFCs and banks, you do not need to have any collateral.
  • The artisans, business people working in the manufacturing unit, farmers, vendors of fruits, and vegetables can get Mudra loans.
  • Those business owners, who belong to low-earning groups can avail Mudra loan for their micro or small businesses.

The target of Mudra loans is not only to assist the MSMEs of India, but also for assisting backward classes, women, tribals, minorities, Dalits. The Government of India is focusing on these segments as people included in the segments of minorities, tribals and others often do not get financial aid to start their businesses.

Some sectors are present that acts as the eligibility criteria and a business owner should meet this criterion just to apply for a Mudra loan.

The borrowers belonging to the following sectors can get loan under Mudra loans:

Distinct sectors The activities that are covered under Mudra loans

Food

An applicant can apply for a Mudra loan for buying machinery or setting up a business in biscuit and bread, jam and jellies, and so on.

Agriculture

You can be able to begin, establish grow your agriculture-allied business as a dairy farm, a poultry farm, a livestock farm by taking a Mudra loan.

Textile

You can get Mudra loans if you are an artisan, who plans to start, expand or establish a business in embroidery, knitting, zari work, and stitching.

Service

You have the ability to take a Mudra loan if you set up your salon, dry cleaning, photocopying facility, and chemist shop.

Transport

You have the ability to apply for Mudra loans if you buy goods including e-rickshaw, taxi, auto rickshaw, and so on.

Types of Mudra Loans

There are three kinds of Mudra loans and they are discussed as follows:

Shishu Loan: The Shishu loan is a child category of Mudra loan and it is suitable for small-sized start-ups. An owner of the micro business can apply for Shishu loan to get a loan amount of at least 50, 000. This loan can assist business owners to get a low amount of capital for starting a business in the sector of MSME. A borrower has to state their business idea with the application form to get Shishu loan.

Kishore Loan: The Kishore loan is ideal for every small business owner, who has to begin their business and is trying to get financial support to have a big enterprise. The business owners can get the loan amount within a range between 50, 000 to 5 Lakhs under Mudra loan category. You have to complete the application process of your Mudra loan and provide the required documents to the bank to show your company's present position for getting approval for Kishore loan.

Tarun Loan: The Tarun loan is included in the PMMY (Pradhan Mantri Mudra Yojana) and it is offered to small scale businesses, which are already established in the small business sector of India. If a small business owner needs cash for expanding their business just to become more successful in the business world, the person can get the Tarun loan. Every business owner can receive the loan amount between 5 Lakhs to 10 Lakhs. You can get such a loan after filling up the application form of Mudra loan. You have to submit ID proofs to show the current position of your company so that you can meet the eligibility criterion to avail for Tarun loan.

Just keep in mind that the loan amount for the above three categories of Mudra loans are fixed. However, the interest rates on these loans can differ depending on the bank from which you are taking the Mudra loan. Check out the documents needed by a wide range of banks before applying for the Mudra loan.

Overview of Mudra Loans

Purpose

To aid new and existing businesses through funding for expansion or improvement.

Quantum

Between 50,000 to 10 Lakhs

Loan term

Repayable within 60 months (5 years). This includes repayment holidays of 2, 3 or 6 months as per business sector or nature of business.

Margin

Loan up to 50,000: Margin is NIL

Loan of 50,000 - 10 Lakhs: Margin is 10% of loan amount

Security

Hypothecation of the assets for which finance is being taken, no collateral or guarantee required.

Interest

At present: 8.40% + 2.75%  (1 yr MCLR + 2.75%) = 11.15%

A co-branded Mudra Card is issued to the applicant and the same can be used across POs and ATMs for cash withdrawal as and when required.

Features and Benefits of MUDRA Loans

Mudra loan features are designed to ensure that the loan is easily available at banks or institutions with which collaborations have been done. Take a look:

  • Flexible loan amount: The Mudra loans aid faster development of micro enterprises and thus, facilitate employment. This scheme provides loan to any agricultural or non-corporate firm, classified as small/micro industry. The finance can go up to 10 Lakhs based on the requirements for set up and functioning of the business.
  • Mudra loans find utility across an array of business needs: You can avail loan to buy equipment, purchase vehicles for transportation of goods, and allied agricultural activities. Even manufacturing units benefit from these loans as much as retailing and service related businesses. These loans spread to the textile sector, food, and even social service related firms.
  • Mudra Loans offer term loan as well as working capital: Besides a maximum term loan of 10 Lakhs, Mudra loans also offer financial help to support day-to-day business activities through working capital loans. This is available through the MUDRA debit card, which is easy to swipe across an array of ATMs and POS across the country.
  • Mudra loans offer developmental support to entrepreneurs: It helps assist businesses build an ecosystem which facilitates building a skilled workforce for sustainable growth. Therefore there are Mudra business literacy programs running in addition to others such as finance counselling, or programs for skill development.
  • Mudra Loans are collateral-free: This aspect makes them easy to manage loans as no collateral is required and the loans are made secure via a credit guarantee scheme requiring an annual fee only.
  • Affordable loans: Low interest rates make these loans highly affordable even by small businesses

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