Updated on 21 January, 2021
Do you want to start a new business but short of funds?
You can now start a business without worrying about funds or high-interest loans because of the Indian govt. is providing loans for MSMEs (Micro, Small and Medium Enterprises) at low-interest rates.
Let’s dig deep into MUDRA Yojana.
What is Pradhan Mantri MUDRA Yojana?
Pradhan Mantri MUDRA Yojana (PMMY) is a government initiative to provide loans up to 10 lakh to the non-corporate, non-farm small or micro-enterprises. These loans are given by Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs. You can approach any of the lending institutions mentioned for the MUDRA loan. You can also apply it online through www.udyamimitra.in.
Main features of PMMY
- No collateral security is required.
- No loan processing fee.
- Repayment of a loan in a maximum period extended up to 5 years.
- Working capital loans will be given through MUDRA cards.
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What is the main objective of the MUDRA Yojana?
Main objective of PMMY is to promote entrepreneurship among the new generation aspiring youth. Other key objectives are-
- Helping the small businesses to grow in India
- Easy access to finance and lowering the cost of finance
- Lending preference to SC/ST and minorities
- Assisting lower-income groups in expanding their business
Types of Loans under Mudra Yojana
Under Mudra Yojana, three types of loans are offered:
- Shishu: covers loans up to Rs. 50,000
- Kishor: provides loans above Rs. 50,000 and up to Rs. 5 lakh
- Tarun: covering loans above Rs. 5 lakh to Rs. 10 lakh
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Who are eligible to avail loans under Mudra Yojana?
Any Indian Citizen who has a business plan or extension plans for a non-farm sector income generating activity such as manufacturing, processing, trading or service sector and whose credit need is less than Rs.10 lakh can approach either a Bank, MFI, or NBFC for availing collateral-free loans under Pradhan Mantri Mudra Yojana (PMMY).
The applicant should not be a defaulter of any banks, NBFCs or Financial Institutions to avail loan under any Mudra category (Shishu, Kishor or Tarun).
Purpose of Mudra Loan Yojana
Mudra loan caters a variety of purposes resulting in not only income generation but employment creation also. The loans handle the following purposes:
- Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities
- A working capital loan through MUDRA Cards
- Equipment Finance for Micro Units to set up machinery.
- Transport Vehicle loans (including car loan) – for commercial use only.
- Loans for agri-allied non-farm income-generating activities, e.g. pisciculture. beekeeping, poultry farming, and many more.
- Tractors, tillers as well as two-wheelers used for commercial purposes only.
Mudra Cards are issued by the Banks either directly or in association with MFIs. Mudra cards are basically RuPay Debit Card
You can withdraw cash from any ATM or purchases can be made either online or at POS machines like any normal debit card.
Sectors covered under MUDRA loans:
1) Transport Vehicle
Loan to purchase of transport vehicles for transportation of goods and passengers such as auto-rickshaws, small goods transport vehicles, 3 wheelers, e-rickshaws, and taxis.
Tractors/Tractor Trolleys/Power Tillers used only for commercial purposes are also eligible for assistance under PMMY.
Two Wheelers used for commercial purposes are also eligible for coverage under PMMY.
2) Community, Social & Personal Service Activities
You can get Mudra loans for salons, beauty parlors, gyms, boutiques, dry cleaning, cycle or motorcycle repair shops, Printing Press and Photocopying Facilities, Medicine Shops, Courier Agents, and similar services.
3) Food Products Sector
Mudra loan covers papad making, achaar making, jam/jelly making, agricultural produce preservation at the rural level, sweet shops, small eating joints and day to day catering/canteen services, cold chain vehicles, cold storages, ice and ice cream making units, and bakery units.
4) Textile Products Sector
Handloom, khadi activity, embroidery work (chikan work, zari and zardozi work, traditional embroidery and hand work), traditional cloth dyeing and printing, apparel design, knitting, cotton ginning, computerized embroidery, stitching and other textile non-garment products such as bags, vehicle accessories, and furnishing accessories.
5) Business loans for Traders and Shopkeepers
Lending support to individuals for running their shops and business activities or service enterprises and non-farm income-generating activities with a beneficiary loan size of up to 10 lakh per enterprise.
6) Equipment Finance Scheme for Micro Units
Setting up micro-enterprises by purchasing necessary machinery or different types of equipment up to 10 lakh as a loan amount.
7) Activities allied to agriculture
‘Activities allied to agriculture’ are pisciculture, beekeeping, poultry, livestock-rearing, grading, sorting, aggregation agro industries, diary, fishery, agri-clinics, and agribusiness centers, food & agro-processing and services supporting these, which promote livelihood are eligible for coverage under PMMY.
PMMY doesn’t cover crop loans, loans for land improvements such as canal, irrigation, and wells.
Mudra Loans Interest Rates
The interest rates on loans will be 1% per month i.e. 12% per annum. Some interest rate examples with tenures are-
|Bank of Baroda||8.40% to 9.25%||1-3 years|
|Bank of Maharashtra||10.35% onwards||1-3 years|
|Bank of India||8.35% onwards||1-3 years|
|UCO Bank||8.85% to 10.85%||4-5 years|
|Union Bank of India||8.75% to 10.00%||1-5 years|
|HDFC||As per bank guidelines||1-5 years|
|ICICI Bank||As per bank guidelines||1-5 years|
|Allahabad Bank||As per bank guidelines||1-5 years|
|Canara Bank||As per bank guidelines||1-3 years|
|Central Bank||As per bank guidelines||1-3 years|
|IDBI Bank||As per bank guidelines||1-5 years|
|Oriental Bank of Commerce||As per bank guidelines||1-5 years|
|State Bank of India||As per bank guidelines||1-5 years|
How to Apply for Bank Loan under Mudra Yojana in India
You can approach any of the lending institutions mentioned for the MUDRA loan. You can also apply both online and offline.
#1. How to Apply for Mudra Loan Online
Step 1: Visit www.mudramitra.in and click on ‘Login’ Menu on the right corner of webpage and click on ‘Applicant’. (You can also apply the same procedure at www.udyamimitra.in)
Step 2: From now onwards, you have to complete a 4-step procedure to apply for Mudra loan (as shown in image below). Click on ‘New User’ to register a user id for Mudra loan application.
i) Enter the loan amount and select scheme under which you are going to get loan. (Without entering loan amount, scheme will not be visible)
If you still not clear about the scheme you can click on the ‘Assess your Scheme Suitability’ button and get details about scheme.
ii) Fill the details as shown above and you will be able to calculate about which category scheme and in which range you are eligible for the loan.
Step 3: Login to Mudra Loan Portal. Password will be sent to your registered email id. You can change your password on first login attempt. Once logged in, you can ‘Select Handholding Agency’ that will guide you for the loan related processes.
A Hand holding agency help borrowers in completing lending process. Apart from linking prospective borrowers to banks for loans, they also
provide support through training, skill development, mentoring, project report preparation to help entrepreneurs set up his business.
Step 4: Click on ‘Fill Application Form & Apply’ button as shown in the above image. Fill the application form and click on ‘Next’. You have to complete 6 different pages of the application form to complete the process.
After completion of application process, you will be redirected to a new page where you can fill details of the lending institution and complete the application process.
You can take print out of the form for further use.
#2. How to Apply for Mudra Loan Offline
In offline mode, loans under Mudra Yojana are offered by:
- 27 Public Sector Banks
- 17 Private Sector Banks
- 31 Regional Rural Banks
- 4 Co-operative banks
- 36 Microfinance Institutions
- 25 Non-Banking Financial Institutions
You can reach out any public sector bank or institution metioned in above list to get Mudra loan.
Application form for Shishu Loan under Mudra Yojana
At least 60% of the loans under Mudra Yojana are applied under Shishu Category and the remaining 40% is to be awarded under Kishore and Tarun Catergories.
Application form for Shishu Loan looks like the image below.
What Documents are Required for Mudra Loan (Shishu/Kishore/Tarun)
You require the following documents to be submitted along with the MUDRA loan application form:
- Proof of Identity: Self-attested copy of Voter ID card/driving license / PAN card / Aadhar card / Passport / Photo ID issued by Govt. authority.
- Proof of Residence: Recent telephone bill / electricity bill / Property tax receipt (not older than 2 months) / Voter ID card / Aadhar card / Passport / Bank statement duly attested by Bank Official.
- Loan applicants recent Passport size Photographs (2 copies).
- Quotation of Machinery / other items to be purchased (if any).
- Name of supplier/details of machinery/price of machinery and/or items to be purchased.
- Proof of Identity / Address of Business Enterprise – Copies of relevant Licenses / Registration Certificates / other documents pertaining to the ownership identity and address of the business unit (if any).
- Proof of category like SC / ST / OBC / Minority (if applicable).
Where to approach for help regarding Mudra Loan
Visit the local branch of the public sector banks in your region (or other financial institutions that I mentioned earlier) for help related to Mudra Yojana. You can also register on the Mudra website and seek guidance from the hand-holding agency.
You can approach to the Nodal Officers at various SIDBI Regional offices/Branch Offices who are referred to as first contact persons for loans under MUDRA Yojana.
I have tried to cover all the major aspects of Mudra Yojana along with the online application process in a step by step manner. Tell me your thoughts or queries related to Mudra Loan in the comments.