Mudra Loan Scheme Details In India – Eligibility, Application Process

ByNext What Business Research Team Finance
mudra loan scheme details

Do you want to know more about Mudra Loan? If yes, you are in the right place. Many individuals across India aspiring to become entrepreneurs face a common hurdle of lack of access to capital, especially those from financially underserved backgrounds. This is where the Pradhan Mantri Mudra Yojana (PMMY), commonly known as the Mudra Loan Scheme, steps in to bridge the gap.

What is the Mudra Loan Scheme?

The Mudra Loan Scheme is a flagship initiative aimed at facilitating the financial needs of small and micro-businesses was  Launched in April 2015 by the Government of India. It is aimed particularly at those who are run by individuals from marginalized communities and economically weaker sections of society.

Read: Best Business Loans in India

“Mudra” stands for Micro Units Development and Refinance Agency. It signifies its primary objective of promoting micro and small enterprises (MSEs). The vision of this funding program is ‘Funding the Unfunded’. Small organizations, companies, and startup entrepreneurs of micro-units in India face a lack of formal financial support in the starting or growing stage of their small businesses.

Key Objectives

The Mudra Loan Scheme has several key objectives:

  • Promoting Entrepreneurship: The scheme encourages entrepreneurship among individuals, especially women, Scheduled Castes (SCs), Scheduled Tribes (STs), and Other Backward Classes (OBCs).
  • Financial Inclusion: It strives to bring individuals who are outside the formal banking system into the mainstream by providing them with access to credit.
  • Job Creation: By supporting the growth of micro and small businesses, the scheme contributes to employment generation.
  • Economic Development: It aims to foster economic growth at the grassroots level by supporting small businesses.

Categories of Mudra Loan

The Mudra Loan Scheme offers three categories of loans based on the stage and financial requirements of the business:

  • Shishu: This category is for entrepreneurs looking for seed capital to start a new business. The loan amount can go up to Rs. 50,000.
  • Kishore: Individuals who require additional funds for expanding their existing businesses can opt for Kishore loans. The loan amount ranges from Rs. 50,001 to Rs. 5 lakh.
  • Tarun: This category is suitable for established businesses looking to further expand their operations. Entrepreneurs can access loans from Rs. 5,00,001 to Rs. 10 lakh.

Mudra Bank Loan Eligibility Criteria

To avail of a Mudra loan, an applicant must:

  • Be an Indian citizen.
  • Have a concrete business plan and estimated project cost.
  • Not have a history of defaulted loans with any financial institution.

The business should be either one of the following:

  • Small manufacturing enterprise
  • Shopkeepers
  • Fruit and Vegetable vendors
  • Artisans
  • ‘Activities allied to agriculture’, e.g. pisciculture, beekeeping, poultry, livestock, rearing, grading, sorting, aggregation agro industries, diary, fishery, agri clinics, and agribusiness centers, food & agro-processing, etc. (excluding crop loans, land improvements such as canal, irrigation, and wells).

Features of Mudra Loans

The Mudra Loan Scheme comes with several salient features that make it attractive for budding entrepreneurs:

  • Collateral-Free Loans: One of the most significant advantages is that Mudra loans are collateral-free, reducing the burden on borrowers to provide valuable assets as security.
  • Low-Interest Rates: The interest rates on Mudra loans are competitive, making them accessible to a wide range of entrepreneurs.
  • Flexible Repayment Terms: Borrowers can choose the repayment tenure that suits their business needs, ensuring manageable EMIs.
  • Quick Processing: The loan application and approval process is designed to be swift and efficient, enabling entrepreneurs to access funds when they need them.

Application Process

Applying for a Mudra loan is a straightforward process:

  1. Visit a participating bank or financial institution.
  2. Fill out the Mudra loan application form.
  3. Submit the necessary documents, including identity and address proof, business plan, and estimated project cost.
  4. Await approval and disbursement of the loan amount.

Therefore, to get a Mudra bank loan you will need to contact your nearest public or private bank. To contact a Mudra bank loan nodal officer (State Wise), you can Click Here.

You can also apply for a Mudra Loan online on the “Udyamimitra” Portal (www.udyamimitra.in) by registering yourself and your application shall be viewed by many lenders for credit support.

Where to Apply for Mudra Loans

The loans under the MUDRA scheme can be availed only through banks and lending institutions which include:

  • Public Sector Banks
  • Private Sector Banks
  • State-operated cooperative banks
  • Rural banks from the regional sector
  • Institutions offering microfinance
  • Financial companies other than banks

The Pradhan Mantri Mudra Yojana, also known as the Mudra Loan Scheme, has become a potent tool for promoting entrepreneurship and financial inclusion in India. Numerous people, especially those from marginalized communities, have been given the opportunity to avail of collateral-free loans with competitive interest rates and flexible terms to start and run small business ventures. It goes without saying that the scheme holds the promise of a better and more lucrative future as it develops and grows for ambitious business owners around the nation,

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Frequently Asked Questions (FAQs)

Is collateral required for Mudra loans?

No, one of the significant advantages of Mudra loans is that they are collateral-free. Borrowers are not required to provide assets or property as security for the loan.

What are the interest rates for Mudra loans, and can they vary?

The interest rates for Mudra loans are determined by the lending institutions, which can include banks, NBFCs, and MFIs. These rates often fall within the range of 9% to 12% per annum. The specific interest rate may vary based on factors such as the loan amount, the applicant’s creditworthiness, and the lending institution’s policies.

How can I apply for a Mudra loan, and what documents are required?

To apply for a Mudra loan, visit a participating bank or financial institution. Fill out the Mudra loan application form and provide the necessary documents, including identity and address proof, business plan, and estimated project cost. Each lending institution may have specific document requirements, so it’s advisable to inquire with them directly.

What is the repayment tenure for Mudra loans?

Mudra loans typically offer flexible repayment tenure options to borrowers. The loan tenure can vary from one lending institution to another, but it often ranges from 3 to 5 years, allowing borrowers to choose a repayment schedule that suits their business needs.

Are there any subsidies or concessions available under the Mudra Loan Scheme?

Yes, borrowers, especially those belonging to priority sectors or marginalized communities, may be eligible for interest rate subsidies or concessions as part of government initiatives. Specific eligibility criteria for such benefits may apply, and applicants should check with their lending institutions for details.

Can I apply for a Mudra loan if I have a bad credit history or previous loan defaults?

The Mudra Loan Scheme aims to provide access to credit for a wide range of individuals. While a poor credit history may affect your eligibility for some loans, it’s advisable to discuss your situation with the lending institution. Some institutions may consider other factors in addition to credit history when evaluating loan applications.

Can I use a Mudra loan for any type of business or project?

Mudra loans are intended for micro and small business ventures across various sectors. However, it’s essential to ensure that your business or project aligns with the objectives and guidelines of the scheme. Be prepared to provide a clear business plan and project details when applying.

How long does it take to get approval and disbursement of a Mudra loan?

The time required for loan approval and disbursement may vary depending on the lending institution’s processes and workload. In many cases, Mudra loans are designed for quick processing, and borrowers can expect a relatively swift approval and disbursement process compared to traditional loans.

These FAQs provide valuable information for individuals interested in availing of Mudra loans to support their entrepreneurial endeavors. However, it is strongly advised to consult with lending institutions and relevant authorities for the most accurate and up-to-date details on the Mudra Loan Scheme’s terms and conditions.

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