What is Mudra Loan?
The lack of institutional monetary support from the banks and financial sector is one of the most significant barriers for SMEs in India. MUDRA Bank, a SIDBI affiliate, has been established to eliminate this barrier and finance micro-enterprises.
The PMMY (Pradhan Mantri Mudra Yojana) is a leading Indian government scheme to support micro and small business enterprises with adequate credit. MUDRA provides loans under three different kinds of schemes. These Schemes (programs) are Shishu, Kishor, and Tarun, based on the micro unit’s developmental period and financial needs. Micro Businesses and Entrepreneurs in India are eligible to apply for this type of loan.
The refinancing of the entire financial institution involved funding small businesses, corporations, trusts, cooperatives, rural banks, scheduled commercial banks, and microfinance institutions that lend to micro-or small-scale enterprises involved in manufacturing, trading, and services activities responsible for MUDRA.
Mudra loans are meant to “fund the unfunded” or bring projects into the formal financial structure. Non-agriculture, minor or small businesses that generate income through manufacturing, trading, or key services can apply for PMMY credits. Mudra loans are also available to enterprises engaged in associated agricultural activities.
Mudra Loan Eligibility
To apply for MUDRA loans, an Indian citizen must be a resident of India and have a business plan for non-farm revenue-generating activities like manufacture, processes, trade, or services (PMMY). To obtain MUDRA loans, one must adhere to the lender’s terms and conditions. The loan rates are determined under the recommendations set by the RBI’s periodic instructions in this regard. As a refinancing institution, MUDRA does not make loans directly but rather through established NBFCs, Financial Companies, Banks, and Principal Lending Institutions.
MUDRA loans are offered in a MUDRA card, enabling borrowers to obtain credit easily and conveniently via a RuPay card. The MUDRA card is used to withdraw cash from ATMs or make purchases using credit card swipe machines. Additionally, the MUDRA card enables redemption of the balance and permits the reimbursement of the surplus, thereby lowering the interest load.
- Mudra loan eligibility: The Applicants must be at least 18 years old and 65 years old or below.
- All eligible are innovators, corporate owners, entrepreneurs, small and medium-sized enterprises (SMEs), and micro and small enterprises (MSMEs).
- Additionally, traders, artisans, manufacturers, and retailers engaged exclusively in the trading, service, and manufacturing industries are eligible.
- Applicants with an excellent repayment history are preferred.
- Individuals who fall under the SC/ST/OBC categories
- Women Entrepreneur
- Applicants who have never defaulted on a loan with a bank
Loans are now being issued through three initiatives under the Pradhan Mantri MUDRA Yojana. Specifically, the three schemes are as follows:
- Shishu: Up to Rs.50 000 loan
- Kishor: Rs.50, 000-Rs.5 lakh loans
- Tarun: Rs.5-10 lakh loans
Mudra Loan Documents Requirement
A Mudra loan requires the following documentation.
Mudra Loan Documents required for Shishu Scheme
- Proof of identity – A self-certified photocopy of a voter identification card, a driver’s license, a PAN card, an Aadhaar card, a passport, other government-issued photo ids, etc.
- Proof of Residency – Recently phone bills, an electricity bill, property tax receipts, a voter identification card, an Aadhaar card, an individual’s/proprietor’s/partners’ passport, and a certificate issued by a government authority/local panchayat/municipality, among others.
- Latest Photograph of the Applicant (2 copies) that is not more than 6 months.
- If appropriate, proof of SC/ST/OBC/minority category.
- Identity proof / detailed business address – if available.
- Account Statement from the current banker for the past six months, if available.
- The price quote for machinery/other equipment
Mudra Loan Documents required for the Kishore and Tarun Schemes
- Identity proof – Self-certified copy of Voter’s ID/Driving Card/PAN Card/Aadhaar Card/Passport/Photo ID issued by government authorities, etc.
- Residential Proof – recent telephone receipts, electricity bills, property tax receipts, Voter’s ID card, Adhaar card, Individual / Owner / Partner Passport, Government Authorities / Local Municipality’s Certification, etc.
- If appropriate, proof of SC/ST/OBC/minority category.
- Identity Proof / Address Proof of the Business Enterprise – Copies of applicable permissions/registration papers/leases or rent agreements / other documents attesting to the business unit’s possession, identity, and address / Udyog Aadhaar Memo.
- Account Statement from the current banker for the previous six months, if available.
- Unaudited balance sheets of existing units for the preceding two years, as well as income tax/sales tax returns, etc. (Applicable for loans of Rs. 2 lacs and above).
- Projected balance sheets of new/existing units for one year for working capital constraints and the loan period for term loans.
- The application must be submitted within the current financial year.
- Financial statement Invoices/Quotations for items to be acquired and, if applicable, calculations for civil works. Where appropriate, the borrower might discuss the aspects of technical feasibility and financial viability.
- Statement of the Borrower’s Assets and Liabilities.
- Where appropriate, the company’s Memorandum and Articles of Association/Partnership Deed of Partners.
- Recent photos of the applicant/Proprietor/Partners or Directors (two copies).
Mudra Loan Interest Rates
The Mudra loan interest rate is established in the Schemes and RBI rules. A loan from a commercial bank to disburse an E-Mudra loan to a micro-unit will have an interest rate determined at the standard rate or MCLR (Marginal Cost of funds based lending rate) by the Central Bank. The loan rate specified for Regional Rural and Schedule Cooperative Banks shall be between 3.5 percent but shall not exceed the Mudra refinance rate.
The interest rate and processing charge are subject to vary based on the RBI policy. This list does not include the GST, and an extra service charge will be added.
A number of factors determine the interest rate on a Mudra loan.
- The individual’s credit history
- Customer profile
- The customer’s business requirements
- The Schemes and RBI guidelines.
Based on the segments, the Mudra loan interest rates are as follows:
- Shishu – The interest rates differ from 1% to 12%.
- Kishor – The interest rates differ from 8% to 12%
- Tarun – Interest rates differ between 11% and 20%
FAQs on Mudra Loan
Q.1: What does MUDRA mean?
The Indian government founded MUDRA (Micro Units Development and Refinance Agency Ltd) to provide financial help to microenterprises. The PM MUDRA loan aims to assist small businesses with financing facilities via several financial organizations, including banks and NBFCs.
Q.2: What is the maximum amount that can be borrowed under a MUDRA loan?
After submitting the relevant paperwork, you can acquire a maximum of Rs.10 lakh at a minimal interest rate.
Q.3: What is the complete procedure for applying for a Mudra Loan?
- To propose the Mudra Yojana business plan, contact the local public or private bank in your area.
- You need to submit a complete description of the plan.
- The bank will ask you to complete an application form.
- If the applicant already has a current account with a bank or is first-time entrepreneurship, the application will be processed swiftly.
Q.4: Can women get MUDRA loans easily?
MUDRA funding is available to women entrepreneurs as part of the government’s efforts to encourage female entrepreneurship. A MUDRA loan credit of up to Rs.10 lakh is available to female entrepreneurs who run non-farm businesses like manufacturing or service sectors.
Q.5: In India, are Digital Signature Certificates legally acceptable?
Yes, Digital Signature Certificates are legally recognized in India following the Information Technology Act 2000. Certifying Authorities issue Digital Signature Certificates. eMudhra offers Digital Signature Certificates online.