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Mudra has become a very common and foremost name in the field of MSME lending. Mudra loans are part of the Pradhan Mantri Mudra Yojana initiated by the Honourable Prime minister in the year 2015. The scheme is targeted for the small businesses that generally face borrowing issues on account of lower requirement of loan amount or on account of inadequate documentation or collateral. This scheme aims to address all the issues faced by the micro, small and medium businesses while seeking funds to start a new organization, sustain it or even grow.
About Mudra Loan Documents
The eligible persons under this scheme are the small businesses that are considered as MSME units as per the MSMED Act, 2006. This includes all the businesses involved in manufacturing, trading, service related activities or even agriculture allied activities provided they are income generating avenues.
The applicant is required to be between the ages of 18 years and 65 years to be eligible for a loan under the scheme and should possess the necessary skill or qualification or talent to set up a new business and to sustain it and eventually grow.
Another important requirement is that the applicant should not have been a defaulter with any financial institution.
The list of eligible applicants under the scheme can be found below.
The above list is not exhaustive in nature, it is a merely suggestive list.
The documentation process for Mudra loans under PMMY is very simple, quick and hassle free requiring minimum documents in order to shorten the processing time of the loan. This is to ensure that maximum MSME units can avail the benefit of the loans under PMMY and are not turned away by the lender for want of unnecessary and extra documentation.
The details of documents required under PMMY are,
Some lenders require a few additional documents if the loans are required for working capital or if the loan is sought under Kishor or Tarun Loan Schemes. These additional documents are detailed as under.
Documents relating to Business Proof
Details relating to the existing and proposed Banking and Credit facilities of the borrower
Details required in case of Term loan for purchase of an Asset or equipment
Some of the features that make PMMY a very sought after scheme by the small businesses are highlighted below.
The loans under the PMMY are categorized under three heads/schemes. The basis of these categories is the amount of loans as well as the purpose of loans i.e. the stage of the business for which the loan is required.
Loans under this scheme are for the very first stage of business, the beginning. Borrowers can get up to Rs. 50,000 as loans under this scheme. The rate of interest is comparatively lower than the other schemes under PMMY. The tenure of the loans can be up to 5 years.
This scheme is for the business sustenance stage. Loans under this scheme can be for working capital or a term loan or a combination thereof. The tenure of the loan is up to 5 years but can be increased up to 7 years at the lender’s discretion. The loan amount available under the scheme is from Rs. 50,001 to Rs. 5,00,000.
This is the highest loan scheme available under PMMY. Loans under this schema can be from Rs. 5,00,001 to Rs. 10,00,000. The rate of interest is higher as compared to the previous two schemes under PMMY and also the tenure can be extended to 7 years at the bank’s discretion from the normal tenure of 5 years available in general. Borrowers can seek loans under this scheme for growing their business organization, development of a new line, diversification or expansion or buying as new plant and machinery or equipment that will lead to a growth of the business unit
Rate of interest
The rate of interest under PMMY is usually lower as compared to other business loan products offered by the Banks and the NBFCs. The rate of interest generally starts from 8.65% and goes upwards depending on the lender and the scheme. Recently the Government of India has provided a relief to the small businesses that are hit by the ongoing Coronavirus Pandemic in the form of an interest subvention of 2% on loans under the Shishu scheme. This measure will provide huge relief to the small entities that are going to face huge issues due to suspension of business activities during the lockdown as well as the demand issues post it.
Loans under PMMY are collateral free. This ensures easy and timely access to the funds for the small business owners and ensures that their ownership remains intact and is not diluted for want of collateral by the lending institutions.
The tenure for Mudra loans can be from 3 years to a maximum period of 5 years across all the schemes under PMMY. The tenure can be further extended to maximum 7 years upon a request by the borrower to the lender and at the lender’s discretion.
The processing cost under PMMY is zero or a nominal charge as a percentage of the loan amount depending on the lender.
1. What is the minimum amount of loans under PMMY?
There is no minimum amount of loan specified under PMMY.
2. What are the basic KYC documents required for Mudra Loans?
The basic KYC documents for Mudra Loans are,
3. What is the turnaround time of Mudra Loans?
The turnaround time of Mudra Loans is 24-48 hours maximum as these loans require lesser processing time.
4. Who can avail Mudra Loans?
Mudra Loans can be availed by any small business units registered under MSMED Act, 2006.
5. What is the maximum loan available under Mudra Scheme?
The maximum amount of loans under Mudra Scheme is Rs. 10,00,000.
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