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Introduction

Pradhan Mantri Mudra Yojana was launched by PM Narendra Modi on April 8, 2015, for providing loans of up to Rs. 10 lakhs to the non-corporate units. MUDRA Loan facilitates financing the credit requirements of all non-farm income generating activities, under Pradhan Mantri Mudra Yojna (PMMY). The primary objective of this scheme is to provide loans to small and medium enterprises that are non-corporate, non-farming.

After agriculture, the country's largest economic sector consists of non-corporate micro-enterprises generating the bulk of the employment opportunities, estimated to be around ten crores, affecting 50 crore Indians' lives. They are mainly involved in manufacturing, trading, logistics and distribution and are commonly known as Proprietary or Own Account Enterprises (OAE) firms. This sector is rightly called the country's economic bulwark; however, it is known to be the world's largest unorganized business ecosystem. The MUDRA scheme under the aegis of PMMY aims to turn this huge sector into an institutional credit cluster, transforming it into a powerful tool for employment and GDP growth.

Who are eligible to get loans under the MUDRA Scheme?

MUDRA Loans are offered to these targeted customers/segments:

Individuals/MSMEs engaged in non-farm entrepreneurial activities; This includes, manufacturing, trading and service enterprises including professionals rendering services across the country. The business setup could be in rural, semi-urban, urban or metro centres.

The below list enumerates some of the activities eligible for a MUDRA Loan: 

Transport Vehicle

Purchase of transport vehicles for transportation of goods and passengers such as auto rickshaws, small goods transport vehicles, 3 wheelers, e-rickshaws, taxis, etc. 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.

Community, Social & Personal Service Activities

Salons, beauty parlours, gymnasium, boutiques, tailoring shops, dry cleaning, cycle and motorcycle repair shops, DTP and Photocopying Facilities, Medicine Shops, Courier Agents, etc.

Food Products Sector

Activities such as papad making, achaar making, jam/jelly making, agricultural produce preservation at rural level, sweet shops, small service food stalls and day to day catering / canteen services, cold chain vehicles, cold storages, ice making units, ice cream making units, biscuit, bread and bun making, etc.

Textile Products Sector / Activity

Handloom, powerloom, khadi activity, chikan work, zari and zardozi work, traditional embroidery and hand work, traditional dyeing and printing, apparel design, knitting, cotton ginning, computerized embroidery, stitching and other textile non garment products such as bags, vehicle accessories, furnishing accessories, etc.

Business loans for Traders and Shopkeepers

Financial support for lending to individuals for running their shops / trading & business activities / service enterprises and non-farm income generating activities with beneficiary loan size of up to 10 lakhs per enterprise / borrower.

Equipment Finance Scheme for Micro Units

Setting up micro enterprises by purchasing necessary machinery / equipment with per beneficiary loan size of up to Rs. 10 lakhs.

Activities allied to agriculture

'Activities allied to agriculture', e.g. pisciculture, bee keeping, poultry, livestock-rearing, grading, sorting, aggregation agro industries, diary, fishery, agri-clinics and agribusiness centres, food & agro-processing, etc. (excluding crop loans, land improvement such as canal, irrigation and wells) and services supporting these.

Check list of documents required to apply for the MUDRA Loan

  • Proof of identity - Self certified copy of Voter’s ID card / Driving License / PAN Card / Aaadhar Card/Passport.
  • Proof of Residence - Recent telephone bill, electricity bill, property tax receipt (not older than 2 months), Voter’s ID card, Aadhar Card & Passport of Proprietor/Partners/Directors.
  • Proof of SC/ST/OBC/Minority.
  • Proof of Identity/Address of the Business Enterprise; Copies of relevant licenses/registration certificates/other documents pertaining to the ownership, identity and address of the business unit.
  • Applicants should not be a defaulter in any Bank/Financial Institution.
  • Statement of accounts for the last six months, from the existing banker, if any.
  • Last two years’ balance sheets of the units along with income tax/sales tax return etc. (Applicable for all cases from Rs.2 Lakhs and above).
  • Projected balance sheets for one year in case of working capital limits and for the period of the loan in case of term loan (Applicable for all cases from Rs.2 Lakhs and above).
  • Sales achieved during the current financial year up to the date of submission of application.
  • Project report (for the proposed project) containing details of technical & economic viability.
  • Memorandum and Articles of Association of the Company/Partnership Deed of Partners etc.
  • In absence of third party guarantee, Asset & Liability statements from the borrower including Directors& Partners may be sought to know the net-worth.
  • Photos (two copies) of Proprietor/ Partners/ Directors.

What are the types of loans offered under the MUDRA Scheme?

Mudra loans are meant for very small business units. Anyone who runs a small business enterprise is eligible to apply for mudra loan. Financing under the MUDRA Loan is mainly of 2 types:

1. Firstly, a Micro Credit Scheme, mainly provided to different micro-enterprises and small businesses through microfinance institutions (MFIs), which provide the loan to a total of 1 lakh. Even if the distribution model can be made through SHGs / JLGs / individuals, the MFIs provide loans to individual entrepreneurs for unique revenue generation micro / small enterprises.

2. The second one is the Refinance scheme for Banks. Various banks such as Commercial Banks, Local Rural Banks, Small Finance Banks, and NBFCs are eligible for MUDRA refinancing help to fund micro-enterprise activities. This refinancing, which is mainly for term loan and working capital loan, is available up to a sum of Rs.10 lakhs per unit. To make it easier, the scheme is streamlined into 3 categories:

Shishu: Start-ups seeking a loan up to an amount of Rs. 50,000 can apply for a loan under this classification. The rate of interest would be 10–12%.

Kishor: Unestablished business units seeking a loan amount of Rs. 50,000 up to Rs.5 lakhs can apply for a loan in this category and will have to bear an interest rate of 14–17%.

Tarun: Established businesses looking for expansion of their existing unit can apply for a loan under this category with funding of up to Rs. 10 lakhs. The interest rate ranges above 16%.

Who are the implementation agencies to disburse the MUDRA Loans?

Since Mudra itself is not a bank, the loans under Mudra scheme can be availed only through banks and other lending institutions which include:

  • Banks in public sector
  • Banks in private sector
  • State operated cooperative banks
  • Rural banks from regional sector
  • Institutions offering micro finance
  • Financial companies other than banks

FAQs: MUDRA Loan Eligibility

1. How do I apply for a Mudra Loan?

There are two ways to apply for a MUDRA Loan:

  • Online on the Udyami Mitra Portal / Mudra Mitra Portal or the official websites of banks and NBFCs offering this scheme. You fill in the details and upload the documents online.
  • Offline through the Bank or Financial Institution where you want to avail the loan from. You fill in the details on a paper form and submit the documents physically at your nearest branch.

2. Is MUDRA only for rural people or can people in urban areas also apply for a Mudra loan?

MUDRA loan caters to entrepreneurs from both the rural and urban areas. People in urban areas can also apply for a Mudra loan.

3. Do I need to submit any collateral for the MUDRA loan?

RBI has mandated that all loans up to Rs. 10 lakhs to the MSME sector will not need any collateral. Hence, MUDRA loans do not require any security or collateral. However, the lending bank may require the borrower to hypothecate (pledge) the stocks, machinery, movables, or any other items acquired with the money from the Mudra loan.

4. Is there an age limit to apply for Mudra loan?

The age limit to apply for MUDRA loans is specific to the banks. The general guideline is that, minimum age to apply for a Mudra loan is 18 years at the time of loan application and maximum age is up to 65 years at time of loan maturity. However, applicants should check with the bank or lending institution before submitting the application.

5. What is the minimum and maximum loan amount one can get under the MUDRA scheme?

Eligible borrowers can get loan amounts of Rs. 50,000 up to Rs. 10 lakhs under the MUDRA Scheme.

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