The Pradhan Mantri Mudra Yojana (PMMY) is a scheme launched by the Government of India in 2015 to provide loans up to 10 lakh rupees to non-corporate, non-farm small/micro enterprises. Mudra stands for Micro-Units Development and Refinance Agency.
Mudra loans are collateral-free and the interest rates are reasonable. There are three types of loans under PMMY: Shishu (up to 50,000), Kishore (50,000 to 5 lakh), and Tarun (5 lakh to 10 lakh). By providing access to formal credit channels to small businesses, PMMY aims to promote entrepreneurship and financial inclusion in India.
Highlights of Mudra Loan
Before getting into the details, let’s go through the highlights of Mudra loan from below:
| Mudra Interest Rates | Depends on the Lender |
| Loan Amount | Upto 10 Lakhs |
| Loan Category | Shishu, Kishore & Tarun |
| Loan Type | Collateral Free Loan (without Security) |
| Loan Facility | Cash Credit, Overdraft & Term Loan |
| Repayment Tenure | Depends on the Lender |
| Mudra Processing Fee | Zero (For Shishu category)As per Lender (For Kishore & Tarun category) |
Objectives of Mudra Loan
The Mudra Loan scheme aims to empower small businesses in India by providing them with access to affordable credit, promoting financial inclusion, and creating a supportive ecosystem for entrepreneurs. Here are the highlights of the objectives of the Mudra Loan:
- Financial Inclusion: To bring the unbanked and under-banked sections of society into the formal financial system.
- Job Creation: By providing financial support to small businesses, the scheme aims to generate employment opportunities, especially in rural and semi-urban areas.
- Entrepreneurial Development: To nurture entrepreneurship and encourage the growth of micro-businesses, contributing to economic self-sufficiency.
- Sectoral Diversification: To promote diversification across sectors by supporting enterprises in agriculture, manufacturing, services, and trade.
- Empowering Women and Minorities: Focused on empowering women and minorities by facilitating their access to credit for entrepreneurial ventures.
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Interest Rates of Mudra Loan
Interest rates on Mudra loans vary from lender to lender. The government has not fixed or set limits on interest rates for these loans. Rates offered can start from 7.30% p.a. onwards depending on the lending institution, type of loan, borrower's profile, etc. Here are the highlights of the Mudra loan:
| Mudra Loans Interest Rate | 7.30% p.a. onwards |
| Loan Amount | Up to ₹10 lakhs |
| Loan Tenure | Up to 7 years |
Types of Mudra loan
The Pradhan Mantri Mudra Yojana (PMMY) offers a diverse range of loan products under three categories, catering to various stages of micro-enterprise growth:
1. Shishu:
- Loan amount: Up to Rs. 50,000
- Suitable for: Startups businesses.
- Purpose: Meeting initial working capital needs, purchasing equipment, and covering setup costs.
2. Kishor:
- Loan amount: Above Rs. 50,000 and up to Rs. 5 lakh.
- Suitable for: Growing businesses requiring expansion capital.
- Purpose: Investing in machinery, upgrading technology, increasing inventory, and expanding operations.
3. Tarun:
- Loan amount: Above Rs. 5 lakh and up to Rs. 10 lakh.
- Suitable for: Established businesses seeking further growth and diversification.
- Purpose: Setting up new units, acquiring land, and undertaking large-scale expansion projects.
Mudra Loan Eligibility
The Pradhan Mantri Mudra Yojana (PMMY) offers loans to Indian citizens who want to start or grow their non-farm, income-generating micro-enterprises. To be eligible for a Mudra loan, you must meet the following criteria:
- Indian citizen: You must be a citizen of India.
- Age: You must be at least 18 years old.
- Business activity: Your business must be non-farm and involved in income-generating activities.
- Business stage: Your business can be at any stage, from nascent startup to established enterprise seeking expansion.
Note that the eligible borrowers under PMMY can be Individuals or Proprietary concern or Partnership Firm or Private Ltd. Company or Public Company or any other valid legal forms.
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Funding Support Under Mudra Loan
The Pradhan Mantri Mudra Yojana (PMMY) offers a range of funding support options to micro-enterprises in India. These options cater to different business needs and stages of growth, facilitating access to affordable credit, and promoting entrepreneurship.
Here's a breakdown of the funding support available under Mudra Loan:
1. Loan Products:
- Shishu: Up to Rs. 50,000
- Kishor: Between Rs. 50,000 and Rs. 5 lakh
- Tarun: Between Rs. 5 lakh and Rs. 10 lakh
These loans are offered through various lending institutions, including banks, NBFCs, and MFIs. The interest rates and repayment terms vary depending on the loan amount, category, and lending institution.
2. Mudra Card:A prepaid card providing a working capital loan facility to micro-entrepreneurs. The credit limit is determined based on the borrower's business needs and repayment capacity.
3. Equipment Finance:Specific loans for purchasing equipment required for business operations. The loan amount can cover up to 100% of the equipment cost, with flexible repayment options.
4. Refinance Support:Mudra refinances loans up to Rs. 10 lakh provided by lending institutions to micro-enterprises. This helps reduce the interest burden on borrowers and encourages lenders to take part in the scheme.
5. Credit Guarantee Scheme:Provides credit guarantees to lending institutions, mitigating their risk exposure and encouraging them to lend to micro-enterprises. This scheme helps improve access to credit for micro-enterprises, especially those with limited financial history.
Business Activities Covered Under Mudra Loan
Mudra Loan's inclusive approach ensures that financial support reaches micro-entrepreneurs across various sectors, promoting economic diversity and sustainability. The scheme aims to empower individuals engaged in diverse business activities, contributing to job creation and inclusive economic growth. Here are some of the major business activities covered under the Pradhan Mantri Mudra Loan scheme:
- Manufacturing Enterprises: Small manufacturing units, food processing units, automobile repair workshops, machine/equipment repairing units, etc.
- Trading Activities: Retailers, vendors, hawkers selling products, small distributors of various goods, etc.
- Service Sector: Beauty parlors, internet cafes, tailoring shops, coaching centers, health units like clinics, pathological labs, hygiene services, etc.
- Transport Sector: Operators running taxis, tempos, trucks, boats, electric rickshaws, etc. Caterers of transportation services.
- Agro Based Activities: Farmers doing agricultural/horticultural/pisciculture activities, agro processing units in rural areas, cattle rearing, beekeeping, poultry farming, etc.
- Artisans: Handicraft makers, handloom workers, artisans making ethnic products, etc with support of capital tools and finance.
Small businesses involved in manufacturing, trading, and services across rural or urban locations are eligible for funding under the Mudra scheme.
Mudra Loan EMI Calculator
You can calculate your Mudra Loan EMI using the Business Loan EMI calculator. Using this tool, you can understand your affordability and make informed decisions about your loan amount and tenure.
Here's how to use the Business Loan EMI Calculator:
- Visit the Business Loan EMI calculator page.
- Enter the following key details: Loan Amount (in Rs), Interest Rate (%), Loan Tenure (in months)
- Click on the 'Calculate' button
- The EMI amount will be displayed along with the total interest payable and total repayment amount
Documents Required for Mudra Loan
The specific documents required for a Mudra Loan may vary slightly depending on the lending institution and the loan category (Shishu, Kishore, or Tarun). However, here is a general list of documents commonly required:
- Identity Proof: Aadhaar Card, PAN Card, Voter ID, Driving License, Passport
- Address Proof: Ration Card, Electricity Bill, Telephone Bill,
- Business Registration Certificate (MSME, shop & establishment license, etc.)
- Last 3 years' Income Tax Returns (ITRs)
- Financial Statements (balance sheet, profit & loss statement)
- Proof business existence, such as Memorandum of Association or Partnership Deed
Benefits of Mudra Loan Scheme
The Mudra loan scheme aims to support small businesses through right type of formal credit who aid massive job creation in India. Here are some of the major benefits of the Pradhan Mantri Mudra Loan scheme:
- No collateral required for loans up to Rs 10 lakhs: This enables many small businesses to access loans who lack assets to mortgage.
- Low rate of interest and processing fees: Attractive interest rates starting as low as 9% make loan repayment easy.
- Flexible repayment options: Repayment schedules can be customized based on business cash flows.
- Simplified documentation and fast processing: Minimal paperwork and faster loan approval compared to traditional business loans.
- Credit history benefits: Timely repayment can result in good credit score enabling future loans at better terms.
- Variety of funding options: Loans available basis stage of business - Shishu, Kishore & Tarun up to Rs 10 lakhs.
- Boost to entrepreneurship ecosystem: More capital availability can promote more enterprise creation.
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Steps to Apply for Mudra Loan
To access the Pradhan Mantri Mudra Yojana (PMMY), individuals need to register through the UdyamMitra portal at www.udyamimitra.in . The registration process of PM MUDRA Yojana can include the following steps:
Here are the easy 4steps that you need to follow:
- Step 1: Prepare the required documents, including ID proof, address proof, and business proof.
- Step 2: Approach a participating lender (Banks/ NBFCs) under the Mudra scheme and complete the application form.
- Step 3: Submit the necessary documents for further processing.
Mudra Card
The Mudra Card is a debit card issued against the Mudra loan account, specifically for managing the working capital portion of the loan. It is a product of the Pradhan Mantri Mudra Yojana (PMMY) to provide financial support to micro and small enterprises (MSEs).
Here are some key points about the Mudra Card:
- purpose: To provide easy and flexible access to working capital for micro and small businesses
- Eligibility: Available to Mudra loan account holders
- Issuing Platform: RuPay platform
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Frequently Asked Questions
Any Indian citizen who has a viable business plan for a non-farm income-generating activity in the manufacturing, processing, trading, or service sector, and whose credit need is less than Rs. 10 lakh can apply for a Mudra Loan.
The interest rate for Mudra loans varies depending on the lender and the loan amount. However, the interest rate is typically starting from 7.30% p.a..
There is no government fee for Mudra loans. However, lenders may charge processing fees and other administrative charges.
Yes, a bank can refuse a Mudra loan application if the applicant does not meet the eligibility criteria or if the bank does not think the business plan is viable.
The period for Mudra loans can range up to 7 years.
Income proof is not required for Mudra loans up to Rs. 50,000. However, for loans above Rs. 50,000, lenders may require income proof such as bank statements or income tax returns.
Income tax is not required for Mudra loans. However, borrowers pay income tax on any income earned from their business.
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