What is Mudra Loan? Who can avail it?

To start or operate any business, the fund is of critical essence. Now and then businesses, especially Micro and Small Businesses, face funding issues that hamper their operations. These MSMEs play a vital role in the Indian Economy and employ lacs of skilled and unskilled individuals. So it became vital to solving the funding issue for the Government. That’s when the idea of Mudra born.

To empower these MSMEs and “fund the unfunded”, Government of India established MUDRA Ltd, a non-banking financial institution on 8^th April 2015. The core goal of MUDRA Ltd. (Micro Units Development and Refinance Agency) is to extend financial support to well-established financial institutions, Banks and NBFCs so theses institutes can offer MSMEs.

Apart from funding financial institutions, MUDRA Ltd also offers refinancing to the various business via an initiative called PMMY or Pradhan Mantri Mudra Yojna. Under this project, Businesses from various sectors in the different states of their Business cycle can avail the loans of upto INR 10 lakhs.

Let’s take a look into the details of the Mudra loans.

MUDRA Loan

These loans are structured to include various businesses in the financial systems in a systematic way. These loans are offered to the Micro and Small Enterprises involved in non-farm businesses and generate income via manufacturing, trading, or servicing. Although these loans are offered to only non-farm enterprises, businesses involved in the allied agricultural activities are fully eligible for these loans.

Depending on your Business stage, MUDRA loans are offered in three categories.

1. Shishu: Under this scheme,  businesses can avail the loan of upto INR 50,000
2. Kishore: Under this scheme, businesses can avail the loan between INR 50,000 to INR 5,00,000.
3. Tarun: Under this scheme, businesses can avail the loan between INR 5,00,000 lakh to INR 10,00,000.

Features of the Mudra Loan

Now let’s take a look at the features of Mudra Loans:

• These loans are collateral-free, so the borrower won’t have to offer any collateral at the time of availing these loans. In case, the borrower fails to repay the loan; the Government will bear the responsibility of the outstanding amount.
• There is zero processing fees on these loans.
• Businesses can avail the loan of upto INR 10 lakh. 10 lakh is the upper limit of the Mudra Loan.
• Business involved in certain allied agricultural activities like pisciculture or horticulture can also avail theses Loans.
• The repayment schedule of the Mudra loans can be extended up to 7 years.
• For female borrowers, the Mudra loan is offered at discounted rates.

• Amount availed under Mudra Loans can be used as term loans and OD (Over Draft) facilities.
• The interest rate on MUDRA loans are calculated as per the MCLR ( Marginal Cost of Lending Rate), which in turn is governed by the RBI (Reserve Bank of India)

Which industries are covered under MUDRA Yojna?

Here is the list of industries that are covered under MUDRA Yojna

• Allied agricultural business

Non-farm but allied agricultural activities like pisciculture, poultry farming, beekeeping, live-stock rearing, dairies, agri-business, aggregation agro-industries, agro-centres and fisheries are included in this group.

• Transport Service Sector

PMMY loans can be utilized to buy various transport vehicles, including passenger cars, a goods carriage, rickshaw, e-rickshaw, three-wheelers, and two-wheelers for business purposes and any other similar vehicles.

• Traders and Shop Owners

Any trader involved in the trading of vegetables, fruits, FMCGs, or any other product.

• Service Sector Businesses

These Businesses include boutique, Gyms, tailoring units, motor vehicle repair shops, beauty parlours, pharmacies, stationary shops, saloons, courier agencies etc.

• Small industries

Small industries  chicken work, cotton ginning, traditional embroidery and handwork, handloom, knitting, apparel design, computerized embroidery, traditional dyeing and printing, power loom, textile non-garment products such as bags, vehicle accessories, furnishing accessories, zari and zardozi work, stitching and others can also avail the  benefits of Mudra Yojna.

• Food processing

Various food processing units such as agricultural produce preservation at the rural level, small service food stalls, biscuit, bread and bun making, canteen services, day-to-day catering, cold storages and cold chain vehicles, jams/jellies making papad and pickle making, sweet shops, ice and ice cream making units can avail benefits offered under the Mudra Yojna.

Documents required for Mudra Loans

For availing Mudra loans, you will have to submit the following documents with the respective banks:

1. A complete Business plan with all the necessary details
2. As mentioned earlier, Mudra yojna is divided into three categories, Shishu, Kishor and Tarun. So while applying, you will have to submit the relevant form for the category of your choice.
3. Latest Passport sized photographs of the applicant.
4. KYC documents of the applicant
5. Residence proof of the applicant (Aadhaar Card/ Driving License/ Passport/ Utility Bill/ Bank Statement)
6. Any Valid ID proof of the applicant (Aadhar Card/ Driving License/ Passport/ Voter ID)
7. Income Tax returns or any other income proofs.
8. Ownership documents if the businesses if the business is owned (Lightbill/ Index Copy)
9. Rent or Lease agreement if the property is leased or rented (Rent/Lease Agreement)
10. Any other License or registration if applicable

Conclusive words

Mudra Yojna is an excellent initiative by the Indian Government to finance and refinance Micro and small businesses. In the current pandemic, when the businesses are struggling to survive, these loans can prove to be a boon if utilized properly. Mudra loans can be utilized to expand the existing business or start a new one.

The sole purpose of the Mudra Yojna is to empower the unorganized sector of the Indian Economy and establish India as a Global Market Leader. As the numbers show, thousands of businesses and entrepreneurs have availed these loans, marking the Government’s initiative’s success.

Are you looking for Mudra loan or any other form of credit?

Get in touch with us today!

Probal Consulting Group is a leading Taxation, Accounting, and Compliance firm that helps individuals, MSMEs, and other businesses manage their accounting, taxation regulatory compliance affordably.