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Pradhan Mantri Mudra Loan Yojana in India: All You Need to Know

The Pradhan Mantri Mudra Yojana (PMMY) is a government scheme launched in 2015 to provide credit to micro and small enterprises. Mudra loans are designed to bring enterprises into the formal financial system and provide affordable credit to non-farm micro or small enterprises engaged in income generation through manufacturing, trading, and services.

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Key Highlights of Mudra Loan Yojana

Mudra Loan, also known as Pradhan Mantri Mudra Yojana (PMMY), is a government-backed scheme that provides loans to micro and small enterprises. Here are the key highlights:

  • Loan Amount: Up to Rs 10 lakhs
  • Loan Facilities: Cash Credit, Overdraft, and Term Loan
  • Interest Rates: Depends on the bank’s policy decisions
  • Processing Fees: No processing fee for Shishu category (loans up to Rs 50,000); depends on the financial institution for Kishore and Tarun categories
  • Loan Categories: Shishu (up to Rs 50,000), Kishor (above Rs 50,000 to Rs 5 lakh), and Tarun (above Rs 5 lakh to Rs 10 lakh)
  • Eligibility: Non-corporate, non-farm small/micro enterprises
  • Loan Tenure: Depends on the bank’s policy decisions
  • Repayment: No specified repayment tenure; depends on the lending institution’s rules and RBI regulations
  • Interest Rate Setting: Lending institutions set their own interest rates for MUDRA loans
  • Application Process: Borrowers can apply online through the Udyamimitra portal or approach a nearby branch of a bank, NBFC, or MFI

Types of MUDRA Loans Yojana and Interest Rates

MUDRA loans are categorized into three segments: Shishu, Kishor, and Tarun. The interest rates for each segment are as follows:

  • Shishu: This segment offers loans up to Rs. 50,000 for a tenure of up to 5 years. The interest rate for Shishu loans varies from 10.30% to 12% per annum, as offered by Union Bank of India.
  • Kishor: This segment offers loans from Rs. 50,001 to Rs. 5 lakhs for a tenure of up to 5 years. The interest rate for Kishor loans varies from 12% to 15% per annum.
  • Tarun: This segment offers loans from Rs. 5 lakhs to Rs. 10 lakhs for a tenure of up to 5 years. The interest rate for Tarun loans varies from 15% to 18% per annum.

Factors Affecting Interest Rates

The interest rates of MUDRA loans are influenced by several factors, including:

  • Applicant’s income and credit history
  • Required loan amount and repayment tenure
  • Type of business and industry
  • Lender’s internal guidelines and policies

How to Get the Best Interest Rate

To get the best interest rate on a MUDRA loan, it’s essential to:

  • Compare loan deals offered by various banks and NBFCs
  • Check and verify the interest rates and terms offered by each lender
  • Apply for a loan that suits your business requirements and financial situation
  • Negotiate with the lender to get the best possible interest rate

Fees & Charges MUDRA Loans Yojana

MUDRA Loans, a scheme launched by the Government of India, provides loans up to Rs 10 lakh to micro and small enterprises. The fees and charges associated with MUDRA Loans are as follows:
  • Processing Fees: For Shishu category (loans up to Rs 50,000) – No processing fee
  • Processing Fees: For Kishore and Tarun category – depends on the financial institution
  • Interest Rates: Vary depending on the applicant’s profile, business requirements, and the discretion of the lending institution
  • Loan Amount: Up to Rs 10 lakh
  • Tenure: Varies depending on the lending institution’s policy decisions
  • Security or Collateral: No collateral or third-party security is required
  • Charges for processing the loan: May vary from case to case

It is essential to note that the lending institutions providing MUDRA loans can consider charging an upfront fee as per their internal guidelines. However, most lenders waive the upfront fee or processing charges for loans under the Shishu category.

Registration Process of PM MUDRA Yojana

The registration process for PM MUDRA Yojana involves the following steps:

  • Eligibility: The borrower must be an income-generating micro-entrepreneur or individual engaged in a non-farm sector, such as manufacturing, processing, trading, or service sector, including activities allied to agriculture.
  • Application Form: The borrower needs to fill out the Mudra Loan application form, which can be obtained from nearby branch offices of banks, NBFCs, MFIs, or online through the Udyamimitra portal (www.udyamimitra.in).
  • Identity Proof: The borrower must provide identity proof documents, such as Aadhaar, PAN, Driving License, Passport, Voter ID, or Government-issued photo ID.
  • Residence Proof: The borrower must provide residence proof documents, such as latest utility bill, Aadhaar, Voter ID, Passports, or bank account statement.
  • Business ID and Address Proof: The borrower must provide business ID and address proof documents, such as licenses, registration certificates, deed copy, etc.
  • Loan Application: The borrower must submit the completed application form along with the required documents to the nearby branch office of a bank, NBFC, MFI, or online through the Udyamimitra portal.
  • Loan Approval: The loan application will be reviewed and approved by the lending institution, and the borrower will be informed about the loan amount and terms.
  • Loan Disbursal: The loan amount will be disbursed to the borrower after signing the loan agreement and providing the necessary documents.

Note: MUDRA does not lend directly to micro entrepreneurs or individuals. Mudra loans under Pradhan Mantri Mudra Yojana (PMMY) can be availed of from nearby branch offices of banks, NBFCs, MFIs, or online through the Udyamimitra portal.

Eligibility Criteria of PM MUDRA Loans

To be eligible for a PM MUDRA Loan, the following criteria must be met:

  • Age: The applicant must be between 18 years and 65 years of age.
  • Business Entity: The loan can be availed by new and existing MSME units, including:
    • Small Manufacturers and vendors
    • Artisans
    • Fruits and vegetables Dealer
    • Individuals engaged in agricultural activities like livestock, poultry, and more
    • Shopkeepers
    • Retailers
    • MSMEs
  • Collateral: No collateral or third-party security is required.
  • Loan Amount: The maximum loan amount is up to ₹10 Lakhs.
  • Eligible Lending Institutions: The loan can be availed from:
    • Public Sector Banks
    • Private Sector Banks
    • Regional Rural Banks
    • Micro-Finance Institutions
  • Documents: The following documents are required:
    • Identity proof
    • Residence proof
    • Income proof
    • Application form
    • Passport-size photos

Additional Eligibility Criteria:

  • Business Plan: The applicant must have a business plan for a non-farm income-generating activity such as manufacturing, processing, trading, or service sector.
  • Credit Need: The credit need of the applicant must be up to ₹10 Lakhs.
  • RBI Guidelines: The lending rates are as per the RBI guidelines issued from time to time.

Note: The eligibility criteria may vary depending on the lending institution and the specific loan product. It is recommended to check with the lending institution for their specific eligibility criteria and requirements.

Eligible Activities covered under MUDRA Loans

MUDRA Loans are applicable for any activity which results in income generation. The following activities are eligible for coverage under MUDRA Loans:

  • Manufacturing: Purchase of transport vehicles for transportation of goods and passengers, such as auto rickshaws, small goods transport vehicles, 3 wheelers, e-rickshaws, taxis, etc.
  • Processing: Food Processing is an eligible activity for coverage under one of the MUDRA schemes.
  • Trading: Carpentry and RO water plant installation, on a business mode, are eligible activities under MUDRA loan, if the loan amount is up to 10 lakh.
  • Service Sector: Any Indian Citizen, who is eligible to avail of loan and has a business plan for income generating activity, can avail of MUDRA loan.
  • Agri-Allied Activities: Loans for agri-allied non-farm income generating activities, such as pisciculture, bee keeping, poultry farming, etc. Tractors, tillers as well as two wheelers used for commercial purposes only.
  • Textile Sector: Khadi is one of the eligible activities under Textile sector and in case MUDRA loans are taken for income generation, the same can be covered.
  • Other Activities: Activities allied to agriculture, such as beekeeping, poultry, livestock-rearing, aggregation agro-industries, fishery, dairy, food & agro-processing, agri-clinics and agribusiness centres, etc. and services supporting these are eligible for Mudra Loans.

Eligible Entities

  • Any Indian Citizen, who is eligible to avail of loan and has a business plan for income generating activity, can avail of MUDRA loan.
  • Women entrepreneurs can also avail of MUDRA loans, with additional facilities, including interest reduction on their loan.

Documents required for availing PM MUDRA Loans

Documentation for availing loan under Shishu Category

To avail a Shishu Category Mudra Loan, you need to provide the following documents:

  • Proof of Identity: Aadhaar Card, PAN Card, Driving License, Passport, or Voter ID
  • Proof of Address: Aadhaar Card, Passport, Driving License, or Utility Bills (electricity, water, or gas)
  • Income Proof: Income Tax Returns, Form 16, or Bank Statements
  • Business Proof: Business Registration Certificate, Trade License, or GST Certificate
  • SC/ST/OBC Status: Certificate from a competent authority, if applicable
  • Business Continuity: Proof of business continuity, such as a business registration certificate or a letter from the business association

Eligibility Criteria Shishu Category

  • Non-Agriculture-Based Business: The business must be non-agriculture-based to be eligible for a Shishu Category Mudra Loan.
  • Loan Limit: The maximum loan limit for Shishu Category is Rs. 50,000.
  • No Collateral Required: Mudra Loans are unsecured, and no collateral is required.

Loan Tenure and Interest Rate Shishu Category

  • Loan Tenure: The loan tenure is generally up to 5 years.
  • Interest Rate: The interest rate varies depending on the bank or financial institution providing the loan.

Processing Fee Shishu Category

  • No Processing Fee: Most lenders waive the upfront fee or processing charges for loans under the Shishu Category.

How to Apply Shishu Category

  • Online Application: You can apply for a Shishu Category Mudra Loan online through the UdyamMitra portal or the website of the bank or financial institution providing the loan.
  • Offline Application: You can also apply offline by visiting the branch of the bank or financial institution providing the loan.

Documentation for availing loan under Kishor and Tarun Category

The Kishor and Tarun Category Mudra Loans are designed to provide financial assistance to Micro, Small, and Medium Enterprises (MSMEs) in India. To avail a loan under these categories, you will need to submit the following documents:

Common Documents Kishor and Tarun Category :

  • Business Registration Certificate: A valid business registration certificate, such as a Shop Act, Trade License, or Partnership Deed, is required.
  • Identity Proof: A valid identity proof, such as a PAN Card, Aadhaar Card, or Voter ID, is required.
  • Address Proof: A valid address proof, such as a utility bill or a rental agreement, is required.
  • Bank Statement: A recent bank statement showing the business account is required.
  • Income Proof: A valid income proof, such as a tax return or a profit and loss statement, is required.

Additional Documents for Kishor Category:

  • Business Plan: A detailed business plan outlining the business goals, objectives, and financial projections is required.
  • Financial Statements: Audited financial statements for the last two years are required.
  • Collateral: A collateral, such as a property or a fixed deposit, may be required.

Additional Documents for Tarun Category:

  • Business Plan: A detailed business plan outlining the business goals, objectives, and financial projections is required.
  • Financial Statements: Audited financial statements for the last two years are required.
  • Collateral: A collateral, such as a property or a fixed deposit, may be required.
  • Udyam Registration Number (URN): A valid Udyam Registration Number (URN) is required.

FAQs Mudra Loan

1. What is MUDRA loan yojana?

Ans. MUDRA Loan Yojana or Prandhan Mantri MUDRA Yojana is a government scheme for offering loans of up to Rs 10 lakh to micro enterprises through commercial banks, small finance banks, MFIs, RRBs and NBFCs.

2. How to apply for Shishu MUDRA loan online?

Ans. Prospective borrowers can apply online for a Shishu MUDRA loan through UdyamMitra portal – www.udyamimitra.in. Alternatively, borrowers can visit designated cooperative banks, RRBs, public & private sector commercial banks, foreign banks, micro finance institutions and NBFCs, which offer Shishu MUDRA loans online.

3. What is the repayment period in MUDRA loan?

Ans. Micro Units Development & Refinance Agency Ltd. (MUDRA) has not specified the repayment tenure of MUDRA loan. The lending institutions are free to determine the repayment tenure of their MUDRA loan borrowers based on the cash flow of their enterprise and the terms & conditions set by the of the lender.

4. How to apply for MUDRA loan for business?

Ans. Borrowers can apply for a MUDRA loan online by visiting UdyamMitra portal – www.udyamimitra.in or designated lending institutions offering loan online.  Applicants can also visit the branches of designated cooperative banks, Regional Rural Banks (RRBs), public/private sector commercial banks, micro finance institutions, foreign banks and NBFCs for making MUDRA loan application.

5. What is the maximum limit of loan under MUDRA Yojana?

Ans. The maximum limit of MUDRA Yojana loan is Rs 10 lakhs.

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