Uncovering The MUDRA Loan-Funding the Unfunded

MUDRA has been formed with primary objective of developing the micro enterprise sector in the country by extending various support including financial support in the form of refinance, so as to achieve the goal of “funding the unfunded”.

Under the aegis of Pradhan Mantri Mudra Yojana (PMMY), MUDRA has created products/schemes. The interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth / development and funding needs of the beneficiary micro unit/entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to:

Shishu : covering loans upto  50,000/-

Kishor : covering loans above  50,000/- and upto  5 lakh

Tarun   : covering loans above  5 lakh and upto  10 lakh

Within the framework and overall objective of development and growth of micro enterprises sector under Shishu, Kishor and Tarun, the products being offered by MUDRA are so designed, to meet requirements of different sectors / business activities as well as business / entrepreneur segments.

Purpose of MUDRA loan

Mudra loan is extended for a variety of purposes which provide income generation and employment creation. The loans are extended mainly for:

1.  Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities.

2.    Working capital loan through MUDRA Cards.

3.    Equipment Finance for Micro Units.

4.    Transport Vehicle loans.

Mudra does not support any start-ups in India. The start-up must be a non-corporate micro or small segment. The fields in which an applicant can start their business and can avail loans under Mudra are as follows: Food service units, truck operators, vegetable and fruit vendors, repair shops, fashion store, artisans, small industries, food processor units, shopkeepers, service sector units, potters, carpentry, RO water purifier and such are the fields of businesses that are eligible for the Mudra Loans. Manufacturing, processing and trading related to these fields can be financed by Mudra under Pradhan Mantri Mudra Yojana.

Mudra Card

MUDRA Card is an innovative product which provides working capital facility as a cash credit arrangement. MUDRA Card is a debit card issued against the MUDRA loan account, for working capital portion of the loan. The borrower can make use of MUDRA Card in multiple withdrawal and credit, so as to manage the working capital limit in a most efficient manner and keep the interest burden minimum. MUDRA Card will also help in digitalization of MUDRA transactions and creating credit history for the borrower.

Eligibility of Mudra Loans:

To avail Mudra loans under PMMY one has to follow some eligibility criteria. The rules are as follows:

The applicant must be an Indian citizen, above 18 years old and has to have a business plan to show. The business plan must contain the structure, investment plans, nature of product, marketing and future results as well.

The nature of industry should be non-farm earning activity related and needs investment of not more than Rs. 10 Lac. Other regulations will be same as the RBI guidelines and PMMY rules.

How to avail the loan

In order to take out a Mudra Loan, an applicant (i.e. a borrower) needs to first identify his or her nearest bank offering the loan and visit personally along with a business plan. Loan application is to be submitted along with a comprehensive business plan, photo, quotation, proof of category, identity proof, address proof and passport photographs. Once all paper documentations are completed, the bank will review the business plan and the need. If approved, the bank will sanction the loan.

Security

1.    Assets created out of the Bank’s finance.

2.    No collateral security.

Interest Rates

Limits	Micro Enterprises	Small Enterprises
Up to Rs.50000/-	MCLR+SP	(MCLR+SP)+0.50%
Above Rs.50000/- to Rs.2.00 lacs	(MCLR+SP)+0.50%	(MCLR+SP)+0.70%
Above Rs.2.00 lacs to Rs.10.00 lacs	(MCLR+SP)+0.70%	(MCLR+SP)+0.85%

*The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend.

Processing Charges

            No Processing Charges
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