All You Need to Know About Mudra Loan| How to Apply and Objective

The Pradhan Mantri Mudra Yojana (PMMY) is a scheme that is inaugurated by the Prime Minister on 8th April 2015, to help by providing funds for generating income for Micro, Small, and Medium Enterprises and small-scale companies in India.  

‘MUDRA’ stands for Micro Units Development and Refinance Agency. The main objective of this scheme is to provide funds to the enterprises. Moreover, a firm can avail funds up to Rs. 10 lakhs. 

 Under the Mudra loan scheme, credit is facilitated to MSME sectors. These funds are utilized for several purposes associated with business expansion. 

MUDRA Scheme are classified into three categories 

1. SHISHU

SHISHU under the Mudra scheme provides Rs. 50,000 to the business owner that is lying under the phase of business or wants to start a new business.  

Required details: -  

• Information of the hardware to be acquired.
• Machine quotation and things to be purchased.

2. KISHOR 

KISHOR under the MUDRA loan offer loan up to Rs. 5 lakhs to those enterprises who are searching for more assets to expand their activities. 

Required details: - 

• The balance sheet for the last two years.

• Sales or Income tax return.

• Articles and Memorandum of association.

• Statement records of a current lender for the last six months.

• Sales were generated before documenting the loan application and in the current financial year.

• Evaluated accounting report for the last one year or the duration of the loan.

3. TARUN  

Under the MUDRA loan scheme, TARUN provides up to Rs. 10 lakhs if the entrepreneur meets the qualifications criteria.  

Required details: - 

• Statement records of a current lender for the last six months.

• Sales were generated before documenting the loan application and in the current financial year.

• Evaluated accounting report for the last one year or the duration of the loan.

• The balance sheet for the last two years.

• Sales or Income tax return.

• Articles and Memorandum of association.

Key features of MUDRA loan 

• Basically, it is a working capital term loan.

• The loan is provided to both new & existing units.

• It can be used for several purposes, which include modernization, capacity expansion, purchase of plants and machinery, meeting working capital, & renovation of business premises.

• The target group of the PMMY Scheme includes businesses that are involved in trading, manufacturing, or providing services.

• The repayment tenure ranges from 3 to 5 years.

• The eligible enterprises can get a loan online under this scheme.

• The processing fee charged on the loan amount is up to 0.05%.

Benefits to avail loan under PMMY 

• Banking & Financial services can be provided to both urban and rural areas.

• Such loans can be used for small amounts at an attractive rate of interest.

• shopkeepers, food vendors, & other small business entities can avail loan.

• The credit guarantee of borrowers is availed by the government, as if the borrower is not able to pay back the borrowed amount, therefore the responsibility for the default will be handled by the government of India.

• There is no requirement for collateral or security to get this scheme.

• The borrowers who want to make income through micro- enterprises can get micro-credit schemes.

• The maximum repayment duration of this scheme can be extended to 7 years.

• Women applicants can get a loan at an affordable interest rates.

• Financial banking can be acquired by start-ups and micro or small businesses.

• Financial help is accessible through such scheme in those areas where people do not have any approach to basic banking facilities.

• The funds that are borrowed under this scheme can be used only for business purposes.

• The Pradhan Mantri Mudra Yojana (PMMY) scheme comes in collaboration with the ‘Make in India’ campaign in which the government of India has launched to assist facilitate investment, build the best manufacturing infrastructure, innovation in the country.

• A refinance scheme can also be taken up with designated banks.

• The maximum repayment duration of this scheme can be extended to 7 years.

MUDRA loan interest and processing fees by top banks 

Purpose of MUDRA loan 

Mudra loans can be obtained for several reasons that aid in generating income and creating employment. Listed below are some purposes for mudra loan: -  

• Equipment finance for the units of small enterprises.

• Transport vehicle loans

• Business loans for traders, vendors, shopkeepers, and many other activities in the service sector.

• People who use tillers, tractors, and two-wheelers for a commercial activity can apply for such loans.

• People that are engaged in Agri-allied non-farm income generating activities like bee-keeping, poultry farming, pisciculture, etc... can apply.

Activities covered under Pradhan Mantri MUDRA Yojana 

Activities that are covered under the PMMY scheme are listed below: -  

• Food products sector

• Agriculture related activities

• Transport vehicles that are used for both passengers and goods.

• Communities, social, and personal service activities

• Business loans for shopkeepers and traders

• Textile products sector and activities

• Equipment finance scheme for Micro Units

Companies that are eligible to get loans under Pradhan Mantri MUDRA Yojana (PMMY) schemes are given below: -  

• Commercial banks
• Small Finance Banks
• Nom-Banking Financial Corporation (NBFCs)
• Railway Recruitment Boards (RRBs)
• Micro Finance Institutions (MFIs)

Industries that can avail loan under the PMMY scheme are: - 

• Business vendors
• Shopkeepers
• Agriculture sector
• Food production industry
• Handicraftsmen
• Small scale manufacturers
• Self-employed entrepreneurs
• Restoration and repair shops
• Service based companies
• Truck owners

MUDRA Loan Bank list 

Almost every bank and the financial institution provides loans under the Mudra scheme, listed below is the bank list that provides this scheme at an attractive rate. 

MUDRA loan eligibility criteria 

Eligibility criteria for mudra loan depend on various factors such as business or sales turnover, repayment history, creditworthiness, age of the individual, and total work experience. 

• The age of the borrower should be between 18 years to 65 years of age.

• The continuation of business must be a minimum of 2 years.

• The new and existing company can apply for such loan.

• Audit by registered Charterd Accountants for at least one year.

• The business should be involved in textile agriculture, food production, society, or services provided to the community.

Factors affecting eligibility criteria of the PMMY loan scheme 

The top factors that usually affect the eligibility criteria for PMMY loan scheme are listed below: - 

Poor credit report – Your past financial behavior can decide your financial stability in the future. Moreover, if there were any due payments in the past, then you may lose the chance of getting a loan.  

Bad cash flow – Bank wants to know the cash flow management of the company and whether you are maintaining it well or not, if it seems to be negative cash flow then the possibility of availing a loan become less.  

Document Required for Mudra Loan Application 

Listed below are certain documents that are required for the application of a Mudra loan: -  

• Duly filled loan application with 2 passport sized photographs

• Identity proof – Aadhaar Car PAN Card/Voter ID/Driving License/Passport

• Address proof – Aadhaar Card, Passport, Voter ID Card, Utility Bill, Electricity Bill, Rent, Lease Agreement

• Special Identity Proof identity if an applicant belongs to SC/ST or any other category

• Address proof of business

• Business establishment certificate (for an existing business)

• At least 12 months bank statement

• Any other document required by the bank

How to apply for Mudra Loan Online? 

Step 1: - You must visit the official website of PMMY to get a mudra yojana loan.  

Step 2: - Click on the download button to fill in the application form. You will ask to enter details including background information of partner, proprietor, & director, business details, banking, future estimation, past performance, credit facilities, etc... 

Step 3: - Carry all the necessary handy documents with you while filling in the application form, as per your requirements you can approach any lender or financial bodies that provide mudra loan. 

Step 4: - Submit the application form with affix required documents. 

Step 5: - Once the lender is satisfied with your profile, the loan shall be approved and disbursed to your given bank account details. 

The process to Apply for Mudra Loan Offline? 

As per your wish you can also apply for a mudra loan offline if you are not comfortable with the online process, following are the processes that are to be followed to apply online: 

Step 1: - You must visit preferred banks or NBFCs that are authorized under PMMY. 

Step 2: - Ask a bank representative for a mudra loans application form & fill in the necessary details.  

Step 3: - Review the checklist & list of documents. After that, start filling in the application form with required details. 

Step 4: - Then, affix two passport-sized photographs & necessary documents. 

Step 5: - After the bank reviews your application and gets sure with your profile. Within 48 hours the borrowed amount will be credited to your respective bank account. 

You can approach financeseva to get a loan under Pradhan Mantri Mudra Yojana (PMMY) Scheme to compare the rates and avail the best deal. 

FAQs – MUDRA Loan 

What is a mudra loan? 

It is a type of loan term loan where an individual or a group can get a loan for the purchase of inventory and expansion of a business.  

What are the three categories of PMMY loans? 

The PMMY loans are divided into three categories listed below: -  

• Shishu
• Kishor
• Tarun

Which banks provide mudra loans? 

Banks that provide such loans at affordable rates are: -  

• State Bank of India
• Bank of India
• Central Bank of India
• ICICI Bank
• Kotak Mahindra Bank
• Standard Chartered Bank
• Indian Bank

Who can take a loan under this scheme? 

Any applicant or MSMEs that run a small business can apply for this loan. 

What is the rate of interest applicable to the PMMY loan scheme? 

The interest rate applicable in the PMMY scheme from @7.30 onwards. 

What is the repayment tenure of the mudra loan? 

The repayment schedule for a mudra loan is extended up to 60 months. 

Is PAN Card necessary to avail such loan? 

No, PAN Card is not essential for those who want to get a mudra loan, but you must fulfill other KYC documents required by the preferred lender.  

Also read: - Pradhan Mantri Mudra Yojana Scheme for Women