Mudra Yojana is a loan scheme initiated by the Government of India to offer business loans of amount up to Rs. 10 lakh at competitive interest rates to individuals, MSMEs and self-employed professionals. No collateral or security is required by any financial institution from the borrowers applying for Mudra loan. The maximum repayment tenure offered under Mudra Yojana is up to 5 years with Nil to nominal processing fees.
Micro Units Development and Refinance Agency (MUDRA) Loan scheme under Pradhan Mantri Mudra Yojana (PMMY) is an initiative by the Government of India that offers loans to individuals and MSMEs with the help of banks and NBFCs. Collateral-free business loans offered under MUDRA Yojana come in three loan categories, named Shishu, Kishor, and Tarun.
Features of Mudra Loan
| Nature of Loan | Term Loan, Working Capital and Overdraft |
| Types of Mudra Schemes | Shishu, Kishor, and Tarun |
| Loan Amount | Under Shishu Scheme: Up to Rs. 50,000Under Kishor Scheme: Rs. 50,001 – Rs. 5,00,000Under Tarun Scheme: Rs. 5,00,001 – Rs. 10,00,000 |
| Interest Rates | As per the applicant’s profile and business requirements |
| Processing Charges | Nil, or 0.50% of the sanctioned loan amount |
| Collateral/Security | Not required by Banks/NBFCs |
| Repayment Tenure | From 12 months to 5 years |
| Foreclosure Charges | Nil |
Eligible Entities
Loans under Mudra scheme can be availed by individuals, startups, shopkeepers, street vendors, retailers, traders, small manufacturers, artisans, and MSMEs. Mudra Loan can also be availed by Sole Proprietorships, Partnership firms, and Limited Liability Partnerships (LLPs) engaged only in the services, manufacturing, and trading sectors.
Benefits of Mudra Loan
- Collateral-free loans – No collateral or security is required by the banks/NBFCs form the borrower
- Low-interest rates with even Nil to nominal processing fees
- Concessional interest rates for women entrepreneurs
- Loans covered under Credit Guarantee Schemes from Govt. of India
- Can be used as Term loans, Working capital loans, and Overdraft facilities
- All Non-farm enterprises, i.e. Small or Micro firms engaged in income-generating activities can avail Mudra loans
- Mudra loans can also be availed by people belonging to SC/ ST/ Minority category at special interest rates
How to Apply
The application form is available at mudra.org.in, so you can download the form and fill in all the required details. Different banks may have slightly different application procedures. You must visit the nearest branch of the desired bank from where you want to get the Mudra loan and submit the duly filled application form and complete the bank formalities.
Secondly, you can also apply online on the bank’s official website by submitting the duly filled application form along with the required documents as specified by the lender. Once the lender is satisfied with the submitted documents, then shall approve the loan and you may receive the loan amount in your mentioned bank account within a few working days.
Documents required
- Duly filled application with passport-sized photographs
- KYC documents of Applicant and Co-applicants: Passport, Voter’s ID card, Aadhar Card, Driving License, PAN card, Utility Bills (Water/Electricity Bills)
- Proof of belonging to a special category, such as SC/ ST/ OBC/ Minority, etc. (if applicable)
- Last 6 months’ bank statement
- Business address and tenure proof, if applicable
- Any other documents required by the bank or NBFC
Note: The Mudra loan application form to be filled and submitted is separate in the case of Shishu, whereas similar in the case of Kishor and Tarun loan schemes.
List of Businesses covered under Mudra Scheme
List of businesses that are covered under the Mudra scheme to perform income-generating activities is mentioned below:
- Commercial Vehicle: Mudra finance for machinery and equipment can be used to purchase commercial transport vehicles like tractors, auto-rickshaws, taxis, trollies, tillers, goods transports vehicles, 3-wheelers, e-rickshaws, etc.
- Service Sector Activities: Starting businesses of salons, gyms, tailoring shops, medical shops, repair shops, and dry cleaning and photocopying shops, etc.
- Food and Textile Product Sector Activities: Various activities involved in the respective sector, such as papad, achaar, ice cream, biscuits, jam, jelly, and sweets making, as well as for agriculture produce preservation at rural level
- Business activities for Traders and Shopkeepers: Setting up shops, service enterprises, trading and business activities, and non-farm income-generating activities
- Equipment Finance Scheme for Micro Units: Maximum loan up to Rs. 10 lakh
- Agri-allied Activities: Activities related to businesses in agri-clinics and agribusiness centers, food & agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, grading, aggregation agro-industries, dairy, fishery, etc.
Mudra Loans for Women Entrepreneurs
Mudra Yojana under PMMY encourages women entrepreneurship and for that private and public sector banks, NBFCs & Micro Finance Institutions (MFIs) offer collateral-free business loans at reduced or concessional interest rates for women entrepreneurs. The maximum loan amount offered under Mudra Yojana for women entrepreneurs is up to Rs. 10 lakh with repayment tenure of up to 5 years. The Mudra loan eligibility for women remains the same, as stated for individuals and enterprises. Nil to nominal processing fee is charged on the sanctioned loan amount for women entrepreneurs.
MUDRA Card
Mudra card is a type of debit card that is issued to the borrowers of Mudra loans to meet their business and working capital requirements. After Mudra loan approval, the lender opens a Mudra loan account for the borrower and issues a debit card along with it. The loan amount is disbursed in the bank account and further can be withdrawn from the total sanctioned amount in portions by borrowers, as per their business requirements.
