What is mudra loan Scheme? How To apply for a Pradhan Mantri Mudra Yojana (PMMY)

The MUDRA Loan Scheme

The Pradhan Mantri MUDRA Yojana (PMMY) was launched on April 8, 2015, by the Prime Minister of India. This scheme aims to help small businesses and micro-enterprises that are not part of the corporate or farm sectors by providing loans up to ₹10 lakh. These loans are known as MUDRA loans and can be obtained from various financial institutions like Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, Micro Finance Institutions (MFIs), and Non-Banking Financial Companies (NBFCs). People can apply for these loans through these institutions or online via the Udyami Mitra portal (www.udyamimitra.in).

Categories of MUDRA Loans

The MUDRA loans are divided into three categories based on the stage of growth and the funding needs of the business:

Shishu: Loans available for amounts up to ₹50,000.

Kishore: Loans for amounts between ₹50,000 and ₹5 lakh.

Tarun: Loans for amounts ranging from ₹5 lakh to ₹10 lakh.


MUDRA Loan Scheme

MUDRA Bank

The formation of MUDRA Bank was announced in the Union Budget for the financial year 2015-16. It was set up as a Non-Banking Financial Institution (NBFI) under the Reserve Bank of India (RBI) on April 7, 2015. MUDRA Bank supports the growth of small and micro-enterprises by providing refinance support, meaning it helps banks and other financial institutions lend money to these small businesses.

Offerings and Products of MUDRA

Technology Enabler: This helps micro-units adopt new technologies to improve their businesses.

Refinance Support: MUDRA provides financial support to banks, NBFCs, RRBs, Small Finance Banks, and MFIs, enabling them to lend money to micro-enterprises.

Credit Guarantee: MUDRA offers a credit guarantee to secure the loans provided to small businesses, making it easier for these businesses to get loans.

Development and Promotional Support:

1.     Sectoral Development: Supporting specific sectors of the economy.

2.     Financial Literacy: Informing individuals about financial concepts and practices.

3.     Institutional Development: Helping institutions improve their services and operations.

Loan Categories:

  Shishu: Loans available for amounts up to ₹50,000.

        Kishore: Loans for amounts between ₹50,000 and ₹5 lakh.

        Tarun: Loans for amounts ranging from ₹5 lakh to ₹10 lakh.


Who are eligible for Mudra loan?

The Pradhan Mantri Mudra Yojana (PMMY) is a program started by the Indian government to give loans to small and micro businesses that are not in the corporate or farming sectors. Here are the eligibility needed to get a Mudra loan:

Individuals: Any Indian citizen engaged in income-generating activities can apply for a Mudra loan. This includes artisans, small manufacturers, shopkeepers, fruit and vegetable vendors, truck and taxi operators, and others engaged in similar activities.

Business Enterprises:

Proprietorships: Sole proprietors running small businesses.

Partnership Firms: Small businesses run by partnerships.

Private Limited Companies: Small companies incorporated under the Companies Act.

Other Business Entities: Any other legal business entities.

Non-Corporate Small Business Sector (NCSBS): This includes a wide range of businesses, including small manufacturing units, service sector units, shopkeepers, fruit and vegetable vendors, truck operators, food service units, repair shops, machine operators, small industries, artisans, food processors, and other small-scale traders.

Age Criteria: The applicant should generally be within the age group of 18 to 65 years, although this can vary slightly depending on the specific lending institution’s policies.

Documentation:

Basic documents such as proof of identity, address, and business plan are typically required. Additionally, any specific documentation requested by the lending institution must be provided.


Purpose of MUDRA Loans

MUDRA loans can be used for various purposes that help generate income and create employment. Some of these purposes include:

1.      Business loans for vendors, traders, shopkeepers, and other service sector businesses.

2.      Working capital loans through MUDRA Cards.

3.      Equipment finance for small businesses.

4.      Transport vehicle loans for commercial use.

5.      Loans for activities related to agriculture but not directly involving farming, such as beekeeping and poultry farming.

Examples of Activities Covered

  1. Transport Vehicles: Buying vehicles for transporting goods and passengers like auto-rickshaws, small goods transport vehicles, e-rickshaws, taxis, and even tractors used for commercial purposes.
  2. Community Services: Setting up businesses like salons, beauty parlours, gyms, tailoring shops, and other service-related businesses.
  3. Food Products Sector: Activities like making papad, pickles, jam, and small food stalls.
  4. Textile Products Sector: Activities like handloom weaving, embroidery, and apparel design.
  5. Business Loans for Traders and Shopkeepers: Financial support for running shops, trading activities, and other non-farm income-generating activities.
  6. Equipment Finance: Buying machinery and equipment needed to set up micro-enterprises.
  7. Agriculture Allied Activities: Financing activities like beekeeping, poultry farming, and agro-processing.

 

How to Apply for MUDRA Loans

Online Application Steps:

  1. Visit the bank’s official website and download the loan application form.
  2. Fill in the form with required details and attach relevant documents.
  3. Submit the form online and get a reference ID.
  4. The bank’s representative will contact you to proceed with the loan process.
  5. After processing and verifying the documents, the loan amount will be disbursed to your bank account.

Online Application

Borrowers can also file online applications for MUDRA loans on the Udyami Mitra portal (www.udyamimitra.in)

Offline Application Steps:

  1. Visit the nearest eligible bank branch.
  2. Fill in and submit the loan application form along with required documents.
  3. Complete the further loan formalities with the bank.
  4. Once the documents are verified and approved, the loan amount will be disbursed to your bank account.

MUDRA Card

A MUDRA Card is a debit card issued against the MUDRA loan account for managing working capital. It allows the borrower to withdraw money and make payments, helping them manage their finances efficiently. The card also helps create a credit history for the borrower, making it easier for them to get loans in the future.

Synergies with Other Initiatives

MUDRA works well with other government initiatives like Make in India, Start-up India, Stand-up India, and the National Skill Development Corporation (NSDC). It also collaborates with the National Rural Livelihoods Mission (NRLM) and the National Urban Livelihood Mission (NULM) to support micro-enterprises and create sustainable livelihood opportunities.


Roles and Responsibilities of MUDRA

MUDRA (Micro Units Development and Refinance Agency Ltd.) was created to help small businesses in India grow and succeed. Its main goal is to provide financial support, including refinancing, to small and micro-enterprises. This initiative aims to "fund the unfunded," giving financial opportunities to those who previously lacked access to formal banking services.

A press release by the Government of India on March 2, 2015, outlined the key roles and responsibilities of MUDRA. These responsibilities include:

  1. Providing Refinance Support: MUDRA offers financial assistance to banks and other lending institutions to help them provide loans to small businesses.
  2. Monitoring PMMY Data: MUDRA keeps track of the data related to the Pradhan Mantri MUDRA Yojana (PMMY) through a web portal, ensuring that the program runs smoothly and effectively.
  3. Offering Loan Guarantees: MUDRA facilitates guarantees for loans granted under PMMY, making it easier for small businesses to get the credit they need.
  4. Additional Activities: MUDRA also takes on other tasks assigned by the government to support the growth and development of small enterprises.

Since its inception, MUDRA has been actively fulfilling these roles to promote financial inclusion and support the micro-enterprise sector in India.

The MUDRA Loan Scheme is a significant initiative aimed at promoting financial inclusion and entrepreneurship in India. By providing easy access to affordable credit, it empowers small and micro-enterprises, helping them grow and contribute to the country's economic development.

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Sachin Chopade
I am a Finance and Tax Analyst, Content Creator, sharing valuable articles and calculators related to Finance, Accounting and Banking industry.