What is the Pradhan Mantri Mudra Yojana?
Micro, small, and medium enterprises form the backbone of any country’s economy. They are numerous and offer immense employment opportunities to the youth, acting as a crucial cog in a nation’s socioeconomic machinery. The MSME sector in India contributed more than 1/3rd of the country’s total GDP growth in 2022.
The Indian Government has introduced many convenient financing schemes for MSMEs and start-ups across the country. The Pradhan Mantri Mudra Yojana (PMMY) is one such scheme set up by the Government of India with the auspices of SIDBI( Small Industries Development Bank of India).
The MUDRA Loan Scheme (Micro Unit Development and Refinance Agency) is a wholly owned subsidiary of SIDBI. The primary aim is to provide easy and ample funding opportunities to micro & small businesses all over. SIDBI and GOI work with various lending institutions to inject funds & provide easy access to varied funding mechanisms.
The E-Mudra Loans
E-Mudra Loans are PMMY loans that have been applied for online. If you are looking for financial aid for your SME, you can apply online for MUDRA loans directly via its official portal.
You can also visit the official websites of varied partnering financial institutions and apply online for the PMMY Scheme. Major public and private commercial banks, regional rural banks, microfinance institutions, and non-banking financial institutions act as funding outlets for the MUDRA Scheme.
The Motivations behind the MUDRA Scheme
The central objective of the MUDRA loan system is to extend substantial financial support to the oft-disadvantaged micro-enterprise sector. Micro and small enterprises, especially in rural areas, find it extremely difficult to access any convenient business credit with ease.
The Hon’ble Prime Minister of India, Shri Narendra Modi, and former Hon’ble Finance Minister, late Shri Arun Jaitley, introduced the PMMY Scheme intending to financially empower businesses and start-ups, especially in the MSME industry.
Artisans, shopkeepers, small and micro enterprises, vendors, and agriculture-allied non-farming businesses such as poultry, fisheries, agro-processing centres, etc., get to benefit from the following features of the MUDRA loan scheme.
- Three variations of the Pradhan Mantri Yojana Scheme, Shishu, Kishor, & Tarun, offer fiscal options to different businesses to help them meet working capital requirements and other business requirements.
- Besides the above three credit mechanics, a borrower can also avail of microcredit of up to Rs. 1 lakh under this scheme from microfinance institutions.
- The Yojana Scheme offers easy refinancing support to qualified borrowers through authorized banks, RRBs, and NBFCs. MUDRA’s refinancing scheme has made it easy for small business owners to avail cheaper funds to ensure smooth business operations & maintain profitability.The success of the PMMY scheme is evident from the fact that, up till March 2022, more than Rs. 50000 crores have been disbursed as fresh refinance through the MUDRA loan system.
What is the Pradhan Mantri Yojana Scheme?
The Pradhan Mantri Yojana or Pradhan Mantri Mudra Yojana (PMMY) is a Central Government initiative to facilitate business operations and expand SMEs by offering convenient financing support.
Launched in April 2015 by the Hon’ble Prime Minister of India, the key idea of the Pradhan Mantri Mudra Yojana is to fund the unfunded businesses and sectors of the Indian economy.
Public and private sector banks, regional rural banks, microfinance institutions, and small finance banks provide MUDRA loans between Rs. 50000 to Rs. 10 lakhs to many businesses.
Different Types of Businesses Eligible for the Yojana Scheme:
The following businesses and respective industries can apply for different MUDRA credit schemes:
Micro and small enterprises across all non-farming and agriculture-allied sectors, such as:
- Artisans and handicrafts-men
- Shopkeepers and Vendors
- Self-employed individuals
- Poultry & Livestock rearing
- Agro-processing industries
- Grading, sorting, aggregation, and packing industries
- Textile industry
Small businesses in the manufacturing, trading, and service sector, including
- Beauty parlours
- Repair shops
- Printing agencies
- Courier companies
- Medicine shops
- Dry cleaning & tailoring shops
Variants of the Mudra Scheme: The Mudra Loan Categories
Under the patronage of the Pradhan Mantri Yojana Scheme, businesses and entrepreneurs get to avail of three categories of credit facilities.
1. Shishu Yojana
This MUDRA Loan product caters to budding entrepreneurs and businesses in the early stages of development. Applicants can avail of a maximum loan amount of up to Rs. 50000.
2. Kishor Yojana
Covering funding needs above Rs. 50000 up to Rs. 5,00,000, the Kishore loan product is ideal for businesses requiring additional funds to expand and boost business operations.
3. Tarun Yojana
The third stage of funding available under the MUDRA loan system, Tarun Yojana, allows a beneficiary micro unit or entrepreneur access to loans above Rs. 5 lakhs up to Rs. 10,00,000.
The scheme also provides microcredit options to businesses that meet the eligibility criteria via microfinance institutions. New and existing units and women entrepreneurs can use this scheme to support business activities.
The above credit facilities are available as refinancing support to all micro and small businesses in the manufacturing, trading, and service sectors. For entrepreneurs, each category of the MUDRA loans can be considered to be subsequent stages of pre-seed and seed funding for start-ups.
How the PMMY Scheme aids the MSME & Start-up Sectors?
The primary purposes of the MUDRA Loan scheme are the development, acceleration and expansion of business operations of micro and small units across financially-starved sectors.
Incubation and acceleration of start-ups, micro units development in the rural sector and setting up of last mile financiers that aid in the germination & expansion of innovative business entities & offer reliable employment opportunities to local youth are the long-term focus of the MUDRA scheme.
Activities covered under Mudra Loan Scheme
MUDRA schemes are extended for business activities such as:
- Development of new business units
- Expansion of existing units
- Training, development and technology enablement
- Maintaining healthy working capital
- Purchasing of equipment, machinery, tools, and transport vehicles
The Biggest Advantages of availing the MUDRA Loan Scheme
Myriad benefits are involved; here are some of the most prominent ones.
- Zero collateral security is necessary no matter what the chosen loan slab is.
- Easy financial banking facilities across rural and urban areas for small businesses & start-ups that find it difficult to access business funding
- Minimal interest rates to aid entrepreneurs and small businesses in maintaining healthy liquidity
- The RBI caps base rates at 10% to 12 % for MFIs, 3.5% for RRBs, 6% or more for NBFCs, etc.
- Extensive repayment periods between 1 and 5 years
- Credit guarantee provided by the Indian Government under CGFMU
- Refinancing schemes available from authorized lenders
- Lower interest rates for women entrepreneurs
- Credit facilities are available in different formats, such as term loans, working capital loans, lines of credit, overdrafts, micro credits, etc.
- Scheme launched in coordination with the Make-In-India Campaign, the National Rural and Urban Livelihoods mission, and the National Skill Development Corporation’s activities, fostering the development and progress of indigenous businesses.
How to Apply for a Mudra loan?
It is possible to apply for the Pradhan Mantri Mudra Yojana (PMMY) through the scheme’s official online portal or the official websites of the partnered lending institutions.
The Online Application Process for Mudra Loan
- Visit the official website of PMMY or the Udyami Mitra website.
- Navigate to the necessary options, submit the necessary business details, and upload all essential documents.
- Once the lending institution and other concerned authorities check the integrity of all information provided, funds get disbursed within a week.
- However, given all the red tape, formalities, and the time-consuming nature of government operations in India, it may take more than a month to get the funds.
- Successful applicants can opt for a MUDRA card. It is a debit card linked to their PMMY account and allows a daily withdrawal limit as per the variant of the scheme availed.
Loan applicants can also visit the local branches of partner financial institutions and apply offline. They can interact directly with bank representatives, fill out the MUDRA loan application form, and submit it with all essential documents.
MUDRA loan products offer a maximum loan amount of up to Rs. 10 lakhs. If your business has immediate funding needs of more than Rs. 10 lakhs, Yubi can connect you with leading public and private sector lenders offering an array of business loan options.
Key Eligibility Criteria
- Applicants can apply for MUDRA loans to develop new or expand existing business units.
- The age of the loan application must lie between 18 and 65 years.
- Applicants must be self-employed individuals, entrepreneurs, or owners of a micro or small business.
- Sole proprietorships & partnerships, private & public limited companies, limited liability partnerships, NGOs & trusts are eligible for the MUDRA loan.
- Income-generating & profit-making small and micro-enterprises in the manufacturing, trading, and service sectors are eligible.
- All non-farming but agriculture-allied businesses and entrepreneurs can seek credit through MUDRA loans.
The MUDRA Loan Rate Margins
The Government of India has kept interest rates quite nominal in order to reduce the eventual cost of funding at the last-mile financing level. However, interest rates are different across different partnering financial institutions.
- The Shishu loan product rate ranges between 1% to 12%.
- The Kishor Yojana scheme comes with an interest rate of 8.6% to 11.15%.
- For the Tarun loan scheme, rates hover between 11.15 to 12%.
(As of December 2021)
The Reserve Bank of India regulates these loan products’ base interest rate/MCLR and has capped the rate margins for every partnering financing outlet.
- As of December 2022, public sector banks such as the State Bank of India, UCO Bank, Indian Overseas Bank, IDBI, Bank, Union Bank of India, Central Bank, etc., offer MUDRA loans at interest rates within 10%. Rates are subject to change per the respective bank’s guidelines and the MCLR.
- Private banks adhere to a similar cap in their interest rates, and rates can change as per their guidelines.
- As per RBI guidelines, interest rate margins are capped at 10% for larger microfinance institutions and 12% for smaller MFIs.
- Regional rural banks offer credit at interest rates 3.5% above the MUDRA loan slab rate.
- Non banking financial corporations provide the MUDRA loan at rates of 6% above the margin range of the chosen variant.
Essential Documents for MUDRA Loan Applicants
Here is a list of all the vital documents to be submitted with a MUDRA loan application form.
1. The SHISHU Scheme
Generally availed by micro units and start-ups, applicants need to present clear details of their business idea & plan, a breakdown of the purchase process & quotations, as well as details of the goods to be purchased and the supplier.
2. The KISHOR Scheme
- Last six month’s bank statements
- Business registration documents such as certificates, trade licenses, etc.
- Ownership documents such as articles of association, partnership deeds, etc.
- Photographs of applicants and owners
- Approximate sales forecasts during the loan tenure
- Sales records for the current financial year
- ITR filings
- Accredited reports of the business’s ability to maintain economic and technical stability & continual sustainability
3. The TARUN Scheme
In addition to the documents mentioned above, loan applicants must provide adequate personal details such as identity proof(Aadhar or voter ID card), address proof, any category certificate, etc.
An In-exhaustive List of authorized Financial Institutions
- State Bank of India
- State Bank of Hyderabad
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Canara Bank
- Corporation Bank
- Dena Bank
- IDBI Bank Ltd.
- Indian Bank
- Oriental Bank of Commerce
- Punjab National Bank
- Syndicate Bank
- UCO Bank
- Union Bank of India
- Vijaya Bank
- Allahabad Bank
- Central Bank of India
- Indian Overseas Bank
- Punjab & Sind Bank
- Axis Bank Ltd
- Federal Bank Ltd.
- HDFC Bank Ltd.
- ICICI Bank Ltd.
- Indus Ind Bank Ltd.
- Karur Vysya Bank Ltd.
- Kotak Mahindra Bank Ltd.
- Yes Bank Ltd.
- IDFC Bank Ltd.
- Jammu & Kashmir Bank Ltd.
- Karnataka Bank Ltd.
What are some new benefits the GOI’s providing under the Mudra Shishu Category as per the Atmanirbhar Abhiyan?
The economic upheavals resulting from the ensuing lockdown due to the Covid-19 pandemic have made things extremely challenging for self-employed individuals and start-ups. The Indian Government had thus authorized an interest rate subsidy of Rs. 1500 crore under the Atmanirbhar Bharat Abhiyaan.
This trickles down to the grass-roots level as a 2 per cent interest subsidy for small-scale borrowers under Mudra Yojana. This rate subvention applies to All Shishu loan account holders who make timely payments. The Indian Government has introduced a plan to help micro & small businesses and start-ups cope financially in the wake of the Covid-19 pandemic.
What is a MUDRA Card?
The MUDRA card is a RuPay debit card handed over to applicants after approval. The card is linked to a MUDRA loan account and allows users to withdraw amounts up to a certain limit.
There is a daily cash withdrawal limit of Rs. 25000 and a daily purchase limit of Rs. 50000 on MUDRA cards. MUDRA cards allow account holders to withdraw from ATMs and other point-of-sale devices. It allows easy access to credited funds and helps build a viable credit history for borrowers.
Mudra loan is Central Government-backed refinance scheme launched to support the growth and development of micro and small enterprises.
Private and public sector commercial banks offer a maximum loan amount of Rs. 10 lakhs to applicant businesses.
Yes, you can apply online through PMMY’s official portal, the Udyami Mitra website, or the official websites of authorized financial institutions.
The Pradhan Mantri Yojana Scheme is aligned with the Make-In-India campaign, coordinates with the National Skills Development Corporation, and supports the National Rural and Urban Livelihood Missions by generating employment opportunities at the grass-roots level.
If they meet the eligibility criteria, there are no restrictions to availing this loan scheme. Physical disabilities are no restrictions whatsoever.
Unfortunately, no. The maximum age limit for a loan applicant is 65 years.
Income tax returns are essential documents for applying for a MUDRA loan.
No, SIDBI and the partnering lending institutions mentioned do not consider the CIBIL score while reviewing MUDRA loan applications.
Small business owners, women entrepreneurs, self-employed individuals, and micro-entrepreneurs are the target demographics of the MUDRA scheme.
Yes, the Central Government has recently introduced a 2% subsidy to the interest rate of all Shishu loan account holders who pay their loan instalments promptly.
Yes, if you aspire to start a new business fresh out of college, then the MUDRA scheme can provide substantial pre-seed and seed funding for your start-up.
Absolutely. Women entrepreneurs enjoy reduced interest rates with zero processing and foreclosure charges.
A PAN card is not essential for getting a MUDRA loan.
Self-employed individuals, entrepreneurs, and micro or small business owners can ask for loans from the MUDRA bank.