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Pradhan Mantri MUDRA Yojana offers loans for businesses
MUDRA offers loans across three stages of the business
Under Shishu, the MUDRA loan interest is from 1% to 12%
For Kishore and Tarun, banks decide the interest rate
In 2018, India had about 51 million MSME units that contributed to around 37% of the country’s GDP and 43% to the nation’s exports, according to a report by The Economic Times. Nevertheless, despite the significant role played by small businesses in economic development, MSMEs face various challenges like shortage in raw material and working capital, outdated technology and insufficient labour, all of which stem from a lack of finance.
To help small businesses address financial challenges, the government launched the Pradhan Mantri MUDRA Yojana on 8 April, 2015. MUDRA offers business loans tailored to three different stages of a business’ growth, with repayment terms ranging from 1 to 5 years. Funding is made available as per the type of loan availed and charged at the applicable Pradhan Mantri MUDRA Yojana interest rate.
Read on to know more about the MUDRA loan interest rate and the sanction offered at various stages.
You can avail a MUDRA loan under this phase if you are yet to establish your business or it is in its nascent stages. The scheme offers a sanction of up to Rs.50,000 for a tenor of 5 years. The following businesses are eligible for a Shishu Mudra loan-
- Self-proprietors and partnership firms
- Firms in the service sector
- Micro enterprises and manufacturing firms
- Vendors, truck owners and repairing shops
- Businesses providing food service
The Mudra Shishu loan interest rate ranges from 1% to 12% per annum. The RBI has directed commercial financial institutions providing Mudra refinance to keep the interest rate at MCLR/base rate.
Interest rates for RRBs and SCBs extending the loan are also capped at 3.5% over the MUDRA refinance rate. For NBFCs, the cap stands at 6% for Mudra refinancing. The government has also announced an interest rate subsidy of 2% for prompt payees of the Shishu Mudra loan. The subsidy extends for a period of 12 months ending the 3-month moratorium on 31st May 2020.
This loan is tailor-made to help you sustain your business. The scheme offers a sanction that ranges from Rs.50,000 to Rs.5 lakh at the MUDRA interest rate decided by the lending institution in question. For the Kishore variant, the MUDRA Yojana interest rate may range from 8.60% to 11.15% or more and is based on the guidelines set by the scheme as well as your credit history. You have to repay the loan along with the MUDRA loan interest within the tenor offered by the lender.
You can avail this loan variant when you wish to expand your business. Under this phase, you can access a sanction from Rs.5 lakh to Rs.10 lakh at the PM MUDRA loan interest rate decided by the lending institution. The lender determines PMMY interest rate based on the guidelines and your credit history. The interest rates range from around 11.15% to 20% and the repayment tenor is decided by the lender.
Additional Read: MSME Registration Procedure
Collateral-free Business Loans up to Rs. 30 lakh. Submit only 2 documents and get funding in just 24 hours- Apply Now
MUDRA Yojana offers a range of schemes customised to specific needs. These include the following.
Credit for micro enterprise: This scheme focuses on increasing the inclusion of the general population into the business sector, and offers loans to sectors like food production, textiles and land transport. Here, you can access a loan of up to Rs.1 lakh with microfinance institutions.
Women enterprise programme: Also known as Mahila Udyami Yojana, this scheme offers loans at affordable MUDRA interest rates with a concession of up to 0.25%.
Refinance scheme for banks: This scheme refinances loans of up to Rs.10 lakh extended by banks to MSMEs in the manufacturing and service sector. This is only available if the scheduled commercial banks lend loans at their base rate. Also, rural, regional, and cooperative banks are required to limit their MUDRA Yojana loan interest rate margin at 3.5% over their refinance rate.
MUDRA Card: This debit card is related to the MUDRA loan, and helps beneficiaries access working capital, serving as a means to create a credit history for the user. It can be used to make cash withdrawals from ATMs and payments via POS devices.
Equipment finance scheme: This scheme aims to offer the financial impetus required by microenterprises to expand operations and acquire quality equipment. This way, micro businesses can increase their production and make their ventures more sustainable as well.
The eligibility criteria of MUDRA loan are extremely simple. You can apply for a loan under the scheme if you are an Indian citizen and belong to the:
Non-farm small/micro enterprise segment
Non-Corporate Small Business Segment (NCSBS)
You can also apply if you are a part of a business or as an individual operating as a:
Small manufacturing unit
Trade/manufacturing sector unit
Fruit and vegetable vendor
Service sector unit
Artisan and more
In addition to the above, you should:
Have a good credit history
Have not defaulted on a loan
Have the required skills or experience to start, continue, or expand a business
Additional Read: PMEGP Loan Process & Eligibility
Alternatively, you can apply for a Business Loan with Bajaj Finserv to access a high-value sanction of up to Rs.30 lakh in under 24 hours. Since this is a collateral-free loan, you don’t have to pledge any security and you need to submit only two documents to apply. Be sure to check your pre-approved offer from Bajaj Finserv to get instant approval via a tailor-made deal.
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Ans. The processing time for a Mudra loan varies from one financer to another. Your choice of financial institution will determine the time necessary for you to enjoy the loan disbursal. Businesses can apply for a collateral-free advance of up to Rs.10 lakh and keep all necessary documents ready for easy approval.
Ans. Mudra loan is available as business finance for all individuals. It aims to support entrepreneurial activities irrespective of the category respective to an entrepreneur. However, individuals must not have availed financial support under any other scheme introduced by the central or state government to successfully avail such a loan.
Ans. ITR or Income Tax Return is one of the most essential documents required to avail a Mudra loan when the amount of advance exceeds Rs.2 lakh. An applicant will also need other financial documentation like Balance Sheets for the last 3 years audited by a CA as well as a projected Balance Sheet for the following 2 years.
Ans. Yes, a Mudra loan is available for new businesses and start-ups. The business ventures only need to be associated with trading, manufacturing, or non-agricultural industries. To successfully apply for the loan, a prospective applicant needs to provide the business plan along with the application form. It thus helps budding entrepreneurs fulfil their business dreams.
Ans. As the Mudra loan scheme is government funded, CIBIL score is not a mandatory requirement. Individuals and non-individuals can apply for this loan if they meet the required eligibility criteria of the scheme, which does not mandate a minimum CIBIL score for applicants. However, it is beneficial to hold a healthy CIBIL score to avail better loan terms from financers.
Ans. Benefits of the Mudra loan include –
Advances under the Mudra loan scheme are collateral-free for up to Rs.10 lakh.
There are no processing fees.
Entrepreneurs do not need a healthy CIBIL score mandatorily to successfully apply for a loan.
The loan is available for all non-agricultural businesses.
Unorganised businesses can also avail loans covered by the credit guarantee scheme.
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