What is a MUDRA Loan?

3 minutes

The Pradhan Mantri Mudra Yojana (PMMY) provides loans to non-farming and non-corporate micro and small enterprises. These enterprises can avail loans up to Rs. 10 lakh under the Mudra scheme.

Disclaimer: We have discontinued this product (Mudra loan) at this time. Please contact us on +91-8698010101 to know more about the current financial services provided by us.

Features of Mudra Loan

Loan amount

Up to Rs. 50,000 under Shishu

From Rs. 50,001 to Rs. 5 lakh under Kishore

From Rs. 5,00,001 to Rs. 10 lakh under Tarun

Processing fee

Nil for Shishu and Kishore loan, 0.5% of the loan amount for Tarun loan

Eligibility criteria

New and existing units

Repayment period

Up to 7 years for Mudra

3 to 5 years for Mudra kishor and Mudra tarun loans.

1. Shishu Mudra loan

Under the Mudra loan scheme, Shishu loan provides up to Rs. 50,000 to entrepreneurs who are either in the nascent stages of business or looking to start one. Borrowers also have to provide details of the machinery supplier.

2. Kishor Mudra loan

Under the Mudra loan scheme, Kishor loan offers up to Rs. 5 lakh to those looking for additional funds to expand their operations. Borrowers also have to provide a report containing the economic and technical viability of the business.

3. Tarun Mudra loan

Under the Mudra loan scheme, Tarun sanctions up to Rs. 10 lakh if the business owner meets certain eligibility criteria.

While this scheme does offer financing, an unsecured business loan from Bajaj Finance may give you access to a higher sanction. On meeting the simple criteria and furnishing minimal documentation, you can get approved for up to Rs. 80 lakh* in under 48 hours.

*inclusive of insurance premium, VAS charges, documentation charges, Flexi fees, and processing fees.

Benefits of MUDRA loan

MUDRA loan aims to promote entrepreneurship and self-employment among the underprivileged sections of society. Some of the benefits of MUDRA loan are:

  • Easy and affordable: MUDRA loan does not require any collateral or guarantor and has a low interest rate. The loans can be availed from various banks, NBFCs, MFIs, and other financial institutions. The loan application process is simple and online.
  • Flexible and customised: MUDRA loan has three categories - Shishu, Kishore, and Tarun - to suit the different stages and needs of the borrowers. The loan amount ranges from Rs. 50,000 to Rs. 10 lakh. The loan can be used for various purposes such as working capital, machinery, equipment, raw materials, etc.
  • Inclusive and empowering: MUDRA loan targets the marginalised and vulnerable groups such as women, SC/ST, OBC, minorities, rural and urban poor, etc. The scheme helps them to start or expand their own businesses and generate income and employment. The scheme also provides training, mentoring, and credit support to the borrowers.

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Frequently asked questions

What is the MUDRA Loan?

MUDRA Loan is a business loan scheme under the Pradhan Mantri Mudra Yojana (PMMY) that provides loans up to Rs. 10 lakh to non-corporate, non-farm small or micro enterprises.

What will be the product offerings under Mudra?

Mudra offers three categories of loans based on the stage and needs of the borrowers: Shishu (up to Rs. 50,000), Kishor (Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs. 10 lakh). The loans can be used for various purposes such as working capital, machinery, equipment, etc.

What is the rate of interest applied on Mudra?

The rate of interest applied on MUDRA loans varies from bank to bank and depends on the risk factor and the loan amount. The interest rates start from 7.30% p.a. and can go up to 18% p.a.

What are the collateral security requirements under Mudra?

MUDRA loans do not require any collateral or guarantor from the borrowers. To mitigate the risk of default, a credit guarantee fund for micro units has been created to provide credit guarantee to the lenders.

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