Mudra Loan - Pradhan Mantri Mudra Yojana (PMMY)

Types of MUDRA Loans

The government has divided Mudra loans into 3 types, based on the funding needs of the micro-unit or entrepreneur. The loans are classified as follows:

1. Shishu

Under the Mudra loan scheme, Shishu 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

Under the Mudra loan scheme, kishor 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

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:

• No Collateral Needed: You don’t have to provide any security or pledge your personal or business property to get a MUDRA loan.
• Easily Available: These loans are easily available for entrepreneurs starting micro businesses across India, in almost every sector.
• Support in Case of Default: If you're unable to repay the loan due to unexpected problems or natural disasters, the government may take responsibility for the repayment.
• Quick Access to Funds: MUDRA loans offer quick and hassle-free funding for small businesses. The Mudra Loan Limit goes up to Rs. 10 lakh, which can be availed without much delay.
• Support for Women: Women entrepreneurs can get special benefits and lower interest rates under the MUDRA scheme.
• Rural Support: MUDRA loans are available in both rural and urban areas, with rural businesses often benefiting more due to better access.
• Flexible Repayment Options: You can choose to repay the loan sooner or extend the repayment period up to 7 years, depending on what suits your business.
• Various Credit Options: The scheme provides different types of financial support, like cash credit and equipment loans, to help your business grow.
• MUDRA Card: You can also apply for a MUDRA card, which gives easy access to funds and overdraft facilities whenever needed.

Eligible Activities covered under MUDRA Loans

Transport vehicles

Loans for the purchase of transport vehicles used for the transportation of goods and passengers, such as auto rickshaws, small goods transport vehicles, 3-wheelers, e-rickshaws, taxis, etc.
Also includes tractors, power tillers, tractor trolleys, and two-wheelers used exclusively for commercial purposes.

• Community, social and personal service activities

Loans for businesses like salons, gyms, boutiques, DTP and photocopying services, tailoring shops, dry cleaning, medicine shops, beauty parlours, cycle and motorcycle repair shops, courier services, etc.

• Food products sector

Loans for businesses involved in the production of items like papad, biscuits, bread, buns, jams, jellies, ice cream, agricultural produce preservation at the rural level, achaar making, cold storage, small food stalls, day-to-day catering or canteen services, cold chain vehicles, ice making units, sweet shops, etc.

• Textile products sector/activity

Loans for activities such as handloom weaving, chikan work, traditional embroidery, computerised embroidery, traditional dyeing and printing, zari and zardozi work, powerloom weaving, khadi production, apparel design, knitting, cotton ginning, stitching, and other non-garment textile products like vehicle accessories, bags, furnishing accessories, etc.

• Business loans for traders and shopkeepers

Loans for individuals running their own shops or involved in trading and service enterprises, including non-farm income-generating activities.

• Equipment finance scheme for micro units

Loans for individuals setting up micro enterprises by purchasing machinery or equipment needed for their business.

• Activities allied to agriculture

Loans for businesses involved in activities such as pisciculture, poultry farming, livestock-rearing, beekeeping, agro-processing, dairy, fishery, grading, sorting, agri-clinics, agribusiness centres, and other services that promote livelihood or generate income. However, crop loans, land improvement activities like irrigation, canal work, and wells are not included under this category.

Eligible borrowers of PM MUDRA Yojana

Here are the types of eligible borrowers:

1. Individuals
2. Sole proprietorship
3. Private limited company
4. Partnership firm
5. Public limited company
6. Entities of any other legal forms
7. Mudra loan age limit: 18 to 65 years

Eligibility Criteria for PM Mudra loan

Mudra Loans, under the Pradhan Mantri Mudra Yojana (PMMY), aim to provide financial assistance to micro-enterprises and small businesses. Here are the eligibility criteria:

• Individuals or entities engaged in income-generating activities such as manufacturing, trading, or services are eligible.
• Loan applicants must be Indian citizens aged 18 to 65 years.
• The business should fall under the non-farm income-generating category, excluding agriculture and allied activities.
• Borrowers must have a viable business plan and demonstrate the ability to repay the loan.
• Loan amounts vary depending on the borrower's business needs and repayment capacity.

Required documents for Mudra Loan

When applying for a Mudra Loan, applicants need to provide specific documents to support their loan application. Here are the documents required for mudra loan:

• Identity proof such as Aadhar Card, Passport, Voter ID, or Driving License.
• Address proof, including utility bills, ration card, or rent agreement.
• Business plan outlining the purpose of the loan and expected outcomes.
• Proof of business ownership or registration documents, such as GST registration or business license.
• Bank statements or financial documents demonstrating the applicant's repayment capacity.
• Any other documents as specified by the lending institution, such as income tax returns or collateral documents.

Documents required for Vehicle Loan under PMMY

Documents required for a vehicle loan under the Pradhan Mantri MUDRA Yojana (PMMY) include the following:

• Mudra loan application form: Duly filled and signed by the applicant.
• Vehicle loan application: Completed form specific to the vehicle loan request.
• Photographs: Two recent passport-sized photos of the applicant.
• Identity proof: Any one of Aadhaar Card, Passport, Voter ID, or Driving Licence.
• Address proof: Valid documents such as Aadhaar Card, Passport, recent bank statement, electricity bill, or phone bill.
• Income proof: Documents supporting the applicant’s income details, as per the lender’s requirements.
• Bank statement: Statement of the applicant’s bank account for the last six months.

Significance of Mudra loan in Indian economy

Micro and small business units are a key part of India’s income-generating sector. These small units provide employment to millions of people in cities, villages, and even tribal areas. However, many of them rely on informal moneylenders who charge very high interest rates, which often leads to exploitation. If these businesses had access to proper and regulated funding, they could grow and contribute much more to the economy.

To bridge this gap, the central government introduced a simple and flexible loan scheme called the PM MUDRA Loan Scheme. This scheme plays an important role in supporting both the Indian economy and individuals or partnership businesses by helping them earn a steady income and support their families. Under the MUDRA scheme, people can start new businesses or expand their existing ones.

The scheme improves access to both short-term and long-term finance for deserving small businesses across rural and urban areas of India. It also creates more income opportunities for businesses at the lower end of the economic ladder. As a result, it helps increase the national per capita income and boosts employment levels.

The scheme is managed by SIDBI (Small Industries Development Bank of India), which also works to provide financial education to entrepreneurs, helping them grow both economically and socially.

Sectors that are covered under the MUDRA Yojana scheme

• Transport: For buying vehicles like auto-rickshaws, three-wheelers, small delivery vans, taxis, and similar vehicles.
• Personal Services: Includes men’s salons, beauty parlours, gyms, boutiques, dry cleaners, medical stores, tailoring shops, and similar businesses.
• Food Products: For small-scale production and packaging units such as making papads, jams, sweets, ice creams, or running canteens.
• Agriculture and Related Activities: Includes fish farming, poultry, dairy, agro-processing, beekeeping, animal rearing, and similar services.
• Textiles: For businesses involved in handloom, khadi work, traditional embroidery, and making vehicle accessories.
• Business Activities: Suitable for traders, shopkeepers, service providers, and other small non-farming income-generating activities.

Nature of financial assistance

When seeking financial assistance for business needs, various types of loans and credit facilities are available to cater to specific requirements:

1. Term loan
2. Working capital loan
3. Overdraft limit
4. Composite loans

Steps to apply for Mudra Loan online

To apply for a Mudra Loan online, follow these steps:

• Visit the official website of the Mudra Loan portal or the website of a participating bank.
• Register as a new user and create an account on the portal.
• Complete the loan application form with accurate details about your business, loan amount required, and repayment capacity.
• Upload the required documents, including identity proof, address proof, business plan, and financial statements.
• Review the application carefully and submit it online.
• Track the status of your application through the online portal or contact the bank for updates.
• Once approved, complete any additional documentation and formalities required by the bank to disburse the loan amount.

Steps to apply for Mudra Loan offline

To apply for a Mudra Loan offline, follow these steps:

• Visit a participating bank branch or financial institution offering Mudra Loans.
• Request a loan application form from the bank's loan officer.
• Fill out the application form with accurate details about your business, loan amount required, and repayment capacity.
• Attach the required documents, including identity proof, address proof, business plan, and financial statements.
• Submit the completed application form along with the documents to the bank officer.
• The bank will review your application and verify the documents.
• Once approved, complete any additional formalities required by the bank to disburse the loan amount.