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MUDRA Loans: What Are These?


MUDRA Loans: What Are These?

  • By Saral Credit
  • November 01, 2021

If we see around, many micro, small, medium, and large companies are housed in India. From the past few years, the number has been rising, and the companies are growing, which, if successful, can contribute greatly to the country's economy. However, some of them get stuck due to a shortage of funding, and to be able to have the flow with the aid of money, the government of India has introduced a scheme called the Pradhan Mantri Mudra Yojana. Under this scheme in the form of MUDRA loan, enterprises can avail the monetary aid, fulfill their career-related dreams, and help in the country's economy. Ten points that you should know about MUDRA loan:

1. Eligibility for the Loan: There are some eligibility criteria to avail of this MUDRA loan. Anyone from rural or urban areas can apply for this MUDRA loan, but they have to fulfill some of the criteria.

  • Age Limit: 18 years to 65 years
  • Amount of loan: Shishu Yojana- Up to Rs 50,000
  • Kishor Yojana- 50,000 to Rs 1 lakh
  • Tarun Yojana- Rs 1 lakh to Rs 5 lakh
  • Tenure of the loan: 3 years to 5 years

2. The Interest Rate of MUDRA Loan: Interest rates applied in MUDRA loans are based on RBI defined marginal cost of lending rate. So, here are the following interest rate calculations for different categories:

  • Up to Rs 50000: for micro-enterprises, it is MCLR +SP, and for the small enterprises, it is calculated as (MCLR+SP) + bank load.
  • Above 50000 up to 2 lakh: For micro-enterprises, it is (MCLR+ SP) + bank load for the small enterprises it the same as micro-enterprises.

3. Salient Features of MUDRA Loan: 

Here are some of the features of the MUDRA loan that distinguish this scheme over several others offered by the government.

  • The amount that you avail from this MUDRA loan can be used to fulfill the working capital requirements.
  • This loan is mainly served to the industries engaged by manufacturing, trading, and services.
  • Whether it is the existing one or the new company, anyone can apply for the MUDRA loan.
  • At the time of processing, it is mentioned that the tenure of this loan is 3-5 years.
  • The MUDRA website and MUDRA app are well equipped that anyone can apply online.
  • After obtaining the fund from this loan, enterprises can utilize it to purchase the equipment, expand the business, hire competent staff, and many more.
  • No additional charges are required via a third party is required.
  • Here you can have three products under the MUDRA loan scheme that provides versatility to the borrower.

4. What Are The Documents That Are Required To Apply For A MUDRA Loan?

When you apply to any of the loan systems, then documentation is something that is needed mandatory. Here for the MUDRA loan, some documents are required to apply for.

  • Passport size photos of the borrower/applicant
  • Identity proof- for this, you can give Aadhar card, PAN card, Voter's ID or driving license, etc.
  • Address proof of the enterprise if applicable
  • Proof of address where you can submit Aadhar card, utility bills, bank statements, passport, etc.
  • Identity proof of the enterprise if applicable
  • Quotation proof of merchandise equipment/plant to be purchased

5. What It Offers: 

Micro unit development and refinance agency LTD, an NBFC supporting the development of the micro-enterprise sector in the country. These are very important as they provide refinance support to Banks/NBFCs/MFIs. By MUDRA, they can lend to micro units having loan requirements up to Rs 10 lakh. Under the scheme of the Pradhan mantra MUDRA yojana, MUDRA provides refinance support to the micro business. Other products are for development support for the sector. Here are some of the offerings that are targeted across the spectrum of beneficiary segments.

  • Technology enabler
  • Refinance for micro-units to commercial banks/NBFCs/RRBs/SBFs/MFIs. From here, it is divided into three categories like for Shishu(child), the limit is Rs 50,000; for Kishor(youth), the limit is 50,000to Rs 5 lakh, and the last is for Tarun(adult), where the limit is 5 lakh to Rs 10 lakh. 
  • Credit guarantee for MUDRA loan, which is through NCGTC.
  • Development and promotional support, for example, for sectoral development, financial literacy, and institution development.

6. FAQ About It:

  • Why has MUDRA been set up? Focusing on the non-corporate small business sector, which lacks financial support, MUDRA loan has been set up for the growth of entrepreneurship.
  • What are the roles and responsibilities of MUDRA? It is responsible for refinancing all the last mile financiers. Then whether it is microfinance institutions, societies, trust non-banking finance companies. MUDRA would also partner with state and regional level financial intermediaries to finance last-mile financiers of micro/small business enterprises.
  • What is the rate of interest charged by the MUDRA? MUDRA is the refinancing agency that extends its fund to the last mile financiers to reach out to various sectors. To bring down the cost of funding for the unlimited borrower, it will use multiple innovative financing means, including technology.
  • Any standard format of application to avail MUDRA loans? Regarding the Shishu category, a one-page application format has been designed, which one can see on the MUDRA website. For the Kishor and Tarun category, a three-page indicative application format has been designed, and the same can be seen on the MUDRA website. 

7. How You Can Apply For It: 

  • For applying for the MUDRA loan, you can visit the website www. Mudra.org.in and download the application form.  
  • Fill the form; before filling it, go through it with accurate details such as name, address, KYC details, and number. 
  • MUDRA loan documents now needed to be submitted along with the application form. 
  • If the bank requires any other additional procedure, then fulfill it. 
  • The verification process then starts. The selected bank will then verify the documents.
  • After the verification loan amount then gets credited to the account.
  • To apply to the first category successfully is Shishu Yojana, the owner will need to give precise details of their business ideas. In addition, details of quoting the type and quantity of machinery required for purchase are also required. No processing fees apply to her.
  • Kishor Yojana is applicable for the owner who has an established business or is pursuing expanding it further. Applicant must complete and submit the form and can avail loan of about 5 lakh. Documentation is also required.
  • Like the Kishore Yojana, Tarun Yojana is a MUDRA loan scheme where one can have a loan to expand their business. Here borrowers can seek an amount up to Rs 10 lakh provided they meet all the eligibility criteria. 

8. Purpose of MUDRA Loan: MUDRA loans are extended for various purposes, resulting in income generation and employment creation. Here are some of the purposes for which this loan works:

  • Working capital loan through MUDRA cards
  • For micro-units, equipment finance
  • Business loans for vendors, shopkeepers, traders, and other service sector activities.
  • Tractors, tillers as well as two-wheelers used for commercial purposes only.
  • Transport vehicle loans for commercial use only
  • Loans for Agri-allied non-farm income-generating activities, e.g., Poultry farming, beekeeping, etc.

9. MUDRA Card: Here card also plays a vital role as it makes the work easy. It is a debit card issued against the MUDRA loan account. T works for the capital portion of the loan. By MUDRA card, the borrower can make multiple drawls and credits to make the working capital limit, which is cost-efficient and keep the interest burden minimum. MUDRA card also plays an integral part in the digitalization of MUDRA transactions and creating credit history for the borrower. This card can be operated in the country, and the borrower can withdraw cash from any ATM/Micro ATM.

10. Benefits of MUDRA Loan:

There are several benefits related to this MUDRA loan. Some are here stated below:

  • No collateral or third party is needed to avail any MUDRA schemes.
  • MUDRA loan interest rate is very affordable, and every month, it doesn't exceed 1%
  • After receiving the amount, you can withdraw the amount with the help of a MUDRA card, which is very easy. With the card, you can easily handle the transactions without making a physical visit to the bank.

If you are seeking an opportunity to expand your business or thinking of starting a new company, then a MUDRA loan is the best option. Here you can apply for three categories, which you want to avail yourself of. This is the best scheme that the government of India introduced. Before applying for the loan first, it is good to know about it. You can also go for the family and friends' advice if they have availed it, or you can check out online about the feedbacks of the others. So, don't be late and have a successful business for that; you can apply for the MUDRA loan that you can avail via online or through the bank.