MSME sectors are a significant contributor to the country’s socio-economic development. They also contribute a staggering amount to country’s GDP and export.
However, several MSME sectors have come to a halt in the long run due to improper infrastructure and inadequate funding. To mitigate such circumstances and ensure the growth of MSMEs, the Government of India has launched the MUDRA (Micro Units Development and Refinance Agency Ltd.) scheme. MUDRA loan under PMMY is the amount sanctioned under the scheme can be used to procure machinery, expand a business, meet working capital needs, etc.
Benefits of the MUDRA Scheme
The MUDRA Yojana scheme extends the following advantages to the MSME sectors and aspiring business owners:
- Individuals do not have to pledge any collateral to avail MUDRA loans. However, in case of any default, the government is liable to repay the loan amount.
- The loan amount is extremely beneficial for those seeking to set up micro-enterprise.
- Aspiring entrepreneurs or established business owners can access a loan amount of up to Rs. 10 Lakhs and use it to fund several business requirements.
- Borrowers also get an extended repayment term of 5 years.
- Furthermore, the dedicated MUDRA website and apps can be easily accessed to apply for the loan amount.
- A wide range of industries, including handicraft artisans, business vendors, the agricultural sector, self-employed entrepreneurs, Services Companies, small-scale manufacturers, etc., can apply for a MUDRA loan.
- The loan amount can be availed for businesses both in urban and rural areas.
- The loan is a part of the Pradhan Mantri Jan-Dhan Yojana. Hence, it also enables business owners to take advantage of the overdraft facility, of a balance which amounts to Rs. 5000.
- Women can also avail of MUDRA loans under PMMY (Pradhan Mantri Mudra Yojana) at reduced interest rates.
- The loan principal can be used as term loans, overdraft facilities and working capital loans.
- Borrowers can also opt for a MUDRA debit card, giving them instant access to funds.
- Individuals do not have to bear any processing or foreclosure charges under the scheme.
- People from minority categories can avail of MUDRA loans at concessional interest rates.
Types of Credit Offered Under the MUDRA Loan
The MUDRA scheme extends three MUDRA loan products:
- Shishu Loan
Shishu loans are offered to Micro and small business owners or start-ups. The loan amount extended under this type is up to Rs. 50000.
- Kishor loan
Under the Kishor loan, unestablished business bodies can avail of a loan amount ranging from Rs. 50000 to Rs. 5 Lakhs and use it to purchase raw materials, equipment or machinery.
- Tarun loan
Under Tarun loan, individuals can avail of a loan principal between Rs. 5 Lakhs to Rs. 10 Lakhs. It can be opted by established business bodies willing to expand their business premises.
The honourable Finance Minister Shri Arun Jaitley has announced the establishment of the Mudra bank. It is an institution that is in charge of financing the business of the MSME sectors.
Eligibility Criteria to Avail MUDRA Loans
MSME sectors located both in rural and urban areas can avail of MUDRA Loan by meeting the following eligibility criteria:
- Individuals must belong to age bracket of 18 to 65 years.
- Loan amounts under the scheme can be availed by self-employed individuals, start-ups, MSMEs, shopkeepers, retailers, artisans, street vendors, shop owners, sole proprietorships, partnership firms and other business entities.
- Under Shishu loan products, individuals can avail of the fund for the launch of a company. On the other hand, under Kishor and Tarun, business professionals can avail loan amounts to expand their existing business.
Documents Required to Apply for MUDRA Loan
Here are the documents that business owners must submit to receive approval for the loan principal:
- Identity proof (Voter’s ID, PAN, Aadhaar card, etc.)
- Address proof (Utility bill, Aadhaar card, passport, etc.)
- KYC papers
- Bank account statements of last six months
- Proof of business (Business license, certificate, registration etc. confirming the existence of business and ownership)
- Balance sheet of last 2 years
- Income tax returns
- Partnership deed
- Articles of association
- Sales of current FY
- Proof of category
- Quotation copy of merchandise or equipment to be purchased
- Proof regarding the business continuity
- Trade references
How to Apply for a MUDRA Loan
Here are the steps that will help one apply for a MUDRA loan:
Step 1: Visit the official website of any financial institution or the MUDRA portal.
Step 2: Download the application form and fill it out with necessary details.
Step 3: Attach relevant documents. Mention the necessary details as mandated by the financial institution.
Step 4: After thorough verification, loan amount will be credited to the account of the beneficiary.
To sum up, the MUDRA scheme is a boon for MSME sectors. Under the scheme, companies will receive adequate monetary support to establish their businesses and flourish. MUDRA loan is a working capital loan offered under PMMY, helping individuals in capacity expansion, purchasing machinery, renovating business premises, etc.