What is Mudra loan?

Micro-units Development and Refinance Agency (MUDRA) Scheme is an initiative by the Government of India and comes under Pradhan Mantri Mudra Yojana (PMMY) to promote small businesses, micro-units, and MSMEs by providing financial help for various banks for their business expansion and growth. In this scheme the maximum loan amount offered under the MUDRA scheme is up to Rs. 10 lakh with the repayment tenure up to 5 years.


MUDRA loan scheme has been offered to the self-employed professionals, small-business owners, micro-units, and MSMEs to ensure that, they do not have to rely only on personal networks and any private lenders. Under MUDRA Loan scheme, the small business owners, micro-units and MSMEs can avail of the Mudra loan from eligible Government recognized financial institutions at comparatively lower interest rates. On the other hand, the borrowers are not required to submit any collateral/security or any third-party guarantee to apply for a Mudra loan.


Types of Mudra loans 


Mudra loans are divided into three categories, named as Shishu loan, Kishor loan, and Tarun loan to fulfill different funding requirements of micro business units and MSMEs at different stages of business development. The mudra loan amount of each loan schemes offered is mentioned below:


The maximum loan amount is up to Rs. 10 lakh


Under Shishu category

Loan amount up to Rs. 50,000

Under Kishor category

Loan amount up to Rs. 50,001 up to Rs. 5 lakh

Under Tarun category

Loan amount up to Rs. 5,00,001 up to Rs. 10 lakh


Shishu loan:


This loan is one that comes under the child category of the Mudra loan and is perfectly suited for small start-ups. A micro business owner can apply for a loan amount up to Rs. 50,000. The Shishu loan is offered to the business owners to get a small capital and start a business in the MSME sector.


Kishor loan:


The Kishor loan under the Mudra loan category is best suited for small business owners who have already started a business and need immediate capital to establish it as a large enterprise. The business owners can apply for a loan amount ranging from Rs. 50,000 up to Rs. 5 lakh.


Tarun Loan:


The Tarun loan is offered to the small business users who have established their business for some time and need capital for expansion, as well as for micro-units that need funds to set up a new business. Under this loan the business owners can apply for a loan of Rs. 5 lakh up to Rs. 10 lakh.


What are the factors that affect eligibility for a Mudra loan?


Here is the list that mentions the factors affecting your eligibility criteria for a Mudra loan:


        The applicant’s age should be minimum of 18 years and a maximum of 65 years.

        Applicant must be an Indian citizen.

        The loan amount depends on your total income.

        The borrower’s business should be engaged in non-farm income-generating businesses only in manufacturing, trading, and service sectors.

        Past loan defaults may affect your chances of Mudra loan approval.


Lending institution that are eligible to provide MUDRA Loan


Here are some lending institutions that are eligible to provide Mudra loans. All public sector, private sector, and RRB (Regional Rural Banks) are eligible to provide Mudra loan if they satisfy the following criteria:


      To be eligible the bank must have generated profits during the last two years.

      Net performing assets should not be more than 15%, 10%, and 6% for public, private, and regional rural banks respectively.

      For private and public sector banks the net worth should be above Rs. 250 cr and for rural banks, it should be more than Rs. 50 cr.


Documents required for Mudra loan


The Mudra loan eligibility documents are required for specific purposes, whether you are applying for a vehicle loan, business installment loan, or Best  business loan:


For vehicle loan:


        Fill the vehicle loan application form for Mudra Yojana.

        Submit 2 passport size photograph

        Submit address proof such as an Aadhaar card, passport, bank statements, telephone, or electricity bill. 

        Income proof of the borrower

        Submit a bank statement for the last 6 months


For business installment loan


        Fill the online application form for Mudra Yojana

        Submit the loan application form

        Submit 2 passport size photograph

        Identity proof such as an Aadhaar card, passport, voter ID, driving license, etc.

        Submit the proof of ownership of the enterprise or residence.

        Submit the proof of qualification, establishment, and business continuity.

        You should submit 2 years of ITR and CA certified financials.

        Bank statement for the last 6 months.


For business loan


        Fill the application form for Mudra Yojana

        The borrowers should submit identity and age proof such as an Aadhaar card, passport, and voter ID card, driving license, etc.

        Give your residential address proof such as an Aadhaar card, passport, bank statement, telephone, or electricity bill.

        Submit the proof of qualification, establishment, and business continuity.

        Bank statement for the last 12 months

        Submit income tax return for the recent 2 years.


Mudra loans interest rates


Here is the list of banks that offer MUDRA loan to the borrowers with the given interest rates, maximum loan amount, processing fee, and tenure:


Bank names

Interest rate

Processing fee

Loan amount

Tenure

HDFC Bank

10.99% up to 20.70%

Up to 1.5%

Maximum loan amount up to 15 lakhs

1 to 5 years

ICICI Bank

From 10.99% up to 17.99%

Up to 2.25%

Maximum amount up to Rs. 20 lakhs

1 to 5 years

Oriental Bank of Commerce

Starting from 10.65% up to 11.65%

0.5%

Maximum amount up to Rs. 10 lakh

1 to 5 years

 

Key objectives of MUDRA Yojana


      It helps in creating easy access to finance for the unbanked and helps in lowering their cost of finance.

      Assisting the lower-income group in building and expanding their business.

      It helps to regulate all microfinance institutions that are dealing with trading, manufacturing, and service.

      It provides SC/ST lending preference.


Conclusion:


With the given information of MUDRA loans such as the eligibility criteria, types of Mudra loans, several banks offering mudra loans, and documents required for applying for mudra loans, one can easily fulfill their financial requirements. You can select the bank for applying for the loan such as HDFC Bank, ICICI Bank, and Oriental Bank of Commerce according to your affordable loan amount.

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