Mudra Loan was introduced in 2015 as Pradhan Mantri Mudra Yojana (PMMY) by the Prime Minister of India. The objective of mudra loan is to extend financial assistance to all needy people engaged in income generating activities.
What is MUDRA
After the announcement of PMMY scheme, Government of India set up Micro Units Development and Refinance Agency Ltd (MUDRA) in April 2015. It is a wholly owned subsidiary of Small Industries Development Bank of India (SIDBI) and a Non-Banking Financial Institution.
The objective of MUDRA is to refinance and develop micro enterprise sector by supporting institutions who are in the business of financing micro enterprises. MUDRA has partnered with Banks, MFIs, other lending institutes both in State and regional level.
MUDRA is also responsible for successful implementation of PMMY. MUDRA collate data for Mudra loan and monitor its progress in reaching out to micro enterprise sector across the country.
Features of PMMY
As per PMMY, which is also popularly known as Mudra loan, all entrepreneurs engaged in non-farm micro and small enterprise can avail a loan upto ₹10 lakh under this scheme. This loan can be availed from commercial banks, Regional Rural Bank (RRBs), Small Finance Bank (SFB), Micro Finance Institute (MFI) and Non-Bank Finance Corporations (NBFC).
The scheme has categorised Mudra loan in three segments – Shishu, Kishore and Tarun.
Sishu – loan upto ₹50,000
Kishor – loan above ₹50,000 and upto ₹5 lakh
Tarun – loan above ₹5 lakh and upto ₹10 lakh
Apparently as the entrepreneur succeed in his enterprise, it progresses step by step from Sishu to Tarun category and thereby become eligible for higher loans. Mudra loan is given as a Term Loan.
Once the borrower become successful and established, he is supported by schemes under MSME Act
Who can apply for Mudra loan?
Mudra loan can be applied by any individual, proprietorship concern, partnership firm, Private and Public limited companies and any other legal entities.
The borrower should be engaged in non-farm entrepreneurial activities like manufacturing, trading, service enterprise or Agricultural allied activities.
Eligible activities
Broadly following activities are financed under mudra loan,
- Purchase of vehicle like auto rickshaws, Van, Cab, 3-wheelers, transporting vehicle etc for commercial use.
- Service outlet like pharmacy, salons, tailoring, dry cleaning, beauty parlour, document centre, all type of servicing centre etc.
- Setting up shops for trading of various goods
- Agriculture-allied activities like pisciculture, beekeeping, poultry, livestock, rearing, grading, sorting, dairy, agri clinic, food and agro processing etc.
The above list is indicative. There could be many more similar activities covered under Mudra loan.
Mudra loan is not given for farming or cultivation. This is taken care under Kisan Credit Card and other agricultural loan product of banks.
How to apply for mudra loan
Entrepreneurs can apply for Mudra loan by approaching any of the commercial banks. RRBs, MFIs and NBFC. Alternatively, borrower can apply online through the portal www.udyamimitra.in This portal after receiving the application online forward the same to the nearest implementing agency i.e bank or MFI.
What are the documents required for Mudra Loan
The applicant may be a new or existing entrepreneur.
a) In case of new entrepreneur, the borrower has to submit his/her details with a project report on the venture to be undertaken. The project report can be prepared by self with details of manufacturing or service process, availability of market, cost of setting up the unit and its profitability.
b) In case of existing entrepreneur, apart from above documents, the borrower need to submit financial statement of his current business. Generally, banks don’t not insist on audited financial for loan upto ₹5 lakh. However, borrower need to furnish statement of sales and profit for last 2 years. The projection for future sales and profitability is also need to be furnished. The existing business should be profit making for last 2 years.
For loans above ₹5 lakh and upto ₹10 lakh CA certified financials may be obtained. Or self declared statement may be furnished.
The loan sanction is granted based on the merit of the project, profile of the applicant, performance of the existing business and other necessary documents.
The borrower needs to have clear track record with banks. The credit score should be within acceptable level.
The process may very from bank to bank.
As per RBI guideline no security is required for Mudra loan. However, the assets created out of the loan will be hypothecated to the lender.
e-Mudra Loan
The borrowers now have an option of applying for Mudra loan from the convenience of home. This facility known as e-Mudra loan has been brought by State Bank of India, Canara Bank and Punjab National Bank. Under this facility the borrower can directly apply to these banks for Mudra loan.
The features of E-Mudra loan are as below:
- The applicant should be a micro entrepreneur
- Should be an existing customer of the bank for atleast 6 months
- Maximum eligible loan amount is ₹1 lakh
- The loan will be repayable over 5 years
The applicant needs to have proof of business and Aadhar number. If applicable, the borrower needs to provide community certificate, GSTN, Udyog Aadhar, Proof of shop & Establishment and any other relevant document.
If the loan is sanctioned, the borrower need to visit the branch where he or she is having account to execute the required documents. The loan account opening and disbursement is done online.
What is the achievement under PMMY
Upto November 2022, the implementing agencies have sanctioned 2.99 crore applications. The amount of loans sanctioned estimated at ₹223219 crore and disbursement at ₹216771 crore.