Mudra Loan

It’s a financial initiative for facilitating micro-units and providing them with sufficient funds to help them develop their business. Medium and small businesses are often incapable of availing loans from banking institutions due to lack of security and inadequate funds for paying off the interest. There are more than 577 crore small businesses at present functioning in the country. Helping these businesses grow would ultimately lead to the advancement of the economy.

What are the loan limits and interest rates under this scheme?

As per the choices for financing available under this scheme, the loan limits and interest rates vary for accommodating for the growth phase of the respective business availing such loan. The applicable limits and rates are as follows:

1. Shishu – Loans up to a limit of INR 50,000 with interest being 1 per cent/month or 12 per cent/annum. The repayment period for such loan is up to 5 years
2. Kishore – Loans from INR 50000 up to INR 5,00,00. The interest rate would depend on the bank, as per the guidelines of the schemes and keeping in view the applicant’s credit history. Loan repayment period is dependent on the option of the bank
3. Tarun – Loans from INR 5,00,000 up to INR 10,00,000. The interest rate would depend on the bank, as per the guidelines of the schemes and keeping in view the applicant’s credit history. Loan repayment period is dependent on the option of the bank

Overall 27 Public Sector Banks, 31 Regional Rural Banks, 17 Private Sector Banks, 36 Microfinance Institutions, 25 Non-Banking Financial Institutions and 4 Co-operative banks have been selected for disbursing this loan as of now. 60 percent of the loans under the scheme to be offered via ‘Shishu’ option and the remaining 40 percent would be via ‘Kishore’ and ‘Tarun’ schemes.

Eligibility of the borrower

Loans would be provided to all the non-farm income-generating businesses in trading, manufacturing and services whose credit requirements are less than INR 10 lakhs by all Public Sector Banks, State Cooperative Banks, Regional Rural Banks and Urban Co-operative Banks would be known as MUDRA loans under the PMMY (Pradhan Mantri MUDRA Yojana). Basically, all those who want to avail loans below INR 10 lakhs for micro units are qualified for such loan.

An application form under the scheme would be available with each of the above-mentioned institutions. This application form needs to be submitted together with the documents listed below:

• 1. Identity months
  2. Quote for the Machinery or other items to be purchased
  3. Supplier details/Details of the machinery/Price of Machinery
  4. Identity Proof/Address Proof of the Business (relevant certificates & licenses)
  5. Category Proof if any

Apart from the documents mentioned above, applicants’ banks might ask for other documents as required. The Banks should not charge any processing fee and aren’t supposed to request any collateral. The loan repayment period is extended to 5 years. However, it is made clear that any applicant shouldn’t be a defaulter to any financial institution.