Micro-Units Development and Refinance Agency (MUDRA) was set up in April 2015 to help and support small and micro business units under the Pradhan Mantri Mudra Yojana (PMMY). The Mudra scheme was launched with a budget of Rs. 20,000 crores. Also known as Mudra Loan Yojana or Mudra Bank Scheme, the credit products offered by MUDRA are more commonly known as Mudra loans. The main aim of the MUDRA loan scheme is to fund the underfunded and help the small and emerging business enterprises.
MUDRA Loans are essentially collateral free loans given to those sectors who which to either start a business or expand their existing one. The loans do not have a minimum amount of lending however the maximum amount of loan one can avail is till Rs. 10 Lakh.
What are the key objectives of the MUDRA Yojana?
The inception of MUDRA Yojana was done keeping in mind several objectives to be fulfilled during the implementation of this yojana. The most prominent of these are:
- For laying down policy guidelines for financing small/ micro enterprises
- Getting all the Microfinance Institutions and related entities registered and then regulating the same
- For helping the small businesses develop and grow further
- Assisting lower income groups in building and expanding their business
- To assist in creating easy access to finance for unbanked and help in lowering their cost of finance
- To provide SC/ST lending preference
- For regulating all Microfinance Institutions that are dealing with trading, manufacturing, and service
Types of loans under the MUDRA Loan Scheme
The MUDRA Loans are divided under 3 categories namely
1) Shishu – Loans till Rs. 50,000
2) Kishor – Loans till Rs. 5 lakh
3) Tarun – Loans till Rs. 10 lakh
For an entrepreneur to secure a loan under the MUDRA scheme, he/she needs to have a strong business plan in place. Along with having a business plan the repayment process or structure should be sound.
A detailed explanation about the types of loans the documents required for the loans has been mentioned here. Click on this link to know more.
Interest Rates on the MUDRA Loans
Different banks like Commercial Banks, Regional Rural Banks, and Scheduled Cooperative Banks are eligible to avail of refinancing support from MUDRA for financing microenterprise activities. The refinance is available for term loan and working capital loans, up to an amount of 10 lakh per unit. The eligible banks, which have enrolled with MUDRA by complying to the requirements as notified, can avail of refinancing from MUDRA for the loan issued under Shishu, Kishor and Tarun categories.
The number of financial institutions authorized by MUDRA to offer Mudra loans is listed below:
| Financial Institutions | Numbers Eligible to Offer Mudra Loans |
| Public Sector Banks | 27 |
| Regional Rural Banks | 27 |
| Private Sector Banks | 17 |
| Foreign Banks | 2 |
| Micro Financial Institutions (MFI) | 25 |
The loan amount is fixed for each category of Mudra loans; however, there can be a slight variation in the interest rates of different banks. The interest rates for Shishu, Kishor and Tarun categories fall in the range of 10 to 12%, 14 to 17%, and 16% onwards, respectively.
| Mudra Loan Type | Loan Amount | Interest Rate |
| Shishu Loan | Up to Rs. 50,000 | 10 – 12% |
| Kishor Loan | From Rs. 50,000 to Rs. 5 lakh | 14 – 17 % |
| Tarun Loan | From Rs. 5 lakh to Rs. 10 lakh | 16% onwards |
However, the interest rates differ from lender to lender and according to market policies and the credit score of the individual or the business.
Processing Fee on the MUDRA Loan Scheme
While many times the interest rate might seem low, there are a few hidden charges charged by different lenders that go unnoticed by many borrowers. This, in turn, increases the cost of the entire loan indirectly, making the loan seem expensive.
As a borrower, it is your duty to ensure to check the processing fee charged by the institution you are borrowing the loan from. Different institutions have different processing charges for the MUDRA Loan Schemes.
The processing fee could differ from
- NIL
- NIL for Shishu
- As per the credit amount and financial profile
- As per the guidelines of the bank
- 0.5% of the loan amount
- 50% concession for Kishor and Tarun
These are the different types of processing fees that one could be charged while borrowing the loan. Even though the rates offered are different by different institutions, all of these institutions are regularly checked by MUDRA so as to ensure no inefficiencies exist.
What can the loans under the MUDRA Loan Scheme be used for?
The loans under the MUDRA scheme can be used for various purposes right from the inception of a business to the expansion of the current business or even commercial vehicle loan used for the business. One needs to note that the MUDRA Loan scheme cannot be used for personal uses such a personal car loan or home loan. MUDRA Loans can only be borrowed for the purposes of a business activity that falls under the criteria mentioned by the scheme. Below is a list of uses the loan can be used for.
– Commercial vehicle business loan
– The inception of the business
– Working Capital Loan
– Loan for heavy machinery – Plant and Equipment
– Expansion of the current business
– Loan to expand the business in more geographic locations
– Revamping the business space
What are the documents required for the MUDRA Loan Scheme?
Documents need for a vehicle loan under the Pradhan Mantri Mudra Yojana (Mudra Loan) has been listed below:
- The application form for Pradhan Mantri Mudra Yojana and vehicle loan application form duly filled.
- 2 passport sized photos.
- Bank statements for last 6 months.
- Photo identity proof, address proof, and income proof.
To know more about the MUDRA eligibility, documentation and the application process for the loan click on the link mentioned below.