Mudra loans are offered to business owners with strong business plans who meet certain eligibility requirements set out by their lending institutions. Each institution has different eligibility standards and interest rates for these loans.
PM Mudra Loan
The Pradhan Mantri Mudra Yojana (PMMY), popularly referred to as Mudra Loan, was initiated by the Indian government on April 8, 2015. First unveiled by Prime Minister Narendra Modi, its purpose is to provide financial assistance to micro, small, and medium enterprises (MSMEs) that operate or plan to start up. Loans are categorized into three types: Shishu, Kishore, and Tarun loans. Shishu loans are part of the PM Mudra Yojana, while Kishore and Tarun loans fall under the PM Mudra Loan scheme.
Mudra Yojana offers loans of up to ₹50,000 with a nominal interest rate ranging between 10% and 12%, while the Tarun Yojana allows loans up to ₹5,00,000 at an unsecured interest rate between 14% and 17%. Kishore loans can offer amounts up to ₹10,00,000. As an unsecured loan, the nominal interest for Kishore loans starts from 16%, depending on the lending institution. Mudra Loans feature several benefits that simplify the borrowing process.
Mudra Loan is one of India’s premier government schemes for business entrepreneurs and offers several attractive features:
- The maximum loan amount a business can borrow is ₹10 lakhs; interest rates depend on the nature of the business, requirements, and borrower profile. Processing fees for this business loan range from 0% to 0.50% of the total loan amount.
- Mudra Yojana does not require collateral. Repayment terms are flexible, extending up to five years, and only a nominal fee will be assessed on Mudra Loan Yojana applications.
The Mudra loan has several benefits that set it apart from conventional loans:
- It offers collateral-free loan solutions from banks and NBFCs without asking borrowers for collateral security. Additionally, Mudra loans boast lower interest rates, commonly referred to as the Mudra Loan Interest Rate, on the loan amount and minimal or no processing fees.
- Women entrepreneurs in India may qualify for Mudra loans with preferential rates under the Indian Government’s Credit Guarantee Scheme, which provides lower interest rates on these loans for working capital, overdraft facilities, and term loans.
- Non-farm businesses such as small and micro firms involved in services, trading, manufacturing, and income-generating activities that do not depend on farming can benefit from a PM Mudra loan. Citizens belonging to SC, ST, or minority categories can also avail themselves of this loan.
Who Is Eligible for PM Mudra Yojana Loans?
Pradhan Mantri Mudra Yojana loans may be availed by business entities engaged in services, trading, and manufacturing activities. Below is the list of entities eligible for PM Mudra loans:
- Startups, individuals, and self-employed professionals.
- Micro, Small, and Medium-Sized Enterprises (MSMEs).
- Street vendors, traders, shopkeepers, artisans, retailers, and small manufacturers.
- Partnership firms, sole proprietorships, limited liability partnerships (LLPs), and various other forms of legal entities.
Businesses Covered Under the Mudra Scheme
Shopkeepers can avail themselves of the benefits offered under PM Mudra Yojana. Eligible businesses include:
- Fruit and vegetable vendors operating as small manufacturing units.
- Service sector establishments, including beauty parlors, courier agents, boutiques, cycle repair shops, dry cleaning shops, motorcycle repair shops, DTP/photocopying facilities, gyms, pharmacies, salons, and tailoring units.
- Truck operators can use Mudra loans to purchase goods and personal transport vehicles used commercially, such as passenger cars, e-rickshaws, auto-rickshaws, small goods transport vehicles (SGTVs), taxis, or three-wheelers.
- Artisans and food service/vendor units, including small food stalls, agricultural produce preservation units, and food processing units such as bread, biscuit making, and sweet shops.
Mudra Loans for Women Entrepreneurs
One of the government programs designed to foster an entrepreneurial culture among women entrepreneurs is the Pradhan Mantri Mudra Yojana (PMMY). Women looking to start or expand their businesses might qualify for loans through this program, offered by banks and financial organizations, providing them additional support as they work toward building better lives and creating brighter futures for themselves.
Mudra schemes for women entrepreneurs approved by banking institutions will receive Mudra cards, which function similarly to credit cards for cash management for their businesses. The maximum withdrawal allowed on each card is 10% of the loan balance. Based on each business’s individual characteristics and needs, Mudra Yojana provides various programs specifically designed for women entrepreneurs, with a maximum business loan amount of ₹10 lakhs available.
Conclusion
The Pradhan Mantri MUDRA Yojana (PMMY) is an integral element of India’s entrepreneurial ecosystem, offering accessible financial assistance without collateral requirements and opening new pathways for micro, small and medium enterprises (MSME) growth. By providing loan options tailored specifically for retail stores or service industries that meet various business needs from retailing to service provisioning businesses across various industries across India – especially those run by women entrepreneurs – PMMY plays a pivotal role in instilling an entrepreneurial spirit among individuals, particularly women entrepreneurs across India.
More entrepreneurs are taking advantage of Mudra loans to bolster both their own financial security and to enhance overall economic development in their country. From startups and street vendors to small manufacturers and manufacturers, Pradhan Mantri MUDRA Yojana provides you with opportunities that can turn your dreams of starting or growing a business into reality. By understanding eligibility criteria and application processes for Mudra loans, potential borrowers can confidently navigate their way towards reaching their business goals and creating significant impact within communities and economies alike.
