A Detailed Guide To The PM Mudra Yojna
The Pradhan Mantri Mudra Yojana (PMMY) is a flagship initiative to empower small businesses and entrepreneurs with financial support. This scheme facilitates collateral-free loans, enabling self-reliance and promoting economic growth at the grassroots level.
What is Pradhan Mantri Mudra Yojana?
The Pradhan Mantri Mudra Yojana loan was launched by the Government of India in April 2015 to financially support micro, small, and medium enterprises (MSMEs). It aims to promote entrepreneurship by offering loans up to Rs. 10 lakh without requiring collateral.
Under this scheme, loans are divided into three categories- Shishu loan, Kishore, and Tarun- loans catering to different growth stages of business. Applicants can access these loans via banks, non-banking financial companies (NBFCs), and microfinance institutions (MFIs), or apply using the loan application form Pradhan Mantri Mudra Yojana available on the Udyamimitra portal.
Objectives of Mudra Loan
The key objectives of this loan are:
- Job Creation: Facilitates employment opportunities in rural and urban regions.
- Promoting Entrepreneurship: By targeting small businesses, the Mudra scheme helps develop entrepreneurial ventures.
- Economic Growth: Supports grassroots economic development by funding enterprises that contribute to local and national growth.
Categories of Pradhan Mantri Mudra Yojana
The scheme categorises loans into the following:
- Shishu Mudra Loan: For startups and micro-enterprises needing up to Rs. 50,000.
- Mudra Kishore Loan: For growing businesses requiring Rs. 50,000 to Rs. 5 lakhs.
- Mudra Tarun Loan: For established enterprises requiring Rs. 5 lakhs to Rs. 10 lakhs.
These categories help entrepreneurs at different stages of business growth access to tailored financial support. Similarly, Indiagold also provides flexible and secure gold loans that businesses can avail instantly from the comfort of their home.
Key Features and Benefits of Mudra Loan
The major features of the PMMY loan are:
- Loan Amount Flexibility: Loans are categorized into different types, ranging from Rs. 50,000 to Rs. 10 lakhs, ensuring accessibility to businesses of varying needs.
- Wide Accessibility: This scheme ensures that individuals in both rural and urban areas, even those from remote regions and limited banking facilities, can access financial aid for their businesses.
- Mudra Loan Tenure: Loan repayment periods are flexible, ranging from 1 to 5 years.
- Collateral-Free: Borrowers do not need to provide security, making it ideal for small businesses and first-time entrepreneurs to secure loans.
- Affordable Interest Rates: These loans are offered at competitive rates, ensuring that repayments are manageable for small business openers.
- Low Processing Fees: Affordable charges reduce the financial burden for MSMEs.
- Extended Repayment Tenure: Borrowers can opt for longer repayment terms, up to 7 years, providing flexibility and reducing financial stress.
- Mudra Card: A pre-approved credit card facility called Mudra Card is offered to meet the working capital needs. This enables easy withdrawals and payments.
- Support for New Entrepreneurs: The scheme encourages startups and new ventures by providing micro-credit loans up to Rs. 1 lakh, enabling them to establish and grow their businesses.
- Government Credit Guarantee: The Credit Guarantee Fund for Micro Units (CGFMU) safeguards lenders, ensuring loan approvals even without collaterals.
- Promotion of Local Businesses: By fostering small and micro-enterprises, the scheme aligns with the “Make in India: campaign, boosting local industries and employment opportunities.
Mudra Loan Interest Rates
The Mudra Yojana interest rate under PMMY is determined by the lending institution. Public and private sector banks, NBFCs, and MFIs offer these loans. Each lender sets its interest rates based on established guidelines and an assessment of the applicant’s profile, business requirements, and risk factors.
The interest rate is affected by these key factors:
- Loan Amount and Tenure: The interest rate may vary depending on the loan category and the credit amount requested. Longer repayment tenure may influence the rate as lenders assess risks over an extended period.
- Type and Stability of the Business: Businesses with a proven financial track record and stable cash flow are generally offered lower interest rates. Startups or high-risk ventures might face higher rates due to the increased possibility of defaults.
- Lender’s Internal Policies: Interest rates vary across institutions based on their operational costs, risk management practices, and administrative charges. Different lenders may offer concessions or benefits to specific business categories or demographics, such as women entrepreneurs.
- Creditworthiness of the Applicant: Applicants with a strong credit score and consistent repayment history are likely to secure better interest rates. Poor credit ratings may result in higher rates or stricter loan terms.
- Government Initiatives: Certain categories, such as women-owned businesses or ventures in priority sectors, may receive concessional interest rates as part of government policies.
Like PMMY, Indiagold also provides businesses with interest rates based on the loan amount. However, the requirements are not stringent because lenders are availing of the loans based on tier-pledged gold. Indiagold provides interest rates starting from only 0.85% per month.
Who Can Get a Mudra Loan?
Mudra loans are available to individuals and entities involved in small-scale businesses and entrepreneurial ventures. Eligible applicants include:
- Entrepreneurs and Startups: Those planning to launch micro and small enterprises.
- Small Manufacturers: Units involved in production activities.
- Artisans and Craftsmen: Individuals engaged in traditional crafts or handicrafts.
- Service Providers: Small service-oriented businesses like salons, gyms, or photocopy centres.
- Traders and Shopkeepers: Retailers, wholesalers, and small shop owners.
- Agriculture-Allied Activities: Dairy farming, poultry, pisciculture, and apiculture.
- Transport Sector: Drivers or owners of commercial vehicles like taxis, auto-rickshaws, or trolleys.
Eligibility for Mudra Loan
To be eligible for PMMY loan, you need to be:
- Indian citizens aged 18 to 65 years
- Planning to start or expand non-agricultural activities requiring loans up to Rs. 10 lakhs.
Documents Required to Apply for Mudra Loan
- Application Form: Duly filled Mudra loan form.
- Address Proof: Aadhaar, Voter ID, passport, utility bills, or bank statements.
- Identity Proof: Aadhaar, PAN, Voter ID, driving license, or passport.
- Business Proof: Registration certificates, licenses, or deed copies.
- Financial Proof: Vendor quotes, equipment requirements, or loan justification.
- Photographs: Recent passport-sized photographs.
- Minority Proof: If applicable.
How to Get a Mudra Loan?
Follow these steps to avail your Mudra loan:
- Understand Your Business Needs and Loan Type: PM Mudra Yojana offers three loan categories with loans starting from Rs. 50,000. The Mudra loan limit is Rs. 10 lakhs. Assess your business requirements to identify the most suitable category.
- Select a Lending Institution: Approach a participating bank, NBFC, or microfinance institution. Confirm that the lender is part of the PMMY scheme and compare their terms for better options.
- Prepare Required Documents: Ensure you have all necessary documents, such as identity proof, address proof, business registration certificates, financial quotations, and photographs. A complete and accurate application facilitates quicker processing.
- Submit the Application Form: Fill out the Mudra loan application form with details about your business, loan requirements, and future plans. Submit this along with your documents to the chosen lender.
- Lender Review and Processing: The lender will assess your application, verify the provided documents, and evaluate the viability of your business.
- Loan Approval and Disbursement: Once the lender approves your application, the loan amount is sanctioned and disbursed directly into your bank account. You can then use these funds for business purposes, such as purchasing equipment, inventory, or working capital.
Conclusion
Mudra loans empower small businesses by providing accessible and affordable financial support. With simple eligibility criteria and collateral-free funding, the scheme fosters entrepreneurship and contributes to India’s economic growth at the grassroots level. This initiative is a cornerstone for aspiring entrepreneurs to realise their dreams. Businesses can also avail of gold loans from Indiagold effortlessly through their pledged gold.
