Last Updated on 9 months by Anoob P T
Want to know what is Mudra Loan Eligibility? You will find everything you need to know in this article.
Mudra Loan is part of economic measures undetaken by the government to enable and strengthen micro-unit level businesses that often require funds to develop business and stay profitable.
Often times, small scale or medium scale businesses are not capable of procuring capital or getting necessary approval for loans due to lack of collateral. Most banks or financial institutions refuse loans to small and medium businesses citing risk as such businesses might not even have capital to keep the business afloat.
In India, it is estimated that there are 577 crore small businesses and the only way for our society to progress is by empowering these small businesses that will help citizens who are dependant on these to earn a living.
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MUDRA Bank stands for Micro Units Development and Refinance Agency which was launched under Jan Dhan Yojana on 8th April 2015.
Key objectives of MUDRA Yojana can be summarized as follows:
Table of Contents
Key objectives of the MUDRA Yojana ?
MUDRA Yogana was implemented after considering several key objectives that are required to help small and medium businessess. Key objectives are:
- Defining policy guidelines for providing financial aid for small/ micro scale enterprises.
- Enabling robust registration process for all Micro finance Institutions, related organizations and then regulating them.
- Helping small start-ups and micro businesses to grow and expand business to become medium size businesses.
- Help lower income groups to build and grow thier business.
- Enable small businesses to have easy access for funds and help these businesses get access to funds at a lower cost.
- SC/ST lending preference.
- To given directions to Micro finance Institutions that currently operate in trading, manufacturing, and service.
Loan limits and interest rates under Mudra Yojana ?
There are many loan limits and interest rates that are fixed under the MUDRA yojana. These rates are fixed keeping in mind the growth phase of the business applying and availing loans under MUDRA Yojana.
As per latest update from MUDRA website, the applicable limits and rates are as follows:
Shishu
These are loans up to a limit of INR 50,000 with interest of 1% per month. A small business awailing this loan can repay the amount in 5 years.
Kishore
Under the Kishore scheme, you can get loans between INR 50,000 to INR 5,00,000. Interest rates for Kishore would vary from bank depending on the credit history of the applicant. Loan repayment duration will also depend on the bank issuing the Kishore financial aid.
Tarun
Tarun loans are for businesses that require capital on the higher side. Loans start from INR 5,00,000 to INR 10,00,000. As with Kishore scheme under MUDRA, interest rate would depend on credit history and the repayment duration will be fixed by the bank.
As of now, 27 Public Sector Banks, 31 Regional Rural Banks, 17 Private Sector Banks, 36 Micro finance Institutions, 25 Non-Banking Financial Institutions and 4 Co-operative banks have been selected to seek applicants and dispense financial aid under the MUDRA yojana.
As MUDRA Yojana is primarily intended for small businesses, 60% of all loans under the scheme would be given for Shishu category and 40% would be for Kishore & Tarun.
What can the loans taken under MUDRA Yojana be used for?
Loans availaed under the MUDRA Yojana can be used only for certain select categories. These are:
- Loan for plant and machinery
- Revamping the business space
- Car loan
- Two-wheeler loan
- Commercial vehicle loan
- Working capital loan
Mudra Loan Eligibility Criteria
Now that we have covered various schemes undcer MUDRA Yojana, we can check what are the eligibility criteria for availing a loan under MUDRA.
As per official guidelines of MUDRA Yojana, loans can be provided to any non-farm income-generating businesses in trading, manufacturing and services. The business should also have credit requirement of less than INR 10 Lakhs by Public Sector Banks, State Cooperative Banks, Regional Rural Banks and Urban Co-operative Banks.
Also, do note these loans would be classified under MUDRA loans under the Pradhan Mantri MUDRA Yojana (PMMY).
In conclusion, if you are non-agriculture business, you are eligible for loans under INR 10 lakhs depending on the factors under Shishu, Kishore and Tarun Schemes.
Mudra Loan Process and Documents Required :
If you qualify for MUDRA Loan, then you need to have some documents and complete the application process to avail your loan.
The MUDRA loan application form is available at any of the designated banks or financial instituitions mentioned above and you will need to submit the following documents along with your application form.
- Identity proof
- Quote for the Machinery or other items to be purchased
- Supplier details/Details of the machinery/Price of Machinery
- Identity Proof/Address Proof of the Business (relevant certificates & licenses)
- Category Proof if applicable
Depending on the financial institution you approach, they might ask for other documents to verify ownership of the business or credit history. Do note that banks are not entitled to ask any collateral or charge any processing fee under the MUDRA yojana loans.
Loan repayment under MUDRA Yojana is up to 5 years but the applicant should not be a defaulter to any financial institution to avail the loan.
Changes in Lending Target Under the Mudra Yojana
In the budget of 2016-17, the financial minister had set a target of facilitating and disbursing loans for INR 1.22 Lakh crores under MUDRA yojana.
The target set for 2016-17 was achieved and also exceeded hence the government has decided to double the lending target to INR 2.44 lakh crores. This means more small and medium businesses can get financially benefited from the MUDRA scheme.
Emphasis on Specific Segments
The MUDRA loan scheme has given emphasis to specific segments of people in the society mainly, women, backward classes, minorities, Dalits and Tribals. As the loan targets have been increased, more emphasis would be given to women who usually struggle to get financial aid for their business.
Mudra Loans Interest Rates
| Bank | Interest Rate | Processing Fee | Loan Amount | Tenure |
| HDFC Bank | 10.99% to 20.70% | Up to 1.5% | Maximum INR 15 lakhs | 1 to 5 years |
| ICICI Bank | 10.99% to 17.99% | 2.25% | Maximum INR 20 lakhs | 1 to 5 years |
| Oriental Bank of Commerce | 10.65% to 11.65% | 0.5% | INR 50,000 to INR 10 lakhs | 1 to 5 years |
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