How can MSME avail Mudra Loans ?

MUDRA or the Micro Units Development & Refinance Agency Limited is an institution that has been set up by the Government of India for the development and refinancing activities relating to micro units. Under MUDRA, the loans are provided under three schemes namely ‘Shishu’, ‘Kishor’ and ‘Tarun’ in order to signify the stage of growth and its funding needs of the beneficiary micro unit. This loan, however,  can be availed by the Micro Units and Entrepreneurs in India. In this article, we will look at the procedure that is to be followed for obtaining the MUDRA loan.

MUDRA is  however  responsible for refinancing all the  financiers or the financial institutions that are engaged in the financing of Small Businesses, Societies, Trusts and Section 8 Companies, Co-operative Societies, Small Banks,  the Scheduled Commercial Banks and the  Rural Banks which have the business of lending to micro or small businesses that are engaged in manufacturing, trading and services activities.

The Loan is provided currently under three schemes in the  Pradhan Manatri MUDRA Yojana. The three schemes, however, are as following:

  • Shishu that is a Loan of up to Rs.50,000/=
  • Kisho that is a Loan of above Rs.50,000 to Rs.5 lakhs.
  • Tarun that is a Loan of above Rs.5 lakhs to Rs.10 lakhs.

Related Post: What documents are required for MSME/SSI application?

Any Indian Citizen who has a business plan for generating income from a non-farm sector activity such as manufacturing, processing, trading or the  service sector and whose credit need is less than 10 lakh can approach either a Bank, MFI, or NBFC for availing of the MUDRA loans under Pradhan Mantri Mudra Yojana (PMMY). The terms and conditions of the lender would required  to be followed for  availing of these  loans under MUDRA. The lending rates under this  are as per the RBI guidelines that is issued in this regard from time to time. Since, MUDRA is a refinancing institution, the loans are not offered directly by MUDRA but they are offered through existing NBFCs, Financial Institutions, Banks, Primary Lending Institutions, etc.,

The target audience for these  MUDRA loans are millions of Proprietorship / Partnership Firms that are  running a small manufacturing unit or service sector unit . The main focus of such units are the  shopkeepers, fruits/vegetable vendors, small industries, artisans, truck operators, food-service units, repair shops, machine operators, food processors and others, in rural and urban areas.

MUDRA loan is however provided in the form of a MUDRA card wherein the borrower can avail credit in a hassle free and a  flexible manner through a RuPay card. This card will provide a working capital arrangement in the form of Cash Credit or Over Draft and it can be used by drawing cash from ATM or by making purchases using Point of Sale credit card swiping machines. This card also allows for the repayment of the amount as and when the surplus is available, thereby reducing the interest burden.

In order To obtain the  MUDRA loan the borrower can approach the branch of a bank or a financial institution for providing MUDRA loan with the following documents and information.

  • A MUDRA Loan Application
  • A Business plan
  • A Proof of Identities like PAN card/ Drivers License / Aadhaar Card / Passport and more.
  • Residence proof like recent telephone bill/electricity bill or property tax receipt and more.
  • The Applicant’s recent photograph that is less than 6 months old
  • A Quotation of the machinery or other items that are to be purchased
  • The Name of the supplier or the  details of machinery or prices of machinery
  • Proof of identity/address of the business like tax registration, business license and more.
  • A Proof of category like SC/ST/OBC/Minority, if applicable

However, It is important to note that there is no processing fee or any collateral requirement for obtaining MUDRA loan. One of the biggest bottlenecks for the MSME in India is the lack of financial support from the formal banking or financial sector. The lack of such formal financing hampers the growth of small businesses and makes them ineffective at competing with the larger players. In order to remove this bottleneck and to provide finance to the micro units or Entrepreneurs, MUDRA Bank has been set up as a subsidiary of SIDBI.

If you want to apply for MSME Registration, you can go with MSME Register website.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]


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