There are many loans and schemes offered by the government, banks, NBFCs, and other lending agencies. Each of these schemes and loans targets small and medium-sized businesses from different sectors with different capacities. Out of them all, the Pradhan Mantri MUDRA Yojana, also known as the MUDRA Loan, is the most popular.

Here is all that you need to know about a mudra loan.

1. What is MUDRA?

MUDRA stands for Micro Units Development and Refinance Agency Limited. This is a non-banking finance company (NBFC) that supports the development of micro and small enterprises in the country. MUDRA provides support in terms of refinancing to banks, NBFCs, and microfinance institutions (MFIs) so that they can, in turn, support micro and small enterprises under the Pradhan Mantri MUDRA Yojana.

2. What is a MUDRA Loan?

Pradhan Mantri MUDRA Yojana (PMMY) is a scheme introduced by the Prime Minister of India on 8 April 2015. The programme focuses on providing loans to non-farm and non-corporate micro/small businesses. The scheme offers loans of up to Rs.10 lakh. The loan programme aims to promote entrepreneurship among the youth.

The programme is segregated into three different schemes:
i. Shishu: The programme offers loans of up to Rs.50,000.
ii. Kishor: The programme provides loans between Rs.50,000 and Rs.5 lakh.
iii. Tarun: This scheme offers loans between Rs.5 lakh and Rs.10 lakh.

The different schemes listed above signify the stages of growth and the funding needs of enterprises. They also act as the reference point to identify the next phase of growth. The government provides more focus on the Shishu scheme, then the Kishor and Tarun schemes. The programmes also offer equal importance to the sector of the enterprise and the business activities practised.

Interested borrowers can avail MUDRA loans from a nearby bank branch, NBFC, or MFI. You can also apply for MUDRA loans online on the Udyamimitra portal, i.e. www.udyamimitra.in. You need to take care not to fall for false traps as the facility does not include any agents or intermediaries.

3. What is the purpose of a MUDRA Loan?

MUDRA loans aim to generate income and offer employment opportunities to the needy. Besides, the loans are provided for the following purposes:

  • Working capital through MUDRA cards
  • Business loan for shopkeepers, vendors, traders, and others
  • Financing for equipment purchase for micro-units
  • Loans to purchase travel vehicles for commercial use
  • Financing for agriculture-allied non-farm income-generating activities, such as bee-keeping, pisciculture, and poultry farming
  • Loans to purchase tractors, tillers, and two-wheeler vehicles used for commercial purposes only

Here are a few more examples of activities that one can do with the financed funds, segregated based on the sectors:

  • Food Products: Under PMMY, one can secure funding for activities, such as preparing pickles, papad, jam/jelly; preserving agricultural produce; setting up sweet shops, small food stalls, catering/canteen services, cold storages, ice-making units, ice cream making units, and more.
  • Textile Sector: Funds will be provided for activities related to garment products, such as handloom, powerloom, khadi, chikan work, zari and zardozi work, handwork and embroidery, apparel designing, traditional dyeing and printing, knitting, cotton ginning, stitching as well as for non-garment products, such as furnishing accessories, bags, and vehicle accessories.
  • Community, Social, and Personal Services: Activities, such as setting up salons, beauty parlours, boutiques, tailoring shops, dry cleaning, gymnasiums, cycle and motorcycle repair shops, medicine shops, photocopying and DTP shops, and courier agencies, are eligible for receiving funding.
  • 4. What is a MUDRA Card?

    A MUDRA card is, basically, a debit card that is issued to beneficiaries of MUDRA loans. A card is issued against every MUDRA loan account for accessing the loan amount. Multiple withdrawals and credits can be made with the card to manage the working capital limit so that the interest can be maintained at a minimum.

    From another perspective, the card helps digitise the transactions and keep track of the credit history for the borrower. The MUDRA card remains valid across the country, i.e. a borrower can withdraw cash from the MUDRA card at any ATM/micro ATM and make payments at any point-of-sale machines.

    5. How is it connected with the Make in India campaign?

    Among the numerous initiatives taken by the Government of India towards encouraging enterprise creation in the country, the ‘Make in India’ programme is a noteworthy one. This programme was designed to facilitate investment, boost innovation, support skill development, and build state-of-the-art manufacturing amenities. The plan was followed by Start-Up India and Stand Up India campaigns. MUDRA loans scheme complements the Make in India initiative in supporting the development of micro-businesses in India.

    6. What does the future roadmap look like?

    There are many challenges that non-corporate small businesses face apart from credit constraints. A few such problems are:

    • Knowledge gaps
    • Skill development gaps
    • Information asymmetry
    • Financial/business literacy
    • Lack of growth orientation

    MUDRA is planning to take up an initiative to offer developmental and support services to the target audience in future. MUDRA looks forward to becoming a market maker and builds a society with capacities to deliver efficient and sustainable results.

    7. Frequently Asked Questions (FAQs)

    Q. How is the implementation of PMMY monitored?

    A. State Level Bankers’ Committee (SLBC) forum monitors the progress of PMMY at the state level. At the national level, the progress will be monitored by MUDRA and the Department of Financial Services. Also, MUDRA has set up a portal where lending agencies input the details of their achievements directly. The portal gathers information and generates reports for public review.

    Q. Is a subsidy available under PMMY?

    A. Generally, no subsidies are available under PMMY. However, there may be cases where a loan proposal is linked to some other programme offered by the government with a capital subsidy. Then, the subsidy may be available under PMMY also.

    Q. What are the terms and conditions of MUDRA loans?

    A. The terms and conditions of MUDRA loans will be governed and issued by the lending institutions; however, they will be based on the broad guidelines given by RBI. It is advised to know more about the terms and conditions from the lending institution you are willing to approach.

    Q. What is the grievance process I should follow in case of non-sanction of loan?

    A. If you have any grievance to be raised against non-consideration of your MUDRA loan application, you can register them with the higher authorities of the lending institution you had approached, such as Regional Manager or Zonal Manager of the bank. This can be done only in the case of any lapse from the bank officials in sanctioning the loan.