In April 2015, the Micro-Units Development and Refinance Agency (MUDRA) was formed under the Pradhan Mantri Mudra Yojana (PMMY) to assist and support small and micro business units. The Mudra scheme was launched with an INR 20,000 crores budget. Also known as Mudra Loan Yojana or Mudra Bank Scheme, MUDRA’s credit items are more generally referred to as the Mudra loans.
These Mudra loans are classified into three categories in the Micro, Small and Medium Enterprises (MSME) division, based on business needs. Every loan from Mudra has a defined amount of the loan, application process and interest rates.
The eligibility conditions and application process for the Mudra loan are also slightly different for the various banks. Applicant must collect the application form from the bank of his / her choice and ask about eligibility conditions to ensure that he/she follows the process correctly and has better chances of receiving approval for a loan.
The banks offering Mudra loans carefully pick the candidates and accept loans for companies that have a lot of growth potential and can provide future job opportunities for others. The Mudra loan scheme was initially introduced to provide enough financial assistance to small business owners.
This is one of the Government’s key measures to ensure that small business owners do not have to rely on personal networks and private lenders because they frequently charge excessive interest rates and impose unfair terms and conditions.
Such small business owners can easily take advantage of the Mudra loan at a low-interest rate from a government-approved financial institution. Another advantage is that to apply for a Mudra loan, and lenders do not need collateral/insurance or any third-party guarantee.
The initiative will help to boost the MSME sector and make it a key contributor to GDP growth, in addition to creating job opportunities for thousands of people across India.
A few requirements that a small business must fulfil to meet the eligibility criteria for the Mudra loan are listed here:
The Pradhan Mantri Mudra Loan list of things that can be protected under Mudra loans is illustrative. In those industries, micro, small and medium-sized enterprises meet the eligibility criteria for Mudra loans and may apply for Mudra loans.
| Sector | Activities |
| Service | Establish a beauty salon, boutique, chemist shop, dry cleaning, photocopying shop, etc. |
| Food | Start a business in making jam and jellies, papad, biscuit and bread, or selling of fruits and vegetables, etc. |
| Agriculture | Start, an agriculture business such as an apiary, a poultry farm, a dairy farm, a livestock farm, etc. |
| Textile | Business in zari work, embroidery, stitching, chikan work, knitting, etc. |
| Transport | To purchase goods transport vehicle, taxi, auto-rickshaw |
The maximum amount of INR 10 lakhs that business owners can claim under a Mudra loan is. A company can only apply for up to INR. 50,000 (Shishu loan) loans. A business that needs capital to develop itself is eligible for INR 50,000 to INR 5 lakh (Kishor loan) loan while an existing company that needs money for expansion may apply for INR 5 lakh Mudra loan to INR 10 lakh (Tarun loan).
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