Mudra Loan: 5 factors you should be aware of

For the smooth functioning of the economy, it is essential to make sure that every business within it has the resources to stay afloat. Realising this fact, the Indian Prime Minister, Narendra Modi, launched the Micro Units Development and Refinance Agency Ltd (MUDRA). Also referred to as Pradhan Mantri Mudra Loan, the scheme was launched to offer low-interest rates loans to small business owners for facilitating them to buy raw materials and run the business efficiently. Small business owners get loans of up to INR 10 lakh under the scheme.

Following are some facts one should be aware of the loan before applying for one –

All small business owners can avail it

Almost every leading bank within the country must have Mudra Loan accessible to consumers belonging to non-farm and non-corporate sectors. No matter which area you reside in, be it urban or rural, you can visit the nearest bank and get loans up to INR 10 lakh under the scheme, only if you meet the eligibility criteria.

Applicable for start-ups and micro-small businesses

If you seek to start your venture but lack the necessary funds, you can apply for the finance under the Mudra Loan scheme. This is a unique loan which new business owners who lack essential resources can get. The scheme was launched in collaboration with the Government’s ‘Make in India’ campaign for fostering innovation, improve skill development, and facilitate investment. You can also apply for the loan even if you are running your business from home.

Available at low-interest rates and flexible tenures

The biggest benefit of the Mudra bank Loan is you get them at meagre interest rates. For instance, public sector banks offer them at affordable prices. Also, tenures are flexible. The minimum repayment tenure is a year and extends up to maximum three to five years, depending on the bank you select. In several cases, the repayment term could go up to seven years.

Different loan categories

For making it easy for the borrowers, the Mudra Loan is available under varied categories. The prominent ones include personal service, community, social activities, buy transport vehicle, loans under food products and production sector, loans for traders and shopkeepers, loans under textile products and production sector, loans for agriculture along with allied activities, and loans for purchasing essential equipment and machinery.

Government acts as a guarantor

The best benefit of the Pradhan Mantri Mudra loan is that the Government serves as the guarantor. If the borrower is unable to repay the credit, the Government bears the responsibility of their loss. As such, the Government repays the bank for making sure the bank recovers the investment.