Pradhan Mantri MUDRA Yojana: Application Process, Types, Eligibility

January 10, 2022

Are you an entrepreneur struggling to raise capital for a startup? If yes, Pradhan Mantri MUDRA Yojana (PMMY) may just be the answer to your prayers. Scroll down to learn about the MUDRA loan, its eligibility and all the other details.

MUDRA Yojana is a Government of India-initiated loan scheme that offers a loan amount of up to ₹ 10 lakh to individuals and micro, small, medium enterprises (MSMEs). They can use this loan amount for launching or boosting their business.

If you are eager to find out more about the MUDRA loan scheme, its features, eligibility and benefits, we’ve got you covered. Go through all the details carefully before application.

What is the Pradhan Mantri MUDRA Yojana Scheme (PMMY)?

Pradhan Mantri MUDRA Yojana, or PMMY, was launched by the Government of India in 2015 with the objective to offer financial support to small businesses, whether they are from profit or non-profit sectors. They can avail of a loan of up to ₹10 lakh to either set up or expand their businesses. And the best part is that they don’t have to submit any security or collateral for it.

What is a MUDRA Card?

MUDRA Card is a debit card issued when one avails the MUDRA Loan. Anyone who has this card can use it to make withdrawals and credits. Let’s check out some of its features and benefits below:

  • It is a RuPay card and functions like any other debit card for cash withdrawals.
  • It is an operational PAN India wherein the borrower can use any ATM to withdraw cash or pay via Point of Sale (PoS) machines.
  • It digitizes all MUDRA transactions and helps in optimizing the borrower’s credit history.
  • It helps the borrower use the capital amount judiciously, keeping the interest burden at bay.

What Purpose Does MUDRA Loan Serve?

With the dual aim of income and employment generation, a MUDRA loan acts as multiple forms of financial support.

  • It acts as a business loan for businesses in the service sector, including vendors, traders, etc.
  • It becomes an effective equipment finance source for micro-units.
  • It can be used as transport vehicle loans to purchase trucks, autorickshaws, etc.
  • It can be used as a working capital loan via MUDRA cards.
  • It also serves as a viable loan option for non-farm activities like poultry, pisciculture, etc., that generates income as well as for tractors, tillers and two-wheelers used for commercial purposes.

Which Type of Companies Can Apply for a Loan under the Pradhan Mantri MUDRA Yojana?

The following kinds of companies can avail of a loan under the Pradhan Mantri MUDRA Yojana:

  • Railway Recruitment Boards (RRB’s)
  • Commercial Banks
  • Micro Finance Institutions (MFIs)
  • Non-Banking Financial Corporations (NBFCs)
  • Small Finance Banks

Which Types of Industries can Apply for a Loan under Pradhan Mantri MUDRA Yojana?

The types of industries that can apply for a loan under PMMY are:

  • Shopkeepers
  • Business vendors
  • Agriculture sector
  • Food production
  • Handicraftsman
  • Small scale manufacturers
  • Self-employed entrepreneurs
  • Restoration and repair shops
  • Service-based companies
  • Truck owners

Benefits of MUDRA Loan

If you’re not sure whether Pradhan Mantri MUDRA Yojana is right for you, check out its list of benefits below:

  • Collateral free loans of up to ₹10 lakh
  • All kinds of non-farm companies can apply for the Pradhan Mantri MUDRA Loan, whether micro or small.
  • The interest rates are extremely low.
  • The loan comes under the Credit Guarantee Scheme from the Government of India.
  • MUDRA Loan can be used as a working capital loan, overdraft facility or term loan
  • Even people belonging to the SC/ST category are eligible to apply for the loan at concessional rates.
  • Female entrepreneurs also have the advantage of MUDRA loans at lower interest rates.

MUDRA Loan Categories

The MUDRA Loan is divided into three different categories, each having its own range for businesses to avail of. The categories include:

  • Shishu: The initial level loan category offers a loan amount of up to ₹50,000. This is mainly preferred by businesses that have short-term financial requirements. The loan helps them bridge investment shortfalls or gaps.
  • Kishor: This loan category offers a higher loan amount of up to ₹5 lakhs. It is meant for businesses, especially small businesses with urgent financial needs regarding production, manufacturing or infrastructure.
  • Tarun: The Tarun category of the MUDRA loan scheme offers a maximum credit of up to ₹50 lakhs. The loan amount from this category generally acts as funding for startups and small/medium enterprises who wish to expand their businesses in different locations.

The Process for Applying for MUDRA Loan

You can download the application form from MUDRA.org.in. Make sure you fill in all the essential details in a specific format. Since the application procedure differs from bank to bank, you may have to visit your nearest branch to learn more about MUDRA loan details. Complete the bank’s formalities and submit your application form only after filling it.

Documents Required to Apply for MUDRA Loan

Given below is the list of standard documents required for the MUDRA loan application.

  • Application form filled with all the essential details and passport size photographs
  • KYC documents of the applicant such as Aadhaar card, PAN card, passport, water or electricity bill, driving licence, etc.
  • SC, OBC, ST or other special category proof (if applicable)
  • Bank statement of last six months
  • Tenure or business address proof (if applicable)
  • Other document requested by the bank or NBFC (Non-Banking Financial Company)Note: The MUDRA loan application process and submission of documents are similar to the Tarun and Kishor loan scheme. However, the process is completely different for the Shishu loan scheme.

MUDRA Loan Eligibility Criteria

For MUDRA loan eligibility, there is a minimum age limit of 18 years and a maximum age limit of 65 years for its application. This loan scheme can be availed by businesses that belong to the non-farm income-generating category in trading, services and manufacturing. They can request a credit of ₹10 lakh or less.

List of Businesses Covered under MUDRA Scheme

Various businesses come under the MUDRA loan scheme to perform income-generating activities. These include:

  • Service Sector: This entails launching service-based businesses such as gyms, salons, repair shops, chemists, dry cleaning, photocopying/internet, tailoring, etc.
  • Textile and Food Product Sector: This includes different production activities in the respective sectors like ice cream, jam, sweets, biscuits, achaar, papad, etc., along with agriculture produce preservation.
  • Commercial Vehicle: One can apply for a MUDRA loan to purchase equipment and machinery. With this loan, one can buy commercial vehicles such as autos, tillers, taxis, tractors, e-rickshaws, transport vehicles for goods, etc.
  • Business Activities by Shopkeepers and Traders: This includes non-farm income-generating activities, service enterprises, shops, business and trading activities.
  • Agri-Allied Sectors: Includes poultry farming, food and agro-processing units, dairy, pisciculture, fishery, beekeeping, livestock-rearing, sorting, grading, and other activities related to businesses in agri-clinics and agribusiness centres.

Which Banks or NBFCs Offer Loans under MUDRA Yojana?

As directed by RBI, the following banks and financial institutions are offering loans under the MUDRA scheme:

Axis Bank Indian Bank
Standard Chartered 

Bank

Oriental Bank of Commerce
CitiBank Karur Vysya Bank
Bajaj Finserv Karnataka Bank
IDBI Bank YES Bank
Bank of Baroda Kotak Mahindra Bank
ICICI Bank Bank of India
Lendingkart Finance Bank of Maharashtra
Punjab National Bank Canara Bank
Saraswat Bank Central Bank of India
State Bank of India HDFC Bank
Syndicate Bank Tata Capital
IDFC First Bank Union Bank of India

Note: Apart from the names mentioned in the list, there are many other banks and financial institutions that offer MUDRA loans to individuals and businesses. So, don’t worry if your preferred bank is not on this list. We suggest approaching the bank via call or in-person to find out more.

Frequently Asked Questions (FAQs)

What’s the MUDRA loan interest rate?

The interest rates for the MUDRA Loan ranges from 11% - 37%. Check out what your nearby bank offers before applying for it.

Who is eligible for the MUDRA loan scheme?

Anyone who has a small business or wishes to start a business is eligible to apply for a MUDRA loan. It is given under three categories - Shishu, Kishor and Tarun - all of which cover different ranges of loan.

Which banks offer MUDRA loans?

Both commercial and regional banks offer the MUDRA loan whilst having their own rules and regulations. Make sure you acquire all the information before applying for it.

How can I apply for a Modi loan?

To apply for a MUDRA or Pradhan Mantri MUDRA Yojana, you need to keep all your documents ready. This includes your Aadhaar, Voter ID, PAN Card, etc. Get in touch with a bank, fill out the MUDRA Loan application form with all essential details and submit it.

Which kind of loan is the MUDRA Loan?

MUDRA or Micro Units Development and Refinance Agency is a government-based loan scheme. It offers loans up to ₹10 lakh to non-farm/non-corporate small and medium enterprises.

What is the MUDRA Loan limit from banks?

Under the MUDRA scheme, the maximum loan amount offered is ₹10 lakh with a repayment period of up to 5 years. Applicants are not required to submit any collateral/security or third-party guarantee to apply for a MUDRA loan.

Is ITR Mandatory to apply for MUDRA Loan?

Yes, it is mandatory to submit ITR documents to avail the MUDRA loan. It is essential to submit two years of ITRs (Income Tax Returns) as proof for those eligible.

Does CIBIL score have a role in MUDRA Loan?

No, the CIBIL score does not have a role in the MUDRA loan.

Do I need to have a PAN card to apply for a MUDRA loan?

Yes, a PAN Card is one of the essential documents you need to have to avail yourself of the MUDRA Loan.

Looking for something more?

Category:Business Loan

You may like these posts