Mudra Loan - Pradhan Mantri Mudra Yojana Scheme for Business

In 2015 Union Budget, the Indian government launched the MUDRA or the (Micro-Units Development and Refinance Agency) bank. The main objective for creating this bank was to provide financial integrity to small business enterprises, food service units and other small sector businesses. Under MUDRA, the government also launched the Pradhan Mantri MUDRA Yojana, which allows small scale manufacturers and other non-farm income generating sector to obtain loans upto Rs. 10 Lakh.The Pradhan Mantri MUDRA Yojana aims to involve the Non-Corporate Small Sector Businesses (NCSBS) into the country’s formal banking system. This includes small-scale businesses that operate informally, like street vendors, car repair shops, small manufacturers etc.

• Shishu : The ‘Shishu’ scheme allows the applicant to obtain a loan amount up to Rs 50,000/-
• Kishore : The ‘Kishore’ scheme loan amount is from Rs. 50,001/- to Rs. 5 Lakh
• Tarun : The third type of scheme, called the ‘Tarun’ loan scheme, allows a person to apply for loans between Rs. 5 Lakh to Rs. 10 Lakh.

A wide variety of businessmen and businesswomen are eligible for the Pradhan Mantri Mudra Yojana, provided that they have not defaulted on any previous loans. Thus, private limited companies, individual business owners, public sector firms etc. are eligible to apply for the loans as long as their credit requirement is less than or equal to Rs.10 Lakh, which is the maximum amount offered in the PMMY scheme.

The maximum time allotted for repayment of loans under the PMMY scheme is 5 years. It may vary between 3 to 5 years depending on the terms set by the loan sanctioning bank.

Interest rates vary according to the loan scheme selected.

• Shishu : Interest rate begins at 1% per month or 12% per annum for ‘Shishu’
• Kishore: The Kishore loan interest rates are decided by the sanctioning bank depending on the credit score of the borrower.
• Tarun: For Tarun loans, interest rates vary on a case to case basis as well as on the borrower and bank.

• Vehicle Loans : Small business owners can apply for the PMMY scheme to purchase commercial vehicles like four wheelers or two wheelers that are used for the running of their company.
• Equipment loans : The PMMY scheme can be used to obtain loans for purchase of equipment or machinery required for the business and also to upgrade the existing machinery.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.