Mudra Loans

Pradhan Manthri Mudra Yojana(PMMY) popularly known as Mudra Loan is the most popular among financial schemes recently introduced by the government

India government has introduced various schemes to boost economy via business. CGTMSE scheme was the most popular among them. Eventhough, the scheme became popular, the objective of uplift of economy was not served, as the marketing of scheme was not that successful as that of Mudra scheme. The government was successful in creating awareness among public about MUDRA scheme, so that the people started asking about the scheme to bankers. Many of bankers are scared and sceptical about the scheme ( Moreover, they are scared about the risks of loan turns bad; as many of the loan seekers are just for free money, than genuine requirement). The bankers feel that the inherent risk and the accountability factor plays a huge role in decision making.

Eligible segments for Mudra

Micro & Small manufacturing units, service sector units, shopkeepers, fruits/vegetable vendors, truck operators, food-service units, repair shops, machine operators, traders,  small industries (Saloons, beauty parlours, gymnasium, boutiques, tailoring shops, dry cleaning, cycle and motorcycle repair shop, DTP and Photocopying Facilities, Medicine Shops, Courier Agents, etc.), Food processors (Activities such as papad making, achaar making, jam / jelly making, agricultural produce preservation at rural level, sweet shops, small service food stalls and day to day catering / canteen services, cold chain vehicles, cold storages, ice making units, ice cream making units, biscuit, bread and bun making, etc.), Textiles (Handloom, powerloom, khadi activity, chikan work, zari and zardozi work, traditional embroidery and hand work, traditional dyeing and printing, apparel design, knitting, cotton ginning, computerized embroidery, stitching and other textile non garment products such as bags, vehicle accessories, furnishing accessories, etc)  and others in rural and urban areas, are eligible for assistance under Mudra.

Machineries (Setting up micro enterprises by purchasing necessary machinery / equipments with per beneficiary loan size of upto 10 lakh)

Activities allied to agriculture such as Pisciculture, Beekeeping, Poultry, Livestock, Rearing, Grading, Sorting, Aggregation agro industries, Diary, Fishery, Agri-clinics and agribusiness centres , food & agro processing etc (excluding crop loans, land improvements such as canals, irrigation, wells) and services supporting these which promote livelihood or are income generating are eligible under PMMY

What is Mudra Bank

Mudra Bank is a government undertaking, that refinances the loan given Individuals who are Indian citizens, proprietary concerns, partnership firms, private limited companies, SHG / JLG or any other entity engaged in manufacturing, processing, trading , service activities and activities allied to agriculture as detailed above, are eligible for loans under the scheme through participating banks( i.e. Public Sector Banks, Private Sector Banks, State Co-operative Banks, Micro Finance Institutions, Non-Banking Financial Companies and Regional Rural Banks are allowed to participate and offer the Mudra loan)

Three tier loan structure is formulated under this scheme. They are

·        SHISHU Loan offering financial support of up to INR 50,000.

·      KISHOR Loan offering financial support of amount ranging between INR 50,000 and INR 500,000.

·       TARUN Loan offering financial support of amount ranging between INR 500,000 and INR 10,00,000

Shishu Loan

Shishu Loan is meant for businesses that are at their nascent (“shishu” means “child”) stage. These businesses don’t have enough funds to procure the raw materials even for their miniscule production. Micro enterprises in India actually qualify for shishu loans.Data shows that 60% of Mudra Loans are disbursed under this category.

Salient features of Shishu Loan is

1.    Maximum Loan amount under the scheme would be INR 50,000

2.    The loan amount is given for a maximum period of 5 years

3.    Processing Fees & Margin is NIL (Zero) for this category of Loans

4.    The yearly rate of interest that will be charged by banks or lenders will usually vary between 11% to 12%.

The Shishu loan is better than personal loans due to its lower amount and lower interest rates. The Personal loans are usually a minimum of INR1Lakh and the interest rate would be 36%, where are shishu loan is less than INR 50000 and Interest Rate is 10-14%.

Kishore Loan

Kishore Loan is meant for businesses that has taken off but need some more finance, which a shishu loan can’t serve. It helps them to get established in the business. The quantum of loan disbursed under this category is between INR50000 to INR500000

Tarun Loan

The scheme is aimed at those businesses which are already established and they are completely set up, but they require some more financial support so that they can continue their business as it is. These business units can avail a loan of up to Rs. 10 lakh.

Types of Loans

1.    Working Capital : to procure stock and also meet the working capital gap

2. Term Loans : or purchase / creation of tangible / intangible assets like machinery, equipment, software etc and also construction of office / building / factory / furnishing / decoration.

3.    Bank Guarantee/ Letter of Credit

1   In the case of borrowers who are not in need of a separate CC limit for the working capital portion, WC component can also be included in the Term loan sanctioned

  

     Quantum of Finance

1.  Cash Credit – Minimum 20% of Accepted Projected Turn Over. (Higher limit may be considered in case of businesses with operating cycle more than 3 months).

2.  Term loan – 100 % of the Project cost / Cost of Asset financed for Shishu loans.

75% of the Project cost / Cost of Asset financed for Kishor & Tarun Loans. 

 How to apply for the Mudra Loan

·         The best thing is to visit the nearest Bank, that is listed as Mudhra Participant

·         It is always better to inform the banker about the project, its viability, profitability etc..

·         Once the Banker is convinced of your project , you can fill up the form and provide the id proofs and all other details so that the bank can process the loan.

·         Clear the clarifications raised by Bank, with regard to project/activity.

·         Once the formalities completed, the bank will disburse the loan.

Age Limit
As for any other Loans, the age limit of this loan also is for Indian Citizen of 18years of age and till 60 years.


PS: The scheme is still under emergence. The issues such as stressed assets, NPA etc are not yet addressed and general perception among public is that it’s a Free Money. It is anticipated that the government shall resort to measures such as revenue recovery, declaring insolvent as per Insolvency Act etc. The banks are very cautious in lending under Mudra loans and are giving much importence to credit history such as CIBIL. In the case of existing units, they shall not be loss making for past two years.

                This is not the beginning or end of promotional schemes. You will be updated with other schemes of Government in due course, as the same is under preparation. You will be notified once subscribed to this blog.

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