The Union Government extends collateral-free Prime Minister Mudra Loans to help finance micro, small or medium enterprises. This financial aid can help you start, enhance or expand your business based on your goals.
To know more about the Mudra loan scheme, including what it entails, its eligibility and the documents required, read on.
Table of Contents
What is the Mudra Loan
A Mudra loan funds startups and growing businesses under the Pradhan Mantri Mudra Yojana for the non-corporate sector. Here, ‘Mudra’ is an acronym for Micro Units Development and Refinance Agency Ltd. The Mudra loan scheme works to empower small businesses with financial aid for growth.
Types of Mudra Loans
Per the PMMY loan (Pradhan Mantri Mudra Yojana) provisions, MUDRA has created various categories of loans, such as:
- Shishu: Loans up to ₹50,000
- Kishor: Loans from ₹50,000 up to ₹5 lakhs
- Tarun: Loans from ₹5 lakhs up to ₹10 lakhs
These categories are based on the entrepreneur’s or micro unit’s growth stage and financial needs. The government’s priority is to offer Shishu loans to encourage small-scale proprietors in India’s rural and urban areas.
Mudra Loan Providers
There are many providers of Prime Minister Mudra loans. You can avail of this loan through qualified member lending institutions, such as:
- Public Sector Banks
- Non-Banking Finance Company (NBFC)
- State-operated co-operative banks
- Rural banks from the regional sector
- Micro Finance Institution (MFI)
- Private Sector Banks
- Small Finance Banks (SFBs)
Eligibility For a Mudra Loan
Meeting some general eligibility criteria helps you qualify for this loan. These are:
Age:
- Minimum: 18 years
- Maximum: 65 years
Eligible Entities:
- Individuals: Including proprietary concerns, partnerships, private limited companies, public companies and other legal entities.
- Enterprises: All non-farm enterprises engaged in manufacturing, trading and services. Agriculture-allied activities are also included under the PMMY scheme.
- Entities: Private and public limited companies, sole proprietorships, partnerships, LLPs, NGOs, trusts and cooperative societies.
Eligibility Criteria for Individuals
- Indian citizen
- No criminal record
- No bank or financial institution payment failure
- Good credit history
- Educational qualification
- Business activity
You may be required to demonstrate skills, experience or knowledge relevant to the proposed activity.
Other Criteria
- Applicants should be engaged in income-generating activities
- Non-farm enterprises should be involved in trading, services and manufacturing sectors
Paperwork Required for Mudra Loans
Once you know the eligibility for a Mudra loan, you will have to work on gathering documents. The documents you need for a PMMY loan depend on the type of loan you select. Check the tables below:
Paperwork for a Shishu Loan
| Document Type | Details |
|---|---|
| ID Proof Self-attested | Choose one: 1. Aadhaar Card 2. Voter’s ID Card 3. PAN Card, Passport 4. Driving Licence 5. Government Photo ID |
| Address ProofSelf-attested | Choose one: 1. Telephone or Electricity Bill 2. Latest Property tax receipt (Less than 2 months old) 3. Passbook or bank account statements (attested by bank officials) 4. Aadhaar Card 5. Passport 6. Voter’s ID Card 7. Domicile Certificate 8. Certificate issued by a Government Authority/Local Panchayat/Municipality |
| Applicant’s Photograph | 2 copies of recent colour photographs, not older than 6 months |
| Quotation of Machinery/Items | Quotation for machinery/items to be purchased, including the following details: Supplier name details and price |
| Proof of Business Identity/Address | A copy of the following as per relevance: • Relevant Business Licences • Registration Certificates • Other documents related to business ownership and address |
Paperwork for Kishore and Tarun Loans
| Document Type | Details |
|---|---|
| Identity Proofself-attested | Choose one: 1. Passport 2. Aadhaar Card 3. Driving License 4. PAN Card 5. Voter’s ID card |
| Address Proofself-attested | 1. Recent telephone and Electricity bill 2. Property tax receipt – not older than 2 months 3. Voter’s ID card 4. Aadhaar Card 5. Passport of Proprietor/Partners/Directors |
| Photograph of Applicant | 2 copies of recent colour photographs – not older than 6 months |
| Proof of Business Identity/Address | 1. Licenses 2. Registration certificates 3. Other documents related to business ownership and address |
| Bank/Financial Institution Default Status | Applicant should not be a defaulter in any bank or financial institution |
| Statement of Accounts | Last 6 months’ statement of business account from your existing bank, if any |
| Financial Statements | The last two years’ balance sheets income tax/sales tax returns – for cases from ₹2 lakhs and above |
| Projected Financials | Projected balance sheets for one year (working capital) or for the loan period (term loan) – for cases from ₹2 lakhs and above |
| Sales Achievement | Sales achieved during the current financial year up to the date of application submission |
| Project Report | Report on the proposed project, including technical and economic viability |
| Company Documents | 1. Memorandum and Articles of Association of the company 2. Partnership Deed of Partners |
| Asset & Liability Statement | Statement from the borrower, including Directors & Partners, if no third-party guarantee is provided |
Application Process for a Mudra Loan
Now you need to understand how to apply for a Mudra Loan. You can get Prime Minister Mudra loans through two means. These are:
Offline Process
You can apply for this loan offline by following these steps:
- Find and visit your nearest eligible Member Lending Institution
- Submit the loan application form with proper information
- Complete other loan formalities with the required documents
- After applying for the loan wait for verification and approval
- Once approved, you will get the loan in your bank account
Online Process
You can get an e-Mudra loan by following these steps:
- Gather all necessary documents
- Visit the PM MUDRA official website
- Select the Udyamimitra portal
- Click ‘Apply Now’
- Click on what best describes you as an applicant from this list:
- New Entrepreneur
- Existing Entrepreneur
- Self-employed Professional
- Enter your name, email and mobile number
- Click on ‘Generate OTP’
- Enter the OTP to register
- Fill in your personal and professional details
- Click on ‘Loan Application Center’
- Choose your loan type:
- Shishu
- Kishore
- Tarun
- Enter data about your business (including industry, business name and activity)
- Enter owner information, existing banking facilities and choose a preferred lender
- Attach all required documents
- Submit the application
- Save the Application Number (to check the status)
At every stage of business, you require funds for your operations, expansions and diversification. If you need to supplement business financing or do not qualify for a Mudra loan scheme, you can get the needed funds from Fibe.
The Fibe Instant Personal Loan offers up to ₹5 lakhs and helps you get competitive interest rates by submitting minimal paperwork. This is an entirely digital process with instant approval. This enables you to cater to urgent monetary requirements with ease.
Zero preclosure charges and a 36-month repayment timeline help you borrow and repay the loan comfortably. Register on our website or download our Personal Loan App to acquire the funds you need to start or grow your business.
FAQs on Mudra Loans
What is the interest rate of a Mudra loan?
Interest rates for these loans are deregulated. Each associated lending institution charges its own interest rates in adherence to RBI guidelines. Usually, the rates on these loans are nominal.
What is the ₹10 lakh loan from the government?
The Tarun Mudra loan under the PMMY offers up to ₹10 lakhs for small businesses. You can apply for it from various financial institutions.
What is the benefit of a Mudra loan?
A Mudra loan offers many benefits. Some of these are:
- Easy eligibility criteria
- Collateral-free facility
- Easy loan disbursal process
- Multi-faceted utilisation of funds
Which bank is the best for a Mudra loan?
Numerous public sector banks, state-operated co-operative banks, private sector banks, rural banks from the regional sector and small finance banks provide a Mudra scheme loan. Compare each bank’s fees, interest rates and requirements and choose the one that best matches your needs.
What is the fee for a Mudra loan?
For amounts up to ₹50,000, there is usually no processing fee applicable on a Mudra loan. For amounts that are more than that, lenders may charge a processing fee along with GST.
