Mudra Loans: Rate of Interest, Eligibility and How to Apply

Overview

Mudra Loan derives its name from Micro Units Development and Refinance Agency Ltd. (MUDRA), a government unit which provides unsecured loans of upto Rs. 10 Lacs from small businesses to micro enterprises through Pradhan Mantri Mudra Yojana (PMMY).

MUDRA offer this loan with the help of banks/FIs, in order to encourage self-employment in the country and generate income.

The interest rates under mudra loans ranges from 11.20% to 19.50% with tenure upto 5 years long and is linked to mclr rates defined by RBI from time-to-time. Moreover, a micro business eligible under Shishu or Kishore categories, are free from loan processing charges. Whereas, micro businesses eligible under Tarun category will have to pay certain processing charges on loan.

Features


No Processing Charges

Unlike regular business loans where a borrower has to pay processing charges to the bank/FI in order to process the funds, under Mudra loans, a borrower can avail funds without the need of paying any processing charges. However, business enterprises eligible under Tarun category will have to pay an upfront processing fee of 0.50% of the loan amount.

No Collateral

An eligible beneficiary doesn’t need to offer any collateral security in order to access the funds unlike regular business loans. Hence, even a business which doesn’t have any collateral to offer, can avail funds as long as it satisfies the eligibility criteria of mudra loans.

No Minimum Loan Amount Criteria

Unlike regular business loans where banks and FIs tends to have a minimum loan amount criteria, which eventually leads to applying for a higher amount than required or look for some other funding source, Mudra loan doesn’t have any minimum loan amount criteria. Hence, borrower can even apply for amount as low as Rs. 5,000.

Mudra Loan Eligibility


An eligible beneficiary is defined as a small business or micro enterprise generating income either through manufacturing, trading or service sectors, including enterprises involved in allied agricultural activities.

Whereas enterprises involved in farming activities such as crop cultivation, farming of fruits and flowers are excluded from the benefits under Mudra Loans.

The various types of businesses eligible under Mudra Loan are as follows:

Transportation Business

Transportation business are defined as businesses involved in local transportation activities such as auto rickshaw, delivery of goods, limousine, taxis and moving vans, or travel and tourism related businesses such as minibuses and passenger cars etc.

Service Based Businesses

Service based businesses includes small businesses acting as service providers be it consumer or industrial such as software development companies, hotels, pubs and restaurants, newspaper printing press, gyms and sports clubs, clinics, hospitals, medical shops, spas, accountancy and law, confectionary shops, boutiques, coaching institutes, and cleaning services etc.

Production Businesses

Production Businesses includes small business or enterprise unite involved in production of consumer products like furniture, utensils, edible products like packaged food items, household tools and electronic products, disposable items, and industrial products such as car parts, industrial tools and equipments, handlooms, etc.

Allied-Agricultural Businesses

Allied-Agricultural businesses are defined as businesses involved into activities that are not directly related to agricultural such as pottery, nursery of plants, shopkeeping, carpentry, diary plantation, poultry farming, bee keeping and fish farming etc.

Other Eligibility Criteria:

  • The individual applying for the loan amount must be an Indian citizen.
  • The applicant must be at least 21 years at the time of loan application.
  • The maximum age of the applicant must not be more than 65 years at the time of loan maturity.
  • The applicant must either be running his/her own income generating business or have an income generating business idea.
  • If the applicant is salaried, then he/she must be occupation for past 2 years in continuity and generating income.
  • If the applicant is self-employed businessman, then the business must be running in continuity for past 2 years and generating income.
  • If the applicant is self-employed professional, then he/she must be in practice for the past 2 years and generating income.
  • Applicant must be living at the current residence for last 1 year. Or, must have 1 year long banking relationship with the bank.
  • The applicant must not be a defaulter in any bank or financial institution.

Categorization of Eligible Borrowers


Under Mudra Yojana, an eligible beneficiary can apply for finance under one of the three different categories – Shishu, Kishor and Tarun based of the current growth of a business and need of finance.

Shishu

Under Shishu category of the Mudra Loan, an eligible beneficiary can avail funds upto Rs. 50,000 either to establish the business, or to kick-start the business operations. The beneficiaries categorized under Shishu are mainly individuals with startups and extremely small businesses.

Eligibility under Shishu Category:

  • An entrepreneur or group of entrepreneurs who are looking for a low amount of funds in order to establish any income generating business.
  • A small business or micro enterprise which is labeled as startup and expected to generate revenues, with finance demands of only upto Rs. 50,000.

Kishore

Under Kishore category, an eligible individual or entreprise can avail funds as high as Rs. 5 Lacs to manage their day-to-day business functions. The beneficiaries categorized under Kishore is rather functional for quite a time and comparatively large in size as compared to shishu category.

Eligibility under Kishore Category:

  • An entrepreneur who have already established the business or a business enterprise which is already in its operational phase and started generating revenues, are eligible under this category.
  • The demand of the funds must be above Rs. 50,000 but not more than Rs. 5 Lacs.

Tarun

Under Tarun category, an individual or business enterprise can avail funds as high as Rs. 10 Lacs for the operational needs of the business. The beneficiaries categorized under Tarun category are running the business operations for longer time and comparatively bigger in size as compared to kishore category.

Eligibility under Tarun Category:

  • The demand of finance must be above Rs. 5 Lacs.
  • An individual engaged in the business or business enterprise which have been generating revenues for quite a long time now.

Mudra Loan Documentation


Mudra Loan Documents for Vehicle Purchase:

  • Mudra application form
  • Vehicle loan application form as available with the bank
  • Self-Attested KYC documents along with 2 recent passport size colour photographs (not older than 6 months).
  • Bank statement (last 6 months)
  • Quotation of the vehicle pricing
  • Copy of any running obligations

Mudra Loan Documents for Business Installments:

  • Mudra application form
  • BIL application form
  • Proof of business establishment
  • Bank statement for past 6 months
  • Ownership proof of residence/office, if business is established on self-owned property
  • Self-Attested KYC documents along with 2 recent passport size colour photographs (not older than 6 months).
  • Rental Agreement of Business Establishment, in the case of rental property.
  • Proof of business existence and continuity
  • Proof of highest degree of qualification
  • Proof of trade references
  • Copy of Income tax return for past continue 2 years
  • Copy of Balance Sheet and Profit & Loss Account as certified or audited by a chartered accountant. (Mandatory for all cases where loan amount is above Rs. 2 Lacs).
  • Quotation of the machinery/equipment pricing if funds are being used for purchasing any machinery/equipment.
  • Copy of any running obligations

Mudra Loans Documents for Business Loans Group and Rural Business Credit:

  • Self-Attested KYC documents along with 2 recent passport size colour photographs (not older than 6 months).
  • Mudra application Form
  • BIL/RBC application form
  • Ownership proof of residence/office, if business is established on self-owned property.
  • Rental Agreement of Business Establishment, in the case of rental property.
  • Business existence proof
  • Bank statement of business account for past 12 months.
  • Copy of Income tax return for last continue 2 years.
  • Copy of Balance Sheet and Profit & Loss Account as certified or audited by a chartered accountant. (Mandatory for all cases where loan amount is above Rs. 2 Lacs).
  • Quotation of the machinery/equipment pricing if funds are being used for purchasing any machinery/equipment.
  • Copy of any running obligations.

Other Documents for Doctors:

  • Medical registration certification
  • Proof of SC/ST/OBC/Minority, if applicable.

Other Documents for Sole Proprietors:

  • Copy of Sole Proprietorship Declaration
  • Proof of SC/ST/OBC/Minority, if applicable.

Other Documents for Partnership Firms:

  • Certified Copy of Partnership Deed
  • Proof of SC/ST/OBC/Minority, if applicable.

Mudra Loan Interest Rates


Banks/FIs Annual Interest Rates
HDFC Bank 12.75% - 20.00%
Tata Capital 13.49% - 19.50%
IDBI Bank 12.75% - 13.75%
SBI 17.80%
Allahabad Bank 13.70%
HDB Financial Services 15.95% - 18.95%
Indian Bank 12.65% - 13.65%
Standard Chartered Bank 12.50% - 17.00%
ICICI Bank 11.49% - 17.50%
Citibank 12.75% - 15.75%
Capital First (IDFC First) 13.00% - 20.00%
Bank of India 12.70% - 14.70%
UBI 14.40%
IOB 14.70%
Kotak Mahindra Bank 11.50% - 18.00%
IndusInd Bank 12.99% - 18.25%
Fullerton India 19.50% - 37.00%
Canara Bank 13.65%
Bank of Baroda 14.15%
Karur Vysya Bank 13.90% - 16.40%
OBC 11.20% - 12.95%
UCO Bank 14.10% - 15.10%
Central Bank of India 12.70%
Bank of Maharashtra 15.20%
Aditya Birla Finance 14.00%
Tamilnad Mercantile Bank 14.40% - 16.40%
South Indian Bank 14.80%

Mudra Loan Schemes


The finance aid to the beneficiary business is offered through four different schemes designed to cater different types of beneficiaries. The schemes are named and defined as follows:

Micro Credit Scheme

Micro credit scheme is designed to cater individuals with finance needs of upto Rs. 1 Lac only, to carry out select micro enterprise activities. The funds are offered through micro financial institutions enrolled with MUDRA Ltd.

Refinance Scheme for Banks

Under Refinance Scheme for Banks, MUDRA provide business loan of upto Rs. 10 lacs to eligible borrowers with the help of Commercial Banks, Regional Rural Banks and Scheduled Cooperative Banks. The funds are offered as term loan and working capital loans and distributed with the help of the enrolled bank within the three business categories – Shishu, Kishore, and Tarun.

Women Enterprise Programme

Under this scheme, the financial aid is offered only to female individuals to set-up their business unit with concession in interest rates of upto 0.25%. This scheme is engaged in order to encourage women empowerment and help female entrepreneurs grow.

Securitization of Loan Portfolio

Under this scheme, the loan is offered through banks and micro financiers where the assets created out of loan amount are securitized against portfolio of the applicant micro enterprise. It works as a second loss default guarantee for the loan, and helps in enhancement of credit limit.

How to Apply for Mudra Loan?


Mudra loans can be applied through online as well offline application methods. Online application methods are comparatively easier to follow since borrower doesn’t need to go through the hustle to visit a branch.

Mudra Loan Online Application:

  • Click here to browse registration page of Mudra Loan online portal.
  • Now, enter the loan amount you want to avail and choose the category from the adjacent drop-down list.
  • Setup login username and provide other information like name, mobile number, email id, and business location.
  • Cross check the information you have provided and click on the terms and conditions link given below.
  • Tick the checkbox to accept the terms and conditions if you agree, and click on “Register” button.
  • Now login into mudra loan online portal here.
  • Fill up the online application form.
  • Select your preferred bank and submit the form.

Mudra Loan Offline Application:

  • Visit a nearby branch or office of your bank/fi along with necessary documents as mentioned above and id proof.
  • Walk to the helpdesk and ask for Mudra Loan application form. You can download the application from for loan under Shishu category from here and loan under Kishore or Tarun category from here.
  • Fill up the form correctly and submit it at the helpdesk along with all the necessary documents.