What is Mudra Yojana?

It is not easy to start a business. Whether you are looking forward to growing a small business or a large business, you often require financial support. Though you can get a bank loan easily nowadays, it can be challenging for small entrepreneurs to get loans from traditional banks due to strict requirements and extensive paperwork. To solve this, the Government of India introduced the Mudra Yojana in 2015, otherwise called Pradhan Mantri Mudra Yojana (PMMY). This scheme provides small business owners with loans that are easy to obtain, require minimal documentation and do not need collateral.

So, whether you are a shopkeeper, a food stall owner, or an artisan, the PM Mudra Loan can be quite a help for you in expanding your business.

In this article, we will discuss the fundamentals of the Mudra Yojana, the Mudra loan application, eligibility, how to apply for a Mudra loan online, and more.

What is Mudra?

MUDRA stands for Micro Units Development and Refinance Agency. It is a financial institution established by the Government of India to support micro and small enterprises. Hence, the primary objective of Pradhan Mantri Mudra Yojana (PMMY) is to facilitate easy access to finance for small businesses that usually do not qualify for traditional bank loans.

Objectives of PMMY Loan

The PM Mudra Loan aims to help small businesses, and its major objectives include:

• Offering quick loans to micro and small enterprises to help them meet their funding needs.
• Promoting entrepreneurship by encouraging individuals to start their own businesses.
• Empowering women entrepreneurs and facilitating easier loan access for them, thereby promoting gender equality in entrepreneurship.
• Strengthening the small business sector to generate employment opportunities.
• Formalising the informal sector and enhancing its credibility.

Also Read : What is a Business Loan

Categories Under PMMY

There are three categories in which the Mudra Loans are divided. These categories are created based on the loan amount, catering to different stages of business development:

1. 1. Shishu Loan (Up to ₹50,000)
   This loan is for budding entrepreneurs who are just starting new ventures. Hence, it is perfect to set up small-scale businesses like kiosks or service centers.
2. 2. Kishore Loan (₹50,000 – ₹5 Lakh)
   This is for entrepreneurs looking for additional funds to expand their existing businesses. They can use this loan amount for purchasing equipment, increasing inventory, or enhancing services.
3. 3. Tarun Loan (₹5 Lakh – ₹10 Lakh)
   If you have an established business and are aiming for substantial expansion, then you can avail this loan. With the loan amount, you can set up new branches or purchase large-scale equipment. However, as part of the documentation, you would need to present comprehensive financial records, business plans and proof of business stability.
4. 4. Tarun Plus Loan (₹10 Lakh – ₹20 Lakh)
   This is a special category created under the PMMY scheme wherein the entrepreneurs who have availed and successfully repaid their previous PMMY loans can get loan amounts of up to ₹20 lakh. This limit increase was introduced in the Union Budget 2024-25.

Eligibility Criteria To Get a Mudra Loan

To be eligible for a Mudra Loan, you must meet the following criteria:

• You must be an Indian citizen.
• You should be between 18 and 65 years of age.
• Should own a micro or small enterprise that is into manufacturing, trading or services.
• Your business should be profit-making or have a business plan showing potential for success.

How to Apply for a Mudra Loan?

You can apply for a Mudra loan in simple steps online or offline. Here’s your step-by-step guide:

Step 1: Visit your bank’s official website and download the Mudra loan application form.

Step 2: Fill in the application form with the required details.

Step 3: Attach the necessary documents.

Step 4: Submit the form and other documents on the bank’s website.

Step 5: Wait for approval.

Offline Process

Step 1: Go to the nearest bank that provides Mudra loans.

Step 2: Request and fill out the Mudra loan application form with the required information.

Step 3: Attach required documents such as an address proof, business plan and any other necessary documents.

Step 4: Submit to the bank official and await approval.

Benefits of Mudra Loan

Here are the major advantages you can avail with a Mudra Yojana Loan:

• No collateral is required and hence, you do not need to pledge any property.
• Avail competitive interest rates as the Mudra loan interest rate is generally lower than conventional business loans.
• Flexible repayment terms of up to 5 years.
• Quick loan processing with an emphasis on minimal documentation and streamlined procedures.

Conclusion

The Mudra Yojana is certainly a great initiative by the Government of India to empower small business owners by providing accessible and collateral-free loans. Whether you are launching a new venture or aiming to expand an existing one, the Mudra loan offers a strong financial foundation.

If, unfortunately, you are unable to get a Mudra Loan on time, you can always count on CASHe instant personal loans. CASHe offers quick loans of up to ₹3 lakhs at competitive interest rates. Download the CASHe app, apply online and get your loan approved within a few minutes.