Finance

What is the MUDRA scheme for small businesses?

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Many entrepreneurs leading small businesses have ideas with huge potential. However, they often cannot act on them because of lack of funding. To promote entrepreneurship among the youth of India, the Micro-Units Development and Refinance Agency (MUDRA) scheme was launched under the aegis of Pradhan Mantri Mudra Yojana (PMMY). MUDRA is also an initiative that fits well with the government’s Make in India vision that aims to enhance skills, provide investment and foster innovation in India’s manufacturing industry.

What is the Mudra business loan?

MUDRA offers MSME loans to entrepreneurs. MUDRA, which by itself is an NBFC, supports micro-enterprises in the country by providing refinance support to banks and other NBFCs for lending to micro units that have a loan requirement.

With a clear objective of boosting the development and growth of micro-enterprises, Tata Capital under the Mudra scheme gives business loans to entrepreneurs. The MSME and SME loan is given under three main categories:

  • Shishu offers loans up to Rs. 50,000
  • Kishor offers loans from Rs. 50,000 to Rs. 5 lakh
  • Tarun offers loans from Rs. 5 lakh to Rs. 10 lakh

This finance scheme can be used by businessmen to streamline operations, expand their business or to manage short-term cash-flow gaps.

Who can avail the MSME loan?

The Mudra MSME loan eligibility is quite simple and straightforward. Anyone with the minimum age of 18 years and maximum age of 65 years can apply for this type of loan. The application process is just like you would apply for any other kind of loan. Applicants have to fill up the required loan form and provide supporting documents such as Aadhaar Card, passport, Voter ID card, driving license, bank statements, telephone bills and photographs.

Startup entrepreneurs, small business owners, shopkeepers, manufacturers, small industrialists, traders, those working in the commercial transport business and agriculture, among others, can avail the MUDRA SME loan.

MUDRA does not have fixed SME loan interest rates. The interest rate depends on the applicant’s profile, type of business, tenure and amount of loan needed and the bank that is proving the MUDRA loan. The loans can start from an interest rate of 8.60% and can go upwards of 10.65% annually. The bank could also charge a processing fee when disbursing the loan, though it is uncommon.

What are its benefits and salient features?

One of the biggest benefits of the MUDRA business loan is that it is for anybody and everybody who aspires to become an entrepreneur. There is no minimum loan amount cap. Business owners can avail a loan from a few thousand to Rs. 10 lakh. Additionally, this loan can be used for different purposes as required by the business.

Another important aspect is that the MUDRA loan does not require the applicant to provide security or collateral for availing the scheme. This further makes it easier for people from different income groups to readily get a business loan.

In closing

MUDRA is a great instrument to boost the spirit of entrepreneurship in the country. Do note not all banks provide MUDRA loans. However, there are plenty of public, private, state co-operative and, regional rural banks and micro-financial institutions that offer this service.

The Tata brand is built on the entrepreneurial spirit, and through Tata Capital, you can avail of the Shishu, Kishor or Tarun loans under the Mudra scheme based on your business needs.

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