The Pradhan Mantri Mudra Yojana (PMMY) is a financial incentive scheme that provides loans up to a value of Rs. 10 lakh to small and micro enterprises, non-farm allied activity entities and non-corporates. These loans can be availed in three categories, namely ‘Shishu’, ‘Kishore’ and ‘Tarun’. Last-mile finance institutions such as Small Finance Banks, RRBs, Commercial banks, NBFCs and MFIs are eligible to lend under PMMY.
As the name suggests, the Shishu loan category provides assistance up to Rs. 50,000 to those entrepreneurs who are in the early stages of setting up their business or want to set up an enterprise.
Documents required to avail Shishu Mudra loan:
● Quotation of the assets and machinery to be purchased.
● Details of the machinery to be purchased.
● Identity and Address Documents.
● SC/ST/OBC/PH or any other relevant certificate.
The Kishore category of Mudra loans targets those people who are looking to expand their business. It offers financial assistance from Rs. 50,000 up to Rs. 5,00,000. Banks usually ask for previous financial statements of the business to check the success of ongoing operations.
Documents required for Kishore Mudra loan:
● Bank statement of previous six months from the current banker, if any.
● Audited Balance Sheet of last two financial years.
● GST or Sales Tax return.
● Personal Return of Income of the entrepreneur.
● Memorandum and Articles of Association, if any.
● Sales Estimates for the upcoming year.
● Technical and Financial Viability statement.
Tarun category provides loans from Rs. 5,00,000 up to Rs. 10,00,000. It is designed for those entities which are in an advanced stage of business. Loans under this category are subject to conditions.
Documents required for Tarun Mudra Loan:
● Same as the Kishore checklist
Rate of Interest
Mudra loan yojana is run through a network of last-mile financiers who decide the rate of interest on the basis of Reserve Bank of India’s guidelines. The rate of interest is subject to change.
Functioning of the Mudra Loan Yojana
Mudra Yojana is essentially designed to function through the network of last-mile finance institutes that include commercial banks, Regional Rural Banks, Small Finance Banks, Non-Banking financial companies and MFI’s.
An interested candidate can approach any of these institutions and avail the loan facility as per eligibility criteria.
Eligibility Criteria of the Mudra Loan Yojana
The following list of occupations is eligible for mudra loan yojana:
● Small Businesses
● Non-Corporate Entities
● Proprietorship firm
● Partnership firm
● Small Manufacturing Unit
● Small Servicing Unit
● Fruits and Vegetable Vendor
● Truck Operator
● Food-Business Unit
● Repair shop
● Machine Operator
● Small industries
● Food Processors
● Small Enterprise
The comprehensive eligibility criterion states that any citizen of India with a business plan for an income-generating, non-farm activity is eligible to apply for a mudra yojana loan. The said activity should fall under the manufacturing, processing, reading or service sector. The loan amount is limited to Rs. 10 lakh categorized into three segments based on the business’s activity level. Mudra loan carries the same terms and conditions as any other commercial loan, with the rate of interest, decided as per the Reserve Bank of India’s guidelines, subject to change.
Pradhan Mantri Mudra Yojana does not carry any subsidy. But a capital subsidy can be availed as part of an ongoing government of India scheme.
Terms of Repayment
The mudra yojana loan is governed by the lending rules of the refinance institution, and therefore the repayment terms will be in accordance with the lending principles of the said institution.
The Pradhan Mantri Mudra Yojana is applicable across all the regions and all commercial banking institutes.