Mudra Loans- Pradhan Mantri Mudra Yojana (PMMY) 2023

Imagine a business owner. What is the image that comes to your mind? a person in a suite running around calling the shots and making big deals, but will you think that your local mobile repair shop is a business owner or your dry-cleaning lady is a business owner?

The answer is simple: these small-scale goods and services provide as much as business owners as big business tycoons like Adani and Ambani.  These local business activities also face the same difficulties as capital loans and other financial help, the way big businesses do, but because of their small-scale lot of financial institutions digress from giving loans. 

To solve the issue of the financial gap which has plagued small and micro-business enterprises, the Government of India launched Pradhan Mantri MURDA Yojana in 2015. 

The goal of this loan scheme is simple: to empower micro-businesses held by an Indian citizen by healing the capital gap to create income-generation opportunities. 

In this article, we will be taking Pradhan Mantri MUDRA Yojana in detail. Following are the topics we will be covering in the article.

 What is Mudra Yojana?
How to Apply for the Loan Scheme
Businesses eligible for the loan scheme.
Businesses not eligible for the scheme.
Conclusion.

Table of Contents

What is Mudra Yojana 

MUDRA Yojana, also known as the Micro Units Development and Refinance Agency Yojana, is a government initiative launched in 2015 to provide financial assistance to small businesses in India. This scheme aims to encourage entrepreneurship and promote self-employment by providing loans to non-corporate, non-farm small/micro enterprises.

The MUDRA Yojana is based on the concept of “funding the unfunded”, and it provides loans up to Rs. 10 lacks to small business owners without collateral or security. These loans are available through various banks and financial institutions, and the interest rates are generally lower than those of traditional loans. The scheme has  the following three loan categories:

Shishu (up to Rs. 50,000)
Kishore (up to Rs. 5 lacks)
Tarun (up to Rs. 10 lacks)

The MUDRA Yojana has been a game-changer for many small business owners in India, particularly in rural areas. With easy access to finance, these entrepreneurs can now expand their businesses, purchase new equipment, and hire additional staff. The scheme has also created employment opportunities and boosted economic growth in the country.

One interesting aspect of the MUDRA Yojana is that it has a strong focus on women entrepreneurs. The scheme encourages banks to lend to women entrepreneurs and provides special incentives for loans given to women. This has led to an increase in the number of women-owned businesses in the country, providing more opportunities for women to become financially independent.

In addition to providing financial assistance, the MUDRA Yojana also offers business support services such as skill development and training programs. This helps entrepreneurs to improve their business skills and knowledge, enabling them to run their businesses more effectively.

Mudra loan home page

How to apply for a Mudra loan  

To apply for a MUDRA loan, you can follow these simple steps:

Identify the category of loan: The MUDRA Yojana offers loans under three categories: Shishu, Kishore, and Tarun. You need to identify which category your business falls under, based on the loan amount you require.

Approach a financial institution: MUDRA loans are provided by various banks, NBFCs, and microfinance institutions. You can approach any of these institutions to apply for the loan. You can check the list of institutions on the official MUDRA website or contact your local bank branch to know more.

Submit the application form: Once you have identified the financial institution, you need to fill in the MUDRA loan application form. The form requires details such as your personal information, business details, the loan amount required, and the purpose of the loan.

Submit the necessary documents: You need to submit documents such as identity proof, address proof, business registration proof, and financial statements to support your loan application. The list of documents may vary based on the financial institution and loan category.

Wait for approval: After submitting the application and documents, the financial institution will verify the information and process your loan application. The approval process may take a few days to a few weeks, depending on the institution and loan category.

Receive the loan amount: Once your loan is approved, the loan amount will be disbursed to your bank account. You can then use the funds to meet your business requirements.

It is important to note that while MUDRA loans do not require any form of processing fee if your bank or other financial institution charges a fee to process your mudra loan, it’s illegal.  

Here is a link for the online application.

Application page homepage

Businesses are eligible for Mudra loans.

MUDRA loans are available to micro and small businesses across various sectors. Here is a list of businesses that are eligible for MUDRA loans:

Manufacturing businesses such as food processing, textiles, garments, and leather products.
Service sector businesses such as restaurants, beauty parlors, repair shops, and computer training centers.
Trading businesses such as grocery stores, stationery shops, and electronic shops.
Agriculture-related businesses such as beekeeping, poultry farming, and horticulture.
Small business owners such as shopkeepers, street vendors, and artisans.
Transport businesses such as auto-rickshaws, taxis, and small commercial vehicles.
Professionals such as doctors, lawyers, and chartered accountants who are looking to set up their practice.
Women entrepreneurs who are looking to start their businesses.
Individuals who are involved in animal husbandry, pisciculture, and other allied agricultural activities.
Small manufacturing units such as small-scale processing units and others.

Businesses are not eligible for mudra loans.

Following is the list of businesses that are not eligible for Mudra loans. 

Speculative businesses such as real estate and stock market investments.
Businesses involved in gambling, horse racing, or similar activities.
Businesses involved in the production or sale of banned substances such as tobacco, liquor, and narcotics.
Businesses involved in speculative activities, such as trading in derivatives and commodity futures.
Businesses involved in speculative real estates activities such as land banking and property trading.
Businesses that are not legal or have not obtained the required licenses and permits.
Businesses that do not have a clear repayment plan or have a history of defaults.
Businesses that do not fall under the micro and small business category.
Businesses that are not in a position to generate sufficient cash flows to repay the loan

Conclusion.

Micro and small business enterprises are going to be the heart and soul of India, more so than it is nowadays. The government is also building a strong base structure with schemes like mudra loans. Acquiring these loans is also no longer a tedious process, you can acquire these loans with a few simple clicks. 

One more simple thing you can do to ensure your chances of getting loans approved is sincerely maintained your accounting books. You can do it manually on a spreadsheet or invest in accounting software like ProfitBooks. 

Profitbooks is software made for people who don’t have vast experience in accounting, hence it’s easy to use.

ProfitBooks also has a “Forever free plan” for micro-businesses and startups, this plan will take care of your basic accounting and bookkeeping needs, visit our website and sign up your business today. 

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