The Micro Units Development & Refinance Agency (MUDRA) Limited is an entity established by the Government of India to support micro unit development and refinance initiatives. The Honourable Finance Minister announced MUDRA in the 2016 Budget. MUDRA provides loans under three schemes: ‘Shishu’, ‘Kishor’, and ‘Tarun’, which indicate the stage of growth and finance needs of the beneficiary micro unit. This loan is available to Indian micro enterprises and entrepreneurs. The primary goal of the loan is to assist Micro and Small Enterprises in India, which constitute the backbone of the Indian economy. The project’s official name is Pradhan Mantri Mudra Yojana (PMMY). The Mudra loan provides support for a number of purposes that contribute to revenue production.

What is the purpose of the MUDRA?

One of the most significant barriers for SMEs in India is a lack of financial support from formal banking or financial institutions. Many times, a lack of institutional financing stifles the growth of small enterprises, rendering them ineffective in competing with larger players. MUDRA Bank, a subsidiary of SIDBI, was established to eliminate this bottleneck and provide financing to micro businesses and entrepreneurs. MUDRA will be in charge of refinancing all financiers or financial institutions that lend to micro or small businesses in manufacturing, trading, and services, as well as societies, trusts, section 8 companies, co-operative societies, small banks, scheduled commercial banks, and rural banks.

Loan Schemes

The loan is now available through three schemes within the Pradhan Mantri MUDRA Yojana. The three schemes are listed below:

Shishu: offers loans up to Rs.50,000, whereas Kishor offers loans ranging from Rs.50,000 to Rs.5 lakh.
Tarun: Loans over Rs.5 lakhs to Rs.10 lakhs

What are the MUDRA eligibility criteria?

Any Indian citizen with a business plan for a non-farm sector income-generating activity, such as manufacturing, processing, trading, or service, and a credit requirement of less than 10 lakh can apply for MUDRA loans under the Pradhan Mantri Mudra Yojana (PMMY) through a bank, MFI, or NBFC. To obtain a loan under MUDRA, the lender’s terms and conditions must be met. Lending rates follow RBI rules provided on a regular basis. MUDRA is a refinancing institution and does not make direct loans. Instead, existing NBFCs, Financial Institutions, Banks, Primary Lending Institutions, and so forth make loans through MUDRA.

MUDRA loans are intended for millions of proprietorship and partnership firms in rural and urban areas that operate small manufacturing or service sector units such as shopkeepers, fruit/vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, and others.

What are the Documents Needed for MUDRA loans?

• MUDRA Loan Application
• Project Report
• Proof of Identity: like PAN / Drivers License / Aadhaar Card / Passport and more.
• Residence proof like recent telephone bill/electricity bill or property tax receipt and more.
• Applicant’s recent photograph which is less than 6 months old
• To purchase machinery or other items, provide a quotation.
• Name of supplier or details of machinery or prices of machinery
• Proof of identity/address of the business like tax registration, business license, and more.
• Proof of category like SC/ST/OBC/Minority, if applicable

It is worth noting that there is no processing charge or collateral required to get a MUDRA loan.

A business plan, often known as a project report, is an important document when requesting for a bank loan. The bank utilizes this document to assess the project’s overall feasibility, risks, financial viability, and potential. A well-written and convincing project report improves the likelihood of loan acceptance.