What is the Eligibility Criteria for Mudra Loan?

Mar 2nd 2024
Loan
MUDRA Loan: Eligibility for Pradhan Mantri Mudra Yojana (PMMY)

Mudra loan is a government-sponsored credit scheme by the government to promote the micro, small, and medium enterprises (MSME) sector. Its major goal is to enable small business owners to give wings to their dreams by realizing them through the money obtained through the Pradhan Mantri MUDRA Yojana (PMMY). If an applicant meets the eligibility criteria, he can get a loan of up to Rs. 10 lakh through registered banking channels. The scheme was launched on April 8, 2015. There are majorly three products launched under this scheme. 

  • Shishu: Offer loans up to ₹50,000 to people in the initial stage of business
  • Kishore: Loans between ₹50,000 and ₹5 Lakh
  • Tarun: Loans between ₹5 Lakh and ₹10 Lakh

What is Pradhan Mantri MUDRA Yojana (PMMY)?

Pradhan Mantri Mudra Yojana (PMMY) is a revolutionary program launched by the government of India to “fund the unfunded”. The core idea of this scheme is to include unprivileged businesses and entrepreneurs in the proper financial system by providing reasonable credit to them. The scheme enables smaller borrowers to take money from various Public Sector Banks like PSU Banks, Private Sector Banks, Regional Rural Banks and Cooperative Banks, Foreign Banks, Micro Finance Institutions (MFI), and Non-Banking Finance Companies (NBFC) in the form of loans of upto Rs 10 lakhs for non-farm income-based chores. The scheme was launched on 8th April 2015 by the Hon'ble Prime Minister.

Included Sectors in the Mudra Yojana

Sector- or activity-focused schemes would be implemented to optimize beneficiary coverage and customize products to match the needs of certain business activities. First, plans are put up: based on a greater concentration of enterprises in specific activities/sectors:

  • Land Transport Sector/Activity - This will, among other things, provide help for the purchase of vehicles for the transportation of goods and people, such as taxis, autorickshaws, small goods transport vehicles, three-wheelers, e-rickshaws, and passenger automobiles.
  • Community, Social & Personal Service Activities - Bars, salons for cosmetic procedures, fitness centers, boutiques, tailors, dry cleaners, bike, and motorcycle repair shops, photocopying and DTP services, pharmacies, courier services, etc.
  • Food Products Sector - The following would be eligible for support: cold chain vehicles, cold storages, ice-making units, ice cream-making units, biscuit, bread, and bun-making, achaar, papad, jam, and jelly making, agricultural produce preservation at the rural level, sweet shops, small service food stalls, and daily catering/canteen services.
  • Textile Products Sector / Activity - To support the following activities: apparel design, knitting, cotton ginning, computerized embroidery, stitching, and other textile non-garment products like bags, car accessories, furnishing accessories, etc.; handloom, powerloom, chikan work, zari, and zardozi work; traditional embroidery and hand work; traditional dyeing and printing; etc.

Eligibility Criteria For Mudra Loan

If Indian citizens require sums up to ₹10 lakhs and have innovative company ideas for the manufacturing, commerce, or service industries, they may be eligible for Mudra loans. It can be obtained from commercial and public banks, small financing banks, regional rural banks, and microfinance institutions.

Minimum age required 18 years 
Maximum age limit  65 years 
Who is eligible for a mudra loan  Both new and existing units can seek to get a mudra loan. 
Security or collateral required No security or collateral is required 
Organizations approved to offer Mudra Loan  Regional Rural Banks, Public Sector Banks, Private Banks, and Micro Finance Organizations 

Who can take Mudra Loan?

Transport Vehicle - Buying transport vehicles for the movement of goods and passengers like auto rickshaws, small goods transport vehicles, 3-wheelers, e-rickshaws, taxis, etc. Tractors/Tractor Trolleys/Power Tillers meant for commercial applications are also eligible for financial support under PMMY. Two-wheelers used for commercial purposes can also seek financial support under PMMY.
Community, Social & Personal Service Activities - Salons, beauty parlors, gymnasiums, boutiques, tailoring shops, dry cleaning, cycle, and motorcycle repair shops, DTP and Photocopying Facilities, Medicine Shops, Courier Agents, etc.
Food Products Sector - Chores such as papad making, achaar making, jam/jelly making, agricultural produce preservation at the rural level, sweet shops, small service food stalls and day-to-day catering/canteen services, cold chain vehicles, cold storages, ice making units, ice cream making units, biscuit, bread, and bun making, etc.
Textile Products Sector / Activity - Handloom, power loom, khadi activity, chikan work, zari and zardozi work, traditional embroidery and hand work, traditional dyeing and printing, apparel design, knitting, cotton ginning, computerized embroidery, stitching and other textile nongarment products such as bags, vehicle accessories, furnishing accessories, etc.
Business loans for Traders and Shopkeepers - Financial support to borrowers for operating their shops/trading & business activities/service enterprises and non-farm income generating activities with beneficiary loan amounts of up to 10 lakhs per enterprise/individual.
Equipment Finance Scheme for Micro Units - Establishment of micro-enterprises to purchase necessary machinery/equipment with per beneficiary loan amount of up to Rs. 10 lakhs.
Activities allied to agriculture - 'Activities allied to agriculture', e.g. pisciculture, beekeeping, poultry, livestock-rearing, grading, sorting, aggregation agro industries, diary, fishery, agri-clinics, and agribusiness centers, food & agro-processing, etc. (excluding crop loans, land improvements such as canal, irrigation, and wells) and associated services.

FAQs

Q. Do mudra loans provide subsidies?

- No subsidy is provided to mudra loan borrowers under this scheme. One exemption is if the applicant's loan application was associated with a government program and got a capital subsidy, which qualifies under the PMMY.

Q. What is the applicable interest rate for mudra loans?

- Non-corporate, non-farming sector microenterprises with revenue-generating potential and credit needs under ₹10 lakhs are eligible for MUDRA loans from banks. The interest rate for MUDRA loans starts at 7.30% annually. Furthermore, the loan payback duration tends to vary from 1 to 7 years.

Q. Do I need to submit an ITR while availing of a Mudra loan?

- In the case of start-ups, applicants may not be asked to furnish proof of income by lenders. However, candidates coming under the Kishore and Tarun classes would already have their businesses operating and would be selecting a larger amount of financing; they would also be required to submit proof of their businesses' existence.

The Conclusion

If you want to start your venture, Pradhan Mantri Mudra Yojana (PMMY) allows you to realize your dreams by getting the much-needed financial support from the government. Almost all nationalized banks are eligible to offer Mudra loans to small businesses and entrepreneurs. For more details, you can contact your nearest public bank and avail a mudra loan easily.

subscribe

Subscribe to our newsletter

Reach out to our Experts if you have any Doubts

Like the best things in life, Consultations @InvestKraft are free

Drop a Mail or give us a Missed Call & Begin your Investment Journey here

subscribe

Subscribe to our newsletter