Friday 19 April 2024

Anything and Everything you Need to Know About Mudra Loan and Card

Mudra Loan

According to recent reports from the Ministry of Finance, the total transactions under the Mudra loan scheme or Pradhan Mantri Mudra Yojana Scheme may cross the quantum of Rs. 3 Lakh Crore in this current fiscal year.

According to government data collected until March 2019, the total amount sanctioned under this scheme was set to be around Rs. 2.80 Lakh Crore.

PMMY loan scheme was introduced by the Micro Units Developments and Refinance Agency Ltd. to aid SMEs in India avail financing for their businesses.

According to the data stated above, this scheme has allowed numerous small businesses to fund their operations and expansion in the last few years, leading to the rapid growth of this sector in the country.

Following is an elaboration of this loan introduced by Mudra and how small businesses can avail it.

Mudra loan – What does it entail?

The Mudra or PMMY loan is a low-cost credit scheme that was introduced in 2015 to provide advances to various micro and small business enterprises under the trading and services sector of our economy. Like the SME loan provides efficient financing solutions for SMEs, the PMMY loan has also helped this sector to accumulate capital for their operation.

This loan is structured into 3 different categories to cater to the financial requirements of businesses. These categories are –

  • Sishu –

Micro or small business owners can borrow credits of up to Rs. 50,000. This category is tailored to suit the requirements of borrowers looking to finance start-ups.

  • Kishor –

This category offers loans ranging between Rs. 50,000 and Rs. 5 Lakh. This is the best option for businesses that have already started their operation and are looking to establish their business as viable enterprises.

  • Tarun –

Businesses can avail loans where beneficiaries can avail a loan amount value ranging between Rs. 5 Lakh and Rs. 10 Lakh. This category is best suited for those established businesses which are looking for capital to expand their operations.

Business owners eligible to avail the benefits of these above categories of PMMY loan can apply for the requisite advance amount from financial institutions that have partnered with Mudra for this scheme. However, interest rates offered can vary from one financial institution to another.

Additionally, since the upper limit to avail this advance is set at Rs. 10 Lakh, the businesses requiring a higher loan amount can apply for a business loan from other financial institutions in the country.

For instance, the advance from financial institutions like Bajaj Finserv offers individuals a high loan amount value along with several added benefits like pre-approved offers.

What is the purpose of Mudra card?

The Mudra loan is offered on a variety of purposes that enable the creation of employment opportunities and boost income generation. The advance is extended primarily to fulfil the following purposes –

  1. As business loans for traders, shopkeepers, vendors and several other activities related to the service sector.
  2. Financing equipment purchasing for micro-units.
  3. Providing advances for the purchase of commercial-use transport vehicles.
  4. Providing working capital loans through Mudra cards.

A Mudra card is akin to a debit card that is issued to businesses against their Mudra loan account, to access the working capital part of the advance. Beneficiaries of this advance can utilise the card to withdraw from the Mudra account according to their working capital requirement.

This facility helps them to maintain a minimum interest payment burden. The card also helps to digitise all the transactions under this scheme and create a credit history for borrowers of this advance.

Borrowers can make use of the card to withdraw cash from ATMs, and also make payments via point of sale machines.

How to apply for a Mudra loan?

To apply for this advance, requisite shopkeepers, business owners, small manufacturers, start-up entrepreneurs need to approach the respective financial institutions and make an application for the same. Following are a few documents required to avail the advance –

  • Business plan details.
  • KYC documents.
  • Photograph of the applicant.
  • Quotation for any machinery to be purchased.
  • Price of the machinery and name of the supplier.
  • Identity proof/address proof of the business like a business license, registration documents, etc.

Upon submitting the application and documents required, financial institutions will process the Mudra loan application, approve and sanction the loan amount. However, before applying, individuals should ensure that they satisfy the eligibility criteria to avoid any hassle in the application process.