Mudra Yojana Loan Interest Rates for Entrepreneurs

  • by Editor

October 27, 2020
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The Indian Government introduced Pradhan Mantri Mudra Yojana(PMMY) to provide financial help for small businesses to grow further and expand. Micro, Small & Medium Enterprises (MSMEs) create many job opportunities, thereby reducing unemployment in the country to a certain extent. The MSMEs sectors contribute significantly to the Indian economy. However, various small and medium scale businesses find it challenging to survive in the competitive market due to insufficient funds.

This is where the PMMY comes to the rescue; this scheme is approved and processed by various financial institutions like public &private banks, small banks, NBFCs, scheduled banks, rural banks, and other registered co-operative societies. The PMMY scheme is divided into three categories, namely ‘Shishu’, ‘Kishore’, and ‘Tarun’ that signify the stage of development and funding requirements of businesses.

Who can apply for the scheme?

  • Individuals and MSMEs can apply for Mudra loan.
  • Small and Micro Manufacturing Units
  • Small Scale Industry (SSI)
  • Artisans, Vendors, Traders, Retailers, Manufacturers
  • Sole Proprietorship, Partnership Firms, Limited Liability Partnerships (LLPs) dealing in trading, manufacturing, and services sector can apply for the scheme.

Eligibility Criteria for Pradhan Mantri Mudra Loan

  • To be eligible for the scheme the applicant must be an Indian citizen.
  • The loan amount required should not be Rs. 10 lakhs or less.
  • Businesses generating income from farming activities are not eligible for MUDRA loan.
  • Small enterprises in rural, as well as urban areas, are eligible for Pradhan Mantri Mudra Yojana.

Documents Required

The following are the list of documents required for different purposes of Mudra Loan. They are as follows:

  • Documents for Vehicle Loan
  • Identity proof such as Aadhaar Card, Driving License, Passport, Voter ID Card, etc.
  • Address proof such as Passport, Aadhaar Card, Bank statements, phone or electricity bill
  • Duly filled application form of Mudra Yojana
  • Application form for a vehicle loan
  • Income proof of the applicant
  • Bank statement for the previous 6 months
  • Passport size photographs

Documents for Business Installment Loan

  • Duly filled application form of Mudra Yojana
  • Identity proof such as Aadhaar, PAN Card, Voter ID, Driving License, etc.
  • Address proof such as Aadhaar, Passport, electricity bill, telephone bill, etc.
  • Business Installment Loan application form
  • Proof of ownership of the business or residence
  • Proof of qualification, establishment, and business continuity
  • Trade references
  • 2 years ITR (Income Tax Returns) and CA (Certified Financials)
  • Bank statement for the previous 6 months
  • 2 passport size photograph

Documents for Business Loan

  • Duly filled application form of Mudra Yojana
  • Identity proof such as Aadhaar Card, Passport, Voter ID Card, Driving License, etc.
  • Residential proof such as Aadhaar, Passport, Bank statements, electricity bill, etc.
  • Business Loan application form
  • Proof of ownership of the enterprise or residence
  • Proof of qualification, establishment, and business continuity
  • Proof of business continuity
  • Bank statement for the last 12 months
  • Income tax return for the recent 2 years

Mudra loan Interest Rate

The Pradhan Mantri Mudra Yojana is available to socio-economically backward people to improve their livelihood and the overall rural economy. The rate of interest on Mudra loan is set according to the guidelines of the PMMY scheme and the RBI (Reserve Bank Of India). The Central bank has MCLR or also known as fixed base rate for private Banks to take a loan for the Micro units. The lending rate prescribed is up to 3.5% for Regional Rural Banks and Scheduled Cooperative Banks.

The interest rate for Mudra loan is based upon a few factors. They are as follows:

  • The individual’s credit history is taken into consideration.
  • Profile of the applicant is reviewed.
  • Applicants business loan requirements
  • Guidelines set for a loan based on the PMMY and RBI

The interest on Mudra loan as per the segments are:

MUDRA Yojana Interest Rate
Shishu Loan 1% to 12%
Kishore  Loan 8% to 12%
Tarun Loan 11% to 20%

Mudra Loan Application

Given below is the step by step process to apply for a mudra loan online:

Step 1: To apply for a mudra loan online by visiting the official website of the bank or financial institution with which you wish to avail the loan.

Step 2: Enter the Mudra loan application form by proving your personal and business details

Step 3: Submit all the required documents for availing Mudra loans such as Identity proof, address proof, and proof of business.         

Step 4:You must then specify the loan requirement and tenure you wish to settle for

Step 5: After submitting your application will be reviewed and verified. On approval of the loan, you will receive a MUDRA card, through which you can withdraw the loan amount whenever you require.