The Pradhan Mantri Mudra Yojana, launched by the Government of India on 8th April 2015, is a flagship scheme to provide funds for fledgling business enterprises. 

This MUDRA scheme aims to bring such enterprises into the mainstream financial market and help them access affordable credit options. 

MUDRA stands for Micro Units Development and Refinance Agency Bank. It is a public sector financial institution that provides low-interest loans to various micro-finance institutions and NBFCs (Non-banking Financial Companies) in India.

These financial institutions offer the same loans to several Micro, Small, and Medium Enterprises (MSMEs) functioning in the country.

Funds borrowed through the MUDRA scheme can be utilized to meet operating costs and capital expenses, pay employees, and ensure the business never runs out of working capital. 

The scheme is accessible for small business entities, including the ones engaged in trading, manufacturing, or service sectors.

MUDRA loans can be availed from the following institutions – 
  • Public sector financers.
  • Private sector financers.
  • Small finance financers.
  • Regional rural financers.
  • Microfinance institutions.
  • Non-banking financial institutions.

The MUDRA scheme functions in 3 categories which are –
  1. Shishu- In this category, loans up to Rs.50,000 are provided to start-ups or enterprises in their initial stage of business. The interest rate charged on these loans is 12% per annum. The repayment tenor provided for such loans is a maximum of 5 years.
  2.  This category offers Kishor- Loans ranging from Rs.50,000 lakh to Rs.5 lakhare. This fund option is generally for entrepreneurs seeking additional funds to expand business operations. The financial institution offering the loan will decide both the interest rate and the repayment tenor in this aspect.
  3. Tarun- Loans ranging from Rs.5 lakh to Rs.10 lakh are provided in this particular category. The loans will be disbursed only when the entrepreneur or entity fulfills specific eligibility criteria.

Just as the Standup India Scheme aims to promote entrepreneurship among women, scheduled castes, and tribes, the MUDRA Yojana aims to support business initiatives and boost slow-moving business enterprises.

The process to apply under the MUDRA scheme

Here’s how entrepreneurs and business entities can avail of MUDRA loans –
  1. Keeping the mandatory documents ready for verification. These include proof of identity (Aadhaar card, voter ID card, PAN card, passport, etc.), proof of address (telephone bill, electricity bill, etc.), and business proof (business registration certificate, IT returns, etc.).
  2. Approaching the financial institution from which you wish to borrow the MUDRA loan. You must read the loan policy in detail before proceeding with the application.
  3. Fill in the application form with proper details. You will also have to specify the amount you want to avail as a loan.
Certain financial institutions also provide the facility to apply for MUDRA loans online. Once you apply for the loan, the authorities verify your eligibility to avail the loan before sanctioning it.

The maximum amount an entrepreneur can availedthrough the MUDRA scheme is fixed at Rs.10 lakh. In some instances, more than this amount might be required to meet the necessary expenses. 

A business loan can suffice in such situations. Business loans offered by NBFCs are known to provide substantial funds sufficient to finance any business operation. Loans up to Rs.30 lakh can be availed through this alternative.

Pre-approved features on such loans offered by Bajaj Finserv make it easier to avail of them. Existing customers can utilize these offers to avail of funds faster and more simply.

These offers are available on numerous financial products, including business, personal, home, and loans against property.

As informed by the Minister of State for Labour and Employment, 18.26 crore loans have been disbursed under the MUDRA scheme till 31st March 2019. 

With more entrepreneurial activities registered under the scheme, it benefits ventures and start-ups to increase their operational outputs.