The Pradhan Mantri Mudra Yojana, launched by the Government of India on 8th April 2015, is a flagship scheme to provide funds for fledgeling 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 which provides low-interest loans to various micro-finance institutions and NBFCs (Non-banking Financial Companies) in India.

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

Funds borrowed through the MUDRA scheme can be utilised to meet operating costs, capital expenses, to pay employees, as well as to ensure that 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 such 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.  Kishor- Loans ranging from Rs.50,000 lakh to Rs.5 lakh is offered under this category. This fund option is generally for entrepreneurs who are looking for additional funds to expand business operations. Both the interest rate and the repayment tenor in this aspect are to be decided by the financial institution offering the loan.
  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 manages to fulfil certain eligibility criteria.

Just as the Standup India Scheme aims at promoting entrepreneurship among women, scheduled castes and tribes, the MUDRA Yojana is aimed at backing business initiatives and boosting slow-moving business enterprises.

The process to apply under the MUDRA scheme

Here’s how entrepreneurs and business entities can avail 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 details 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 of applying 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 which can be availed by an entrepreneur through the MUDRA scheme is fixed at Rs.10 lakh. In certain cases, this amount might not be sufficient to meet the required 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 available on such loans offered by Bajaj Finserv make it easier to avail them. Existing customers can utilize these offers to avail funds faster and in a simple manner.

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

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, this scheme is comprehensively benefitting ventures and start-ups to increase their operational outputs comprehensively.