Which documents required for PM Mudra loan: Loan Limits, Interest Rates & Eligibility?

Mudra Yojana

Hi everyone, and welcome to my blog. Today, we’re talking about PM Mudra Loans. These are a type of government-backed loan in India designed to help small and micro-businesses.

In this post, we’ll specifically discuss the documents you’ll need to apply for a PM Mudra Loan.

Documents Required

Obtaining a PM Mudra Loan is a relatively simple process, but there are some documents you’ll need to have in order to apply. Here’s a list of the most common ones:

  • Identity Proof: This could be your Aadhaar card, PAN card, Voter ID card, or Passport.
  • Address Proof: This could be your Aadhaar card, Voter ID card, utility bill (electricity, water, phone), or ration card.
  • Business Proof: This could be a copy of your business registration certificate, a Gewerbeamtliches Zertifikat ( Gewerbe Certificate in German for businesses in Germany), or a copy of your shop establishment license.
  • Bank Statements: Your bank statements for the past 6 months can help the lender assess your financial history.
  • Project Report: For certain loan amounts, you may need to submit a project report outlining your business plan and how you intend to use the loan funds.

Additional Documents

Depending on the specific lender and loan amount, there may be some additional documents required. It’s always best to check with the lender directly to confirm exactly what they need.

Pradhan Mantri Mudra Yojana (PMMY)

Small and medium businesses often face challenges in obtaining loans from traditional banking institutions due to lack of collateral and insufficient funds for interest payments. Facilitating the growth of these enterprises is crucial for the overall development of the economy.

Mudra Yojana, initiated under the Jan Dhan Yojana, aims to address these challenges by providing financial support to micro-units and enabling them to expand their operations. Launched on 8th April 2015, the MUDRA Bank (Micro Units Development and Refinance Agency) has been pivotal in empowering aspiring entrepreneurs.

FeatureDetails
LaunchedApril 8, 2015
ObjectiveProvide financial assistance to non-corporate, non-farm small/micro enterprises (SMEs)
Target SegmentBusinesses engaged in manufacturing, trading, and services sectors
Maximum Loan Amount₹10 lakh
Loan CategoriesShishu: Up to ₹50,000
Kishore: ₹50,001 to ₹5 lakh
Tarun: ₹5,00,001 to ₹10 lakh
Interest RatesAs per lending institution’s policy, but reasonable
Margin/Promoter ContributionAs per lender’s policy, may not be required for Shishu loans
Lending InstitutionsScheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Microfinance Institutions, Non-Banking Financial Companies
Application ProcessDirectly through lending institutions
Online through Udyamimitra portal (www.udyamimitra.in)
Key FeaturesFlexible repayment options
No collateral required for Shishu loans
MUDRA Card (overdraft facility) available
Refinance SupportMUDRA provides refinance to lending institutions to encourage them to provide MUDRA loans
Websitemudra.org.in

Additional Notes:

  • MUDRA is a refinancing institution and does not directly lend to borrowers.
  • The focus is on Shishu loans to support small businesses at the initial stage.
  • MUDRA also provides other developmental support services to micro enterprises.

Objectives of Mudra Yojana

The Mudra Yojana was established with several key objectives in mind:

  • Setting policy guidelines for financing small and micro enterprises.
  • Registering and regulating all Microfinance Institutions and related entities.
  • Facilitating the development and growth of small businesses.
  • Assisting individuals from lower income groups in expanding their businesses.
  • Providing easier access to finance for unbanked individuals and reducing their cost of finance.
  • Preference for lending to SC/ST beneficiaries.
  • Regulation of all Microfinance Institutions involved in trading, manufacturing, and service sectors.

Which documents required for PM Mudra loan?

To apply for a PM Mudra loan, the applicant typically needs to submit the following documents:

  • Identity proofs
  • Income tax returns
  • Valid photo ID proof
  • Current address proof
  • Business certifications
  • Loan application form
  • Last 6 months bank statement
  • Proof of continuity of business
  • Ownership proof of residence/office
  • Proof of income (latest ITR financial documents)

These documents are essential for the application process and demonstrate the legitimacy and financial standing of the borrower.

Loan Limits and Interest Rates under Mudra Yojana

The Mudra scheme offers different financing options, each with varying loan limits and interest rates to suit the growth phase of the businesses availing the loans. The details are as follows:

  • Shishu – Loans up to Rs. 50,000, with the interest rate depending on the bank’s guidelines and the applicant’s credit history, and repayment period determined by the bank.
  • Kishore – Loans from Rs. 50,000 up to Rs. 5,00,00, with similar interest rate and repayment terms as Shishu loans.
  • Tarun – Loans from Rs. 5,00,000 up to Rs. 10,00,000, subject to the bank’s interest rate and repayment conditions.

Several banking institutions and financial entities have been authorized to disburse Mudra loans, with 60% of the loans offered through the ‘Shishu’ category and the remaining 40% through the ‘Kishore’ and ‘Tarun’ schemes.

Utilization of Mudra Yojana Loans

The loans availed under the Mudra Yojana can be used for various purposes, including:

  • Procuring commercial and transport vehicles.
  • Fulfilling working capital requirements.
  • Investment in plant and machinery.
  • Financing agri-allied non-farm income generating activities.
  • Business support for traders and shopkeepers.

Borrower Eligibility

Mudra Yojana extends its support to non-farm income generating businesses in trading, manufacturing, and services with credit requirements below Rs. 10 lakhs. Eligible borrowers include individuals seeking loans for micro units. The application process is streamlined and can be accessed through designated institutions or online portals like the Udyamimitra portal. Applicants need to submit relevant documents such as identity proofs, business certifications, income tax returns, and business existence proof.

Additionally, banks are prohibited from charging processing fees or requesting collateral, and the loan repayment period can extend up to 5 years. However, it is imperative for the applicants to not have any outstanding dues to financial institutions.

Business Sectors Covered under Mudra Yojana

The Mudra Yojana encompasses a wide range of business activities and services, including:

  • Transportation services such as auto-rickshaws, taxis, and small goods transport vehicles.
  • Commercial use of tractors, power tillers, and two-wheelers.
  • Service-oriented ventures like salons, gyms, tailoring shops, and dry cleaning facilities.
  • Food-related businesses such as sweet shops, catering services, and food processing units.
  • Textile and handloom activities, including apparel design and textile non-garment products.
  • Agriculture-related activities like beekeeping, fishery, dairy, and agro-processing.

Expansion of Lending Targets

The Mudra Yojana’s lending target was doubled after the resounding success of its initial phase. The government’s commitment to advancing INR 2.44 lakh crores reflects its dedication to supporting and reviving the MSME sector.

Focus on Inclusive Growth

The government’s emphasis on lending to specific segments, including women, backward classes, minorities, Dalits, and Tribals, underscores its commitment to providing equal opportunities for business financing.

Mudra Loans Interest Rates

BankInterest RateLoan AmountTenure
State Bank of IndiaAs per bank guidelinesMaximum Rs.10 lakh1 to 5 years
UCO Banks8.85% p.a. onwardsMaximum Rs.10 lakhAt the discretion of the bank
Bank of Baroda9.65% onwardsMaximum Rs.10 lakh1 to 5 years
Union Bank of India7.30% p.a. onwardsMaximum Rs.10 lakh1 to 7 years

Several prominent banks, including State Bank of India, UCO Bank, Bank of Baroda, and Union Bank of India, offer Mudra loans with varying interest rates, loan amounts, and tenures to cater to the diverse needs of entrepreneurs.

Thanks for reading! I hope this post has been helpful. If you have any questions about PM Mudra Loans or the application process, please leave a comment below and I’ll do my best to help.

Disclaimer

Please note that this post is for informational purposes only and should not be considered financial advice. Before applying for any loan, it’s important to do your own research and understand the terms and conditions.

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