What is MUDRA Loan and its Features?

In 2015, the Narendra Modi Government launched Pradhan Mantri Mudra Yojana (PMMY) scheme to facilitate the small scale industries or micro-credit up to Rs. 10 Lakh. Under the PMMY scheme, the MUDRA, a subsidiary of SIDBI, aims to provide financial support to the intermediaries such as the Commercial Banks, Small Finance Banks, RRBs, MFIs, and NBFCs for lending loans to non-corporate, non-farm small/micro-enterprises. 

Under the patronage of PMMY, the three loan products provided are 'Shishu', 'Kishore' and 'Tarun', and they're based on the stages of development and funding requirements of the micro-unit. Entities can borrow loans up to Rs. 10 Lakh to fulfil their capital requirements and operating costs through these easy finance schemes of PMMY. Thus, these loan products are termed as Mudra Loans. The business entities who can opt for Mudra Loans include Business vendors and shopkeepers, Textile industry, Food production sector, Agricultural activities, Artisans, Small manufacturers, Repairing shops, Truck owners, Self-proprietors, and Service sector firms. 

The products provided under the Mudra Scheme are categorised under 3 loan schemes, Shishu, Kishor and Tarun. Following is a brief description of each of the loan scheme:

• Shishu Yojana : This type of Mudra Loan is for micro or small business owners. Under this scheme, the borrower can apply for up to Rs. 50,000 loans. Business owners who require small capital to begin their business can opt for Shishu loans. The applicants are required to present their business idea to obtain their loan application approved. 
• Kishor Yojana: This loan type is offered to business owners who have already begun their business and desire to expand it as a viable enterprise. They can opt for loan amounts ranging from Rs. 50,000 to Rs. 5 Lakh. For applying to get this loan, borrowers have to fill the application form and furnish it with documents that reveal the current status of their organisation. 
• Tarun Yojana: This loan can be opted by small business owners who seek to expand their business. The borrowers may apply for loans up to Rs. 10 Lakh loan. 

Features of MUDRA Loans are as follows:

1. Attractive Interest Rates
2. Maximum Loan Amount can be Rs. 10 Lakh
3. Three Loan Schemes: Shishu, Kishor, & Tarun
4. Nil Processing Fees
5. Age Criteria of the borrower should be minimum 18 years & maximum 65 years
6. Collateral Security isn't required 
7. There's no limit on minimum loan amount  
8. The repayment tenure is up to 5 years

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