Micro Units development and Refinance Agent (MUDRA)[i] is a finance institution, which lend loans to small scale business and entrepreneur. It can also be known as MUDRA Loan Yojana, MUDRA Bank Scheme, Pradhan Mantri MUDRA Yojana (PMMY). The main aim is to promote Micro, Small and Medium Enterprises (MSMEs). The loans are ought to be used for business purposes only. MUDRA loan is multipurpose loan. With the help of MUDRA Yojana the women, entrepreneur, those who belong to schedule caste, schedule tribe or other backward classes get the financial support. This helps them to increase their live hood.
Pradhan Mathri MUDRA Yojana
Pradhan Mathri MUDRA Yojana was introduced by Prime Minister Narendra Modi in April, 2015.The government created the Micro Units Development and Refinance Agency Ltd (MUDRA Ltd) to monitor Pradhan Matari MUDRA Yojana. Under the scheme of Pradhan Mathri MUDRA Yojana, MUDRA provides refinance support up to 10 lakh to micro business. Where many products and schemes where created by MUDRA. MUDRA has partnered with innumerable of regional, state, public, private sector banks and Micro financing institutions (MFIs). There is no proper banking facility in some parts of India, where MUDRA helps them financially. They provide the banking and financial services to both rural and urban. There is no fixed rate of interest on loans. The loans can be granted without any collateral security. Loans which are granted for small scale units and entrepreneur are classified into three categories:
- Shishu = Loans covering up to Rs.50, 000
- Kishor = Loans covering above Rs.50, 000 and below Rs.5 lakh
- Tarun = Loans covering above Rs.5 lakh and below Rs.10 lakh
The interest rate is 10-12% for the loan amount not more than Rs.50, 000 under shishu category. The interest rate is 14-17% for the loan amount from Rs.50, 000 to Rs. 5lakh under kishor category. The interest rate is 16% and above for the loan amount less than Rs.10 lakh under the tarun category.[ii] Their main objective is to develop the entrepreneur and micro units, Shishu get the main focus and then followed by Kishore and Tarun categories. The small entrepreneurs do not get recognised in the banking system, where they get benefited from MUDRA Loans.[iii] These have been categorised on the stage of growth and development in the Micro, Small and Medium enterprises (MSMEs). Sole proprietorships, Partnership firms, Public and Private companies, Entrepreneurs can avail this loan.
Sectors that get benefit from MUDRA
- Food Products: Ice cream making, Papad making, Jelly/Jam making, Bun and Bread making, Sweet shops, Small services Food Stalls, day to day Catering services, Canteen services etc.
- Textile Products: Dyeing and Printing, Knitting, Powerloom, Stitching, Handloom, Embroidery, Handwork etc.
- Transport: 3 wheelers, Taxis, Small goods transport, Rickshaw, Passenger cars etc.
- Agriculture: Bee keeping, Poultry, Rearing, Pisiciculture etc.
- Community, Personal, Social services: Dry cleaning, Medicine shop, Boutiques, Saloon, Beauty parlours, Courier agents, Gymnasium ETC.
MUDRA card
It is debit card issued against MUDRA loan account the borrower can use the MUDRA card for multiple withdrawals and credits. The interest rate is less, the borrower has no burden. The cash can be withdrawn in any of ATM/micro ATM, even at the time of sales. MUDRA card can be used across the country. By using MUDRA card; the transactions have now become digitalised so it is easy to maintain the credit history of the borrower. There is limit over the cash withdrawal of Rs.25, 000 per day.
Eligibility terms
The person who applies for the loan must be Indian Citizen. There is no need for a degree to avail this loan; the person should have adequate knowledge and skill. There are specific set of documents required for the kind of loan been applied for, the person not to have any default in financial institution. The applicant should be of 23 years and not more than 65 years at the time of loan. The applicant should have monthly income of Rs. 17, 000. The applicant should be a non corporate set up. The applicant should have current residence for the period of 1 year minimum.[iv]
Benefits of MUDRA
- MUDRA loan does not require any collateral security, so there is no need for any personal and business security.
- This helps the business to grow and expand with the funds up to Rs. 10 lakh.
- The borrower need not visit the bank for withdrawal of loan amount; they can be benefited from the MUDRA card. This system is easy to operate and provide hassle-free service.
- Interest rate is affordable and reasonable.
- The borrower can repay the loan amount based upon the assets and cash flow in the business. The repayment tenure is 5 to 7 years.
- In case there is a default in repayment of loan the government takes the responsibility to pay back.
- MUDRA loans do not levy any processing charges.
- There is lack in banking facilities in some parts of India; this scheme helps them by offering financial aid.
- The people get loan from legitimate lenders on nominal interest rate even for small amount of loan.
- MUDRA loan empowers the micro units, entrepreneur by supporting them financially.
- The Pradhan Mathri MUDRA Yojana join with “Make in India” campaign, to facilitate investment, infrastructure, skill development, innovation.
- Women entrepreneur are encouraged by reduction of interest in loans.
- There is increase in employment opportunities.
Conclusion
On an average of Rs.46, 530 loans were sanctioned, where Rs.45, 034 distributed. As it was start ups for the business there were no proper increase in employment. According to the government they are achieving the target been set for the year. MUDRA loans could become as serious issue in upcoming years.[v] The banking sectors have stated that there is big liability for the government by MUDRA loan. There is no collateral security for the borrower to get loan from banks, this encourages the people for starting the business easily. Introduction of MUDRA by the government is great decision to improve MSMEs.
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
Reference
[ii] https://medium.com/@sumeruentiger/what-is-pradhan-mantri-mudra-yojana-pmmy-how-it-works-how-it-benefits-msme-2ffbd30ace38
[iii] https://www.dnaindia.com/business/report-11-things-you-must-know-about-mudra-bank-2075665
[iv] https://blog.ruloans.com/pradhan-mantri-mudra-yojana-eligibility-criteria/
[v] https://www.indiatoday.in/india/story/mudra-yojana-is-a-mission-or-mess-5-point-fact-checker-1244538-2018-05-29
