How can an Enterprise procure a MUDRA loan

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How can an enterprise procure a MUDRA loan?

The Government of India had set up the Micro Units Development and Refinance Agency Limited (MUDRA) to facilitate micro-units to conduct development and refinance activities. During the 2016 budget, the Honorable Finance Minister announced the MUDRA scheme. Micro-units and entrepreneurs in India can avail this scheme. The targets of this scheme are partnership/proprietorship firms that run a manufacturing unit or a service sector unit such as food processors, artisans, small industries, machine operators, repair shops, food-service units, truck operators, fruits/vegetable vendors, and shopkeepers.

Types of MUDRA loans

The Pradhan Mantri MUDRA Yojana (PMMY) has three schemes to provide loans:

  • A loan up to Rs. 50,000/- is under the Shishu scheme.
  • A loan from Rs. 50,000/- to Rs. 5 lakhs is under the Kishor scheme.
  • A loan from Rs. 5 lakhs to Rs. 10 lakhs is under the Tarun scheme.

If an owner of an enterprise wants to have a loan under PMMY, the owner should have the following eligibility. The owner should be an Indian citizen. The enterprises’ business plan should be of a non-farm sector; should be related to the Service, Trading, Processing, or Manufacturing sector; and should be in need of a loan of less than Rs. 10 lakhs.

Procedure to avail a MUDRA loan

The applicant must have a business plan ready. The following documents must be submitted:

  • The loan application for MUDRA
  • Passport, Aadhaar card, Driving license, or PAN as a Proof of Identity
  • Property tax receipt, electricity bill, or recent telephone bill as a Proof of Residence
  • The business plan
  • The applicant’s photograph that is less than six months old
  • Quotations of the machinery and other objects that are to be purchased
  • The details or prices of the machinery along with the supplier’s name
  • The tax registration and business license, etc that are a Proof of Identity or Address of the business
  • If applicable, the proof of category such as Minority, OBC, ST, or SC, etc

After these are ready, the applicant need not disburse a processing fee or collateral. Along with these documents, the applicant can approach one or more financial institutions or banks. MUDRA, being a refinancing institution, does not provide loans on its own but through primary lending institutions, banks, financial institutions, and NBFCs, etc.

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Now, the bank or the financial institution will process the loan as per its own terms and conditions. The RBI decides the lending rate, which may change from time to time. If the bank or the financial institution finds that the loan application is acceptable, it will sanction the loan and render a MUDRA card. Using this card, the applicant can take credit in a hassle-free, flexible mode by using the RuPay card.  This card offers an overdraft or a cash credit to withdraw cash from ATM or make purchases through the Point of Sale swiping machine. This card also facilitates the applicant to repay the amount whenever surplus exists and in this manner, decrease the burden of interest.

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