Advantages of MUDRA Yojana

Benefits, and Advantages of MUDRA Yojana Loan

Samara Davis
By Samara Davis
editor

July 5, 2021


  • Categories
  • MUDRA, as you know, stands for Micro Unit Development and Refinancing Agency. This is a scheme the Union Government announced in its budget for FY 2015-2016. The initiative targets small entrepreneurs. What sets it above other loans is its expansive reach. It covers those units of businesses that banks generally avoid. 

    MUDRA Yojana loan scheme

    MUDRA is a refinancing scheme MUDRA Ltd, a subsidiary of SIDBI (Small Industries Development Bank of India) offers. It provides refinancing facilities to micro-financial institutions and banks against the loans they have given for micro and small businesses. The ultimate goal of this scheme is to protect small entrepreneurs from high-end money lenders.

    Benefits of MUDRA loan

    India is the seventh-largest country in the world. It has many places where access to regular banking is quite limited. MUDRA Yojana loan scheme aims to help these people. The scheme offers all the facilities regular banks provide. Loans, savings account, and credit cards are just a few to mention among them.

    Micro-finance is a tool that aims to help the people at the lowest end of society concerning income. In addition to offering banking facilities, the scheme offers financial literacy, social support, and numerous other services.

    SIDBI is the bank entrusted with the task of refinancing facilities to banks and other entities that provide loans to micro and small enterprises. The scheme gives priority to ventures in the service, manufacturing, and trading sectors. MUDRA collaborates with banks and other financial institutions to make it happen.

    Advantages

    Opting for a MUDRA Yojana loan offers you the following advantages:

    1. You Get a High Amount as a Loan

    The loan amount available under this scheme starts from INR50000. The maximum amount is INR1000000. The loan repayment terms and other facilities are arranged in such a way as to help budding entrepreneurs. You can use the amount to start, expand or carry daily operations of your firm.

    2. No Collateral Required

    MUDRA Yojana loan does not require collateral. You can avail of this loan without offering any or any of your personal or business assets as a guarantee to avail of this loan.

    3. No Extra Charges

    You don’t have to pay any extra charge to avail of this loan. If at all there is a charge, that is a processing fee. It comes only up to 0.5% of the entire loan amount.

    4. Credit Guarantee Facility

    The scheme offers a credit guarantee facility to its beneficiaries. This risk-sharing service is offered for a set of loans instead of the individual loan guarantee. This makes the product more effective and popular among young entrepreneurs.

    5. Marketing Support

    The scheme offers support in promoting your products and services. It also provides financial literacy and assists you to evolve yourself as per the requirements of the market.

    Schemes

    MUDRA Yojana Loan is Categorized as Follows:

    • Shishu: under this scheme, you are eligible for a loan of INR50000.
    • Kishor: Under this scheme, the amount of loan available varies from INR50000 to INR500000. The loan is meant for medium enterprises.
    • Tarun: Here, you are eligible for a loan of up to INR1000000. This is meant for those wanting to expand their business.

    Applying for MUDRA Yojana Loan

    You are eligible for a MUDRA loan if your venture belongs to any of the following categories:

    • A small manufacturing unit
    • Artisan
    • Vegetable or fruit seller
    • Shop keeper
    • If you plan to do business in any aspect related to agriculture

    Guide to Apply for MUDRA YOJANA Loan:

    1. Keep all required documents at hand

    Keep the documents given below at hand when applying for a MUDRA Yojana loan:

    Proof of identityAadhar, PAN card, driving license etc.
    Proof of addressElectricity bill, gas bill, phone bill, etc.
    Proof of businessBusiness registration certificate
    1. Contact a financial institution

    Almost all reputed financial institutions offer MUDRA loans.

    1. Fill in the application form

    Fill the application form your choice financial firm provides. Mention and furnish all the documents required. Indicate the loan amount.

    Before doing that, check your eligibility based on the three categories the scheme has. They are mentioned above.

    Features of the Scheme:

    Given below are the main features of the scheme:

    Interest rateVaries based on the bank you choose and your requirements
    SecurityNot required
    Minimum amount availableNo set limit
    Maximum amountINR1000000
    Loan repayment tenure3-5 years
    Processing feeNil

    MUDRA card

    This is a debit card your lender issues for your MUDRA Yojana loan account. You get its portion of the working capital. Borrowers are free to withdraw the money multiple times. This lets you take care of the daily expenses of your business without draining your budget. The facility also reduces the burden of interest on you. Just see that the withdrawal does not exceed the amount available. It is the government’s tool to digitalize the entire process. You may withdraw money from any ATM in the country. It also lets you pay your loan from home.

    The scheme also offers loans tailor-made for women. All-female small-business owners are eligible for the same.

    You need to be an Indian citizen to avail a MUDRA Yojana loan.

    FAQs

    1. How to apply for a MUDRA Yojana loan online?

    Applying for a MUDRA loan online is quite easy. Have all the required documents at hand, visit the company’s official website, fill the application form and submit; done. Follow the instructions you see on the next page.

    2. What are the drawbacks of the MUDRA loan?

    As a business owner, you may face the following issues when applying for a MUDRA loan:

    • There is a maximum limit of INR1000000 for the loan.
    • It is available only for Indian citizens.
    • Large-scale enterprises are excluded from the scheme.
    • Your business needs to have a good credit history to avail of this loan.
    • You should not be a defaulter in any bank when applying for it.

    3. Does the RBI or government of India have any control over the interest rate here?

    No. This is something your lender decides.

    4. Does the scheme allow pre-payment of the loan?

    Yes. You can prepay your loan anytime during the loan tenure.

    5. When does the loan repayment start?

    The repayment of the MUDRA Yojana loan starts the next month after you avail of the loan. The lender may allow more time if your business does not have a stable flow of cash.

    6. How is the MUDRA loan disbursed?

    Generally, lenders disburse the loan directly to the borrower’s bank account. Sometimes, they may even issue checks in favor of the borrower.

    7. Is there any subsidy for my MUDRA loan?

    No. the MUDRA scheme does not offer any subsidy. If your business is concerning any government scheme that offers subsidies, you may avail of the same under this scheme.

    8. Is there any grievance mechanism under this scheme?

    You may complain to your chosen bank’s higher authority in the instance of any complaint. See to it that the bank has not fulfilled its responsibility. You need to offer proof of the same.

    9. Is life insurance a must to avail of this loan?

    No. Obtaining life insurance is not a must for a MUDRA Yojana loan. But a decision in this regard depends on your lender.

    10. Is my Khadi business eligible for a MUDRA Yojana loan?

    Yes. MUDRA loan is available for any business that generates an income.

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