A Guide to Pradhan Mantri Mudra Loan Interest rates

Mudra loans are offered by the Pradhan Mantri Mudra Yojana (PMMY). Micro-Units Development and Refinance Agency is referred to as Mudra. Banks provide Mudra loans to non-corporate, non-farm sector microenterprises that generate income and have credit needs under Rs. 10 lakh.

Under this program, borrowers may apply for business loans between Rs. 50,000 and Rs. 10 lakh. The Mudra loan payback period spans from one year to seven years, with interest rates starting at 7.30% p.a.

An Introduction to Mudra Loan

According to a 2018 analysis by The Economic Times, India had over 51 million MSME units that contributed to roughly 37% of the nation's GDP and 43% of its exports. 

Despite the important role that small firms play in economic growth, MSMEs have to deal with a number of difficulties, including a lack of funding for working capital and raw materials, obsolete technology, and a labor shortage.

The Pradhan Mantri Mudra Yojana was introduced by the government on April 8, 2015, to assist small enterprises with financial issues. Mudra provides business loans with payback tenures ranging from 1 to 5 years that are targeted at three different stages of a company's growth. The amount of funding is determined by the type of loan that is available, and it is charged at the Pradhan Mantri Mudra Yojana interest rate that is currently in effect.

Mudra Loan Interest Rates by Various Banks

Mudra loan interest banks offered by various banks are mentioned in the table below:

Types of Mudra Loan

There are 3 types of Mudra loans: 

1. Shishu Mudra Loan

If your company has not yet been established or is in its infancy, you may be eligible for a Mudra loan during this phase. The program gives a 5-year term with a sanction of up to Rs. 50,000. Businesses that qualify for a Shishu Mudra loan include:

• Micro enterprises and manufacturing firms

• Firms in the service sector

• Self-proprietors and partnership firms

• Businesses providing food service

• Vendors, truck owners, and repair shops

The annual interest rate for Mudra Shishu loans ranges from 1% to 12%. The interest rate must remain at the MCLR/base rate, according to a directive from the RBI to "commercial financial institutions" offering Mudra refinancing. 

The maximum interest rate that RRBs and SCBs may charge borrowers is 3.5% more than the Mudra refinancing rate.

The ceiling for NBFCs for Mudra refinancing is set at 6%. The government has also disclosed a 2% interest rate reduction incentive for quick Shishu Mudra loan payers. The 3-month moratorium is followed by a 12-month extension of the subsidy, which ends on May 31, 2020.

2. Kishore Mudra Loan

This type of loan is specifically designed to support your business. The sanctioned amount under the plan is adjustable between Rs. 50,000 and Rs. 5 lakh, depending on the lending institution's Mudra interest rate. 

The interest rate for the Kishore Mudra Yojana is determined by the terms of the program and your credit history, and it may range from 8.60% to 11.15% or more. Within the duration provided by the lender, you must repay the loan along with the Mudra loan interest.

3. Tarun Mudra Loan

When you want to grow your firm, you can choose this option. You can obtain a sanction in this phase ranging from Rs. 5 lakh to Rs. 10 lakh at the lending institution's determined PM Mudra loan interest rate. 

The guidelines and your credit history are used by the lender to calculate the PMMY interest rate. The lender determines the payback term and sets the interest rates, which range from 11.15% to 20%.

Schemes under Mudra loan

A variety of programs designed to meet certain needs are available under MUDRA Yojana. The following are some of them:

1. Women's business program: This program, also known as the Mahila Udyami Yojana, provides loans at reasonable Mudra interest rates with a discount of up to 0.25%.

2. Credit for micro-enterprises: This program provides loans to sectors like food production, textiles, and land transportation in an effort to expand the general public's participation in the economic sector. Here, you can use microfinance organizations to get a loan of up to Rs. 1 lakh.

3. Mudra Card: This debit card, which is linked to the Mudra loan and gives beneficiaries access to operating capital while building their credit histories, is called the Mudra Card. It can be used to make POS device payments as well as cash withdrawals from ATMs.

4. Bank refinancing scheme: This program refinances loans made by banks to MSMEs in the manufacturing and service sectors totaling up to Rs. 10 lakh. Only when the scheduled commercial banks lend money at their base rate is refinancing possible. Additionally, Mudra Yojana loan interest rate margins for rural, regional, and cooperative banks must not exceed 3.5% over refinancing rates.

5. Equipment funding scheme: This program aims to give small businesses the financial boost they need to grow and buy high-quality equipment. In this approach, microbusinesses can boost their output while also improving the sustainability of their operations.

Loan Amount for Various Types Under Mudra Yojna. 

The loan amount offered under various types of Mudra loans depends on the type of the loan. Take a look at the following table for details: 

Mudra Loan Eligibility

The requirements for Mudra loans eligibility are very straightforward. If you are an Indian citizen and a member of the following groups, you may apply for a loan under this program:

• Non-Corporate Small Business Segment

• Non-Farm Small/Microenterprise Segment (NCSBS)

Indian residents who need funds up to Rs. 10 lakh and have their own company plans for the manufacturing, trading, or service industries can apply for a Mudra loan. 

Banks in the public and commercial sectors, local rural banks, small financing banks, and microfinance organizations all offer it (MFIs).

Additionally, the following criteria also apply:

• Minimum age of eligibility - 18 years

• Maximum age of eligibility - 65 years

• Loans can be availed by new and existing units

Documents Required for Mudra Loan 

You will need the following documents to apply for Mudra loan:

• Properly filled application form based on the loan category

• An identity proof

• Aadhaar cards, voter identification cards, licenses, passports, etc. 

• A proof of residence

• Utility bills (such as those for electricity and telephone service), Aadhaar cards, voter identification cards, passports, etc.

• 2 passport-sized photos of the applicant

• A caste certificate, if applicable 

• A quote for the product or products that will be purchased and used by the business

• ITR filing documents