MUDRA Bank

MUDRA Bank is an abbreviated form of ‘Micro Units Development & Refinance Agency Bank’. MUDRA is a public sector financial institution in India. MUDRA was launched by the Prime Minister of India, Shri Narendra Modi on 8^th April 2015.

MUDRA was set up under ‘Pradhan Mantri MUNDRA Yojana’. MUDRA Bank provides loans to micro-finance institutions as well as non-banking financial institutions at lower rates. Such micro-finance institutions and non-banking financial institutions in turn provides credit to MSMEs.

Eligibility criteria under MUDRA; types of loans provided under MUDRA; benefits of MUDRA loan; application and document checklist for MUDRA loan and sectors covered under MUDRA loan are explained in the present article.

Eligibility criteria under MUDRA –

The eligibility criteria for availing of MUDRA loans are –

1. Indian citizen/ enterprise, involved in the non-farm sector, carrying income generating activity like manufacturing or trading or processing or service sector; and

2. Having credit needs less than INR 10 Lakhs.

In nut-shell, MUDRA covers startups; individuals; retailers; small manufacturers; artisans; shopkeepers; traders; MSME; street vendors; etc.

Types of loans provided under MUDRA –

MUDRA classifies loans into the following categories –

Classification	Loan amount
Shishu	Loans allowed up to INR 50,000
Kishor	Loans allowed up to INR 5 Lakhs
Tarun	Loans allowed up to INR 10 Lakhs

The classification of the loan signifies the stage of growth, development and funding needs of the micro-unit/ entrepreneur. Notably, it will be ensured that 60% of the credit flows to the ‘Shishu’ and the balance credit flows to ‘Kishor’ and ‘Tarun’.

Benefits of MUDRA loan –

Featured benefits of the MUDRA loan are highlighted hereunder –

1. The bank/ NBFCs offering MUDRA loan does not require any collateral/ security from the eligible borrower;

2. The borrower is liable to pay interest at a low rate. Notably, the loan is offered at a concessional interest rate to women entrepreneurs. Further, MUDRA loan is offered at special interest rates to people belonging to SC or ST or minority category;

3. The MUDRA loan charges nominal to NIL processing fees from the borrower;

4. MUDRA loan is available to any non-farm enterprises (small or micro firms) carrying any income generating activity;

5. MUDRA loans can be used as term loans; working capital loans and overdrafts;

Application and document checklist for MUDRA loan –

Steps to apply for the MUDRA loan are –

STEP 1 – Obtain the application form either from the respective bank or download it from the website i.e., https://www.mudra.org.in/;

STEP 2 – It is important to note that different banks have slightly different application procedure. Fill up the application form according to the respective bank requirement;

STEP 3 – Attach the required documents to the application form; and

STEP 4 – Submit the application form to the desired bank either physically or through the bank’s official website.

Documents checklist for MUDRA loan are listed hereunder –

1. 2 copies of a recent photograph.

2. Identity Proof i.e. self-attested copy of PAN card or Aadhaar card or driving licence or passport or voter card etc.

3. Address Proof i.e. recent electric bill or telephone bill or property receipt or Aadhaar card or PAN card or passport or bank passbook or latest account statement or domicile certificate etc.

4. Identity/ Address Proof of business enterprise (if any) i.e. copy of registration certificate or relevant licence or any other document etc.

5. Proof of belonging to the categories like SC or ST or OBC or Minority, etc.

Sectors covered under MUDRA loan –

Various sectors covered under the MUDRA loan are highlighted hereunder –

Particulars	Details
Commercial vehicle	MUDRA loan can be used to purchase commercial vehicles like taxi; auto-rickshaws; goods transport vehicles; trolley; three-wheelers; tillers; e-rickshaws; passenger car; etc.
Food product sector	MUDRA loan is available for undertaking activity of making of papad; achaar; jelly; jam; ice/ ice-cream; sweets; biscuits; agricultural produce preservation at rural level; etc.
Textile product sector	MUDRA loan is available for undertaking activity like powerloom; chikan work; handloom; zari/ zardozi work; hand work; traditional dyeing; traditional embroidery; knitting; computerized embroidery; cotton ginning; stitching; etc.
Service sector	MUDRA loan is available for starting a business like gyms; salons; medical shops; tailoring shops; dry cleaning shops; photocopying shops; cycle/ motorcycle repair shops; boutique; beauty parlours; etc.
Agri-allied activities	MUDRA loan is available for undertaking business like food and agro processing units; agribusiness centres; beekeeping; poultry farming; sorting; pisciculture; livestock rearing; aggregation agro industries; fishery; dairy; etc.