FAQ on MUDRA LOANS
1. What is Mudra?
MUDRA, which stands for Micro Units Development & Refinance Agency Ltd., is a
financial institution set up by Government of India for development and refinancing of
micro units enterprises. It was announced by the Hon’ble Finance Minister while
presenting the Union Budget for FY 2016. The purpose of MUDRA is to provide funding
to the non-corporate small business sector through various Last Mile Financial Institutions
like Banks, NBFCs and MFIs.
2. Why MUDRA has been Setup?
The biggest bottleneck to the growth of entrepreneurship in the Non–Corporate Small
Business Sector (NCSBS) is lack of financial support to this sector. More than 90% of this
sector does not have access to formal sources of finance. GoI is setting up MUDRA Bank
through a statutory enactment for catering to the needs of the NCSBS segment or the
informal sector for bringing them in the mainstream.
3. What are the roles and responsibilities of MUDRA
MUDRA would be responsible for refinancing all Last Mile Financiers such as Non-
Banking Finance Companies, Micro Finance Institutions, Societies, Trusts, Section 8
Companies [formerly Section 25], Small Finance Banks and Regional Rural Banks which
are in the business of lending to micro/small business entities engaged in manufacturing,
trading and services activities as well as agri-allied activities. MUDRA would also partner
with State/Regional level financial intermediaries to provide finance to Last Mile Financier
of small/micro business enterprises.
4. What are the offerings of MUDRA? How will MUDRA function?
Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has already created
its initial products / schemes. The interventions have been named ‘Shishu’, ‘Kishor’ and
‘Tarun’ to signify the stage of growth / development and funding needs of the beneficiary
micro unit / entrepreneur and also to provide a reference point for the next phase of
graduation / growth to look forward to. The financial limit for these schemes are:-
a. Shishu : covering loans upto 50,000/-
b. Kishor : covering loans above 50,000/- and upto 5 lakh
c. Tarun : covering loans above 5 lakh to 10 lakh
MUDRA’s delivery channel is conceived to be through the route of refinance primarily to
Banks/NBFCs/MFIs.
At the same time, there is a need to develop and expand the delivery channel at the ground
level. In this context, there is already in existence, a large number of ‘Last Mile Financiers’
in the form of companies, trusts, societies, associations and other networks which are
providing informal finance to small businesses.
5. Who are the target clients of MUDRA / what kind of borrowers are eligible for assistance
from MUDRA?
Non–Corporate Small Business Segment (NCSB) comprising of millions of proprietorship
/ partnership firms running as small manufacturing units, service sector units,
shopkeepers, fruits / vegetable vendors, truck operators, food-service units, repair shops,
machine operators, small industries, artisans, food processors and others, in rural and
urban areas.
6. Are RRBs’ eligible for assistance under MUDRA?
Yes, MUDRA will be extending refinance support to RRBs for enhancing their liquidity.
7. What is the ROI charged by MUDRA?
MUDRA is a refinancing agency which will extend its funds to Last Mile Financiers to
enable them to reach out to the sector. Access to finance in conjunction with rational price
is going to be the unique customer value proposition of MUDRA. It will use a variety of
innovative financing means including technology to bring down the cost of funding for the
ultimate borrower.
8. I have a small Business dealing in paper Goods. Can Mudra Help Me?
MUDRA loan is available through Banks/NBFCs/MFIs for such activities. All kind of
manufacturing, trading and service sector activities can get MUDRA loan. Loans are
categorised into Shishu, Kishor and Tarun. These products have been designed to cater
to customers operating at the lower end of the enterprise spectrum. The loans will be
extended through MFIs, NBFCs, Banks, etc.
9. I Have graduated recently. I want to start my MUDRA Business. Can MUDRA Help Me?
MUDRA loans are available in three categories. For small business, loans upto 50000/-
/- is available under the 'Shishu' category and beyond 50,000 and up to 5 lakh under the
'Kishor' category. It also offers loans beyond 5 lakh and up to 10 lakh under the Tarun
category. Depending on the nature of business and project requirement you can access
finance from one of the intermediaries of MUDRA as per the norms.
PRADHAN MANTHRI MUDRA YOJANA (PMMY)
Introduction
1. PMMY is a scheme setup by GOI for providing MUDRA loans up to Rs. 10.00 lakhs to the
non corporate, non-farming Small & Micro Enterprise. MUDRA Loans are provided under
3 categories as mentioned below:
Shishu : covering loans upto 50,000/-
Kishor : covering loans above 50,000/- and upto 5 lakh
Tarun : covering loans above 5 lakh to 10 lakh
2. MUDRA loans are given to income generating Small & Micro enterprises engaged in
Trading
Manufacturing &
Service sector.
3. Extended by commercial banks, MFIs, NBFCs and other financial intermediaries.
4. Provides financial assistance to small & micro business to help them develop and expand
their businesses.
Eligible Applicants
1. Type of eligible borrowers
Individuals
Proprietary Concern
Partnership firm
Pvt limited company
Public company
Entities of any other legal forms
2. The applicant should not be a defaulter to any bank or financial institution and should
have a satisfactory credit track record.
3. The individual borrowers may be required to possess the necessary skills/ experience /
knowledge to undertake the proposed activity
4. The need for educational qualification, if any, needs to be assessed based on nature of
proposed activity, and its requirement.
Nature of Assistance
Term loan
Overdraft limit
Working capital loan
Composite loan for acquiring capital assets.
Additional Information:
1. Margin / promoter’s contribution is as per policy framework of lender, which is based on
overall guidelines of RBI in this regard. Bank may not insist for margin for Shishu loans.
2. Interest rates should be charged as per lender’s policy. However interest rates charged to
ultimate borrowers should be reasonable.
3. First charge on all assts created out of the loan extended to the borrower and the assets
which are directly associated with the business /project for which credit has been
extended.
FAQs on PMMY
1. What is Mudra?
MUDRA stands for Micro Units Development & Refinance Agency is setup to provide
funding to non-corporate small business sector through various financial institutions like
Banks, NBFCs and MFIs
2. Who are eligible to avail loan under this scheme?
Proprietorship /partnership firms in rural / urban area running below businesses
Small manufacturing units.
Service sector units
Shopkeepers
Fruits/ vegetable vendors.
Truck operators
Food-service units
Repair shops
Machine operators
Small industries
Artisans
Food processors and others
3. What will be the product offering sunder MUDRA?
The interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of
growth / development and funding needs of the beneficiary micro unit / entrepreneur. The
financial limit for these schemes is:-
Shishu : covering loans upto 50,000/-
Kishor : covering loans above 50,000/- and upto 5 lakh
Tarun : covering loans above 5 lakh to 10 lakh
4. What is the ROI applied on MUDRA?
The Interest Rates are deregulated and banks have been advised to charge reasonable
interest rates.
5. What are collateral security requirements under MUDRA?
RBI has mandated Banks not to insist for collateral security in the case of loans up to 10
lakhs extended to units in the MICRO Small Enterprise sector.
6. Does all bank offer assistance under MUDRA?
Yes. DFS vide its letter dated May 14 . 2015 have advised all PSBs, RRbs and small
finance banks regarding rollout of PMMY and to cover all loans up to loan size of Rs. 10.00
lakhs under PMMY
7. Is there any subsidy under MUDRA?
There is no subsidy for the loan given under PMMY.
Star Weaver Mudra Scheme – FAQs
1. What is Weavers MUDRA Yojana?
Weavers MUDRA Yojana ais at providing adequate and timely assistance from the banking
institutions to the weavers to meet their credit requirements.
2. Who can apply for Weavers MUDRA Yojana?
All weavers and ancillary workers involved in weaving activities (including new borrowers who are
otherwise eligible for credit facilities for carrying out the proposed activities under any of the existing
bank schemes) would be eligible.
Preference will be given to weavers identified under Third Census of Handloom weavers conducted
by Development Commissioner (Handlooms), Ministry of textiles as well as to weavers identified by
State Governments.
Thrust in financing would be on cluster of weavers and ancillary workers who have joined to form
Primary Weavers Co-operative Societies / Self Help Group (SHGs) /Consortia/Producer
Companies/Joint Liability Groups(JLGs). While membership in such bodies would give greater
comfort to banks in lending under the scheme.
All existing weaver customers of bank enjoying credit facilities and having satisfactory dealings with
the bank will also be eligible to avail credit facilities under the scheme for a three- year period as also
the benefits from simplified procedures stipulated under this scheme for availing for such credit.
3. What are the benefits that can be availed under the scheme?
Following are the lit of benefits available under the scheme:
Margin money support up to Rs.42,000/- per weaver and/or
Interest subsidy upto 3% on Bank loan and/or
Reimbursement of one-time guarantee fee as applicable (1% at present) and annual service
charges as applicable (0.50% at present) for a period up to 3 years payable for guarantee cover
under CGTMSE.
4. What will be the nature of assistance under the scheme?
Type of facility : Term loan and Cash Credit
Maximum Loan Amount : Rs.2 lakhs
5. What are the collateral security requirements under the scheme?
No collateral security will be required under the scheme. The limit sanctioned will be secured by the
way of primary charge over the assets financed. Banks may obtain credit guarantee cover from
CGTMSE for the limits sanctioned under the scheme as per bank’s policy and availability of risk cover.
6. What is repayment period?
Term loan – 3 years
Cash Credit – limit to be renewed in 3 years with annual review subject to satisfactory conduct of
account
