Basic Information regarding the PMMY Scheme.
Micro Units Development & Refinance Agency Ltd. (MUDRA) is a new institution set up by the Government of India. In order to provide funding to the non-corporate, income-generating activities of small enterprises. Whose credit needs are below ₹10 Lakh. People included under non-farming activities can avail loans up to ₹10 lakhs. The loans offered under Mudra scheme are by Private Sector Banks, Non-Banking Financial Companies (NBFCs), MFIs, Public Sector Banks, Regional Rural Banks (RRBs), State and Urban Co-operative Banks and Foreign Banks. Under the aegis of Pradhan Mantri MUDRA Yojana, MUDRA has created three products. These are ‘Shishu’, ‘Kishore’ and ‘Tarun’. These were made to symbolize the stage of growth and funding needs of the beneficiary micro unit. Each of these schemes covers a particular loan amount, them being:
Shishu: Shishu loans can be availed up to the maximum limit of ₹ 50,000.
Kishore: PMMY loans exceeding ₹50,000 and up to ₹5 lakh are designated as Kishor loan. And in such cases, the rate of interest will tend to vary depending on the bank sanctioning the loan. Also on the creditworthiness of the borrower.
Tarun: Tarun loans feature the PMMY borrowings that surpass ₹5 lakh and up to the restricted limit of ₹10 lakh according to the scheme. The rate of interest applicable to these loans varies on a case to case basis.
According to the prevailing PMMY rules, the repayment period for a Mudra loan can be extended to 5 years at maximum. However, the repayment period can be reduced if the lender acknowledges it while sanctioning the loan. All minute manufacturing service sector units along with shopkeepers and fruits/vegetable vendors, from both the rural and urban areas are eligible to avail the Mudra loan’s assistance. Non-Corporate Small Business Segments (NCSBS) are included as well.
More about the loans.
Any businessperson or business who/which has not been a defaulter on any loan repayment previously is eligible to borrow under the PMMY. Bank branches will facilitate loans under Mudra scheme as per customer requirements, loans under this scheme are collateral-free loans and can be available for the following reasons.
- Vehicle loan: This can be used to purchase a commercial vehicle, car or two-wheelers.
- Business Installment Loan (BIL): This is used to purchase necessary equipment like plants and machinery. It can also be used for things like renovating offices, etc.
Mudra loans cannot be used for personal needs like house rent and school fees. Businesses can only utilize the money obtained for marketing purposes, acquiring assets to grow the business and increasing the available work.
Documents and applying
The documents required for taking a Mudra loan along with its application form are as follows:
- Identity Proof – This can be a driving license, Voter ID Card, PAN card, passport or Aadhaar card. Any Photo ID issued by any government authority or signature identification from the present banker can be used.
- Proof of Residence – This can be any of the following: recent telephone bill (dated within last 3 months), recent electricity bill (dated within last 3 months), passport, Voter ID card or Aadhaar card.
- Identity and address proof of the business establishment – Copies of the most recent business license or registration certificate of the business can be used. Other documents containing the owner’s name and the business address can also be utilized. 2 Recent passport-size photos of the loan applicant.
The full list of requirements can be found on the Pradhan Mantri Mudra Yojana website. The applicant will also need a specific set of documents regarding the type of loan they’re applying for. If the business is a partnership document will be required from both of the owners.
A vital aspect regarding the vast amount of entrepreneurs across the country is the need for financial support. This falls amongst the largest benefits provided by the bank. Mudra Bank will someday implement what the Grameen Bank had done in Bangladesh. Since its central focus is directed towards the underprivileged sector of the Indian hierarchy. PMMY’s main objective is to help small businesses develop and grow further. But it also has several other objectives and targets to be fulfilled. The most prominent ones are listed below:
- Helping lower-income groups in developing and growing their business.
- To create easy access to banks, and help lower the cost of finance.
- Getting all of them registered and aiding them financially.
The Finance Minister stated that although Pradhan Mantri Mudra Yojana is accessible to all small enterprises. In fact, preference will be given to women, backward classes, minorities. Also to tribal and other people who are usually not provided with sufficient finances for their business. The government has also stated this will allow more people to apply and participate in the Yojana.
How it can Help Indian Economy?
The Mudra Bank initiative is expected to help at least ₹5.77 crores small business entities in India. This aids the economy at a vast level since organizations merely find banks that provide them with loans. And other forms of financial assistance. The Mudra Bank will operate in association with coordinators who’ll function locally and deliver finances to their intended beneficiaries. The scheme is expected to govern various micro-finance institutions in the country and further assist their needs by constantly refinancing services. It’s expected to procure regulations and lay down guidelines for them while allotting ratings.
Mudra Bank will also help the job scenario in this sector, which, at present, employs around ₹12 crores workers across India. Debts valuing to ₹17000 are incurred by each segment’s unit. The Mudra Bank program is known for benefiting self-employed people as well. At present, there are ₹5 crores and ₹75 lakh such people in India and they work with a fund of ₹11 lakh crores.
MUDRA Yojana has a bouquet of offers. Summarized below are the most significant ones:
Micro Credit Scheme –
Under this scheme, financial support is extended through Micro Financial Institutions (MFIs) so that they can provide business loans of up to ₹1 lakh. Typically the mode of delivery of such loans could include individuals engaged in specific micro-enterprise activities, as well as various joint liability groups (JLGs) and self-help groups (SHGs).
Women Enterprise Program (Mahila Uddyami Yojana) –
This scheme is an important part of MUDRA Yojana targeted specifically at women entrepreneurs. The scheme is created to motivate individual female entrepreneurs and self-help groups to develop a multitude of micro-enterprises. Special concessions can be acquired in these cases; for example, a 0.25% reduction on interest rates are granted on loans.
Refinance Scheme for Banks –
MUDRA allows banks including Scheduled Co-operative Banks, Regional Rural Banks, and Commercial banks to easily refinance loan amounts (up to ₹10 lakhs per unit). The refinance facility is available only if these business loans have been extended for micro-enterprise activities. Banks eligible for availing the refinance facility need to comply with requirements that are notified from time to time.
Mudra Card –
MUDRA Card is an innovative credit product which makes credit easily accessible to small business while providing flexibility to the card owner. It can be used as a credit card with overdraft (loan) limit and can also be used as a debit card with the facility of ATM withdrawals. It’s usually utilized by businesses to attain working capital under its premium cash-credit arrangement
Credit Guarantee Fund –
Also known as the portfolio credit guarantee, this involves the use of a special fund termed as the Credit Guarantee Fund for Micro Units (CGFMU). This fund is managed by the National Credit Guarantee Trustee Company Ltd and enables accessible entities to acquire microloans with ease.
Credit to Micro Enterprises –
One of the basic motives of MUDRA is to maximize both the benefits and the number of beneficiaries from the scheme. A major fraction of India’s population is generally incorporated within certain sectors like land transport, food & textile production and community services. To meet the growth requirements of these sectors, various tailor-made products and schemes were and are being launched in order to help micro enterprises succeed and prosper.