Lendingkart’s Guide to Mudra Loans for Small Business Growth


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Mudra Loans

Small businesses are truly the backbone of India’s economy and to support their expansion, the Government of India keeps launching various initiatives and financial schemes. One such scheme is the Pradhan Mantri Mudra Yojana under which small businesses can apply for financial assistance: Mudra Loans.

Let’s explore the various aspects of Mudra loans including its eligibility criteria, application process and more.

Understanding Mudra Loan

The Government of India launched its Pradhan Mantri Mudra Yojana in April 2018 to provide financial assistance for micro and small enterprises. The scheme provides loans starting from ₹50,000 up to ₹10 lakhs to non-farming and non-corporate small enterprises in India. Members of financing institutions, scheduled commercial banks and non-banking financial companies are the central institutions looking into credit distribution.

Know that under the scheme, there are three loan categories:

  • Shishu Loan: Loan amount up to ₹50,000 can be availed.
  • Kishor Loan: Loan amounts from ₹50,001 to ₹5,00,000 can be availed.
  • Tarun Loan: Loan amounts from ₹5,00,001 to ₹10,00,000 can be availed.

Mudra Loan: Eligibility Criteria and Prerequisites

Before you go ahead with the Mudra loan online [1] application process you need to check the eligibility criteria. Here’s everything a business owner needs to know about Mudra loan eligibility criteria:

  • Eligible Applicants

Under the PMMY scheme, mudra loans can be applied by individuals, property concerns, private limited companies, partnership firms and other legal entities.

  • Area of Business Operation

Know that not all categories of small businesses are eligible for Mudra loans. The business must be non-farm and non-corporate operating in trading, manufacturing, service and allied-agricultural activities like poultry, dairy, animal husbandry etc.

  • Business Performance and Finances

Regardless of the type of business loan, every applicant for a business loan must ensure to keep a good financial track record of their business for easy loan approval. This applies to Mudra loans, as well. A clean credit history and impressive credit score build trust between the borrower and lender.

  • Other Qualifications

Remember that the requirement of business qualifications and educational qualifications of the business owner changes according to the loan type. However, borrowers may be required to possess a certain level of expertise, skills and educational qualification in respect of the business that they are running.

Interest Rates on Mudra Loans: What You Need to Know

To create an accessible and affordable financing scheme, the interest rates on Mudra loans have been kept minimal. The actual amount varies depending on the lender and borrower. However, there are cap rates decided by the Reserve Bank of India that must be followed:

  • If the loan portfolio of MFIs exceeds ₹100 crores then the margin cap is 10% and if the loan portfolio is less than ₹100 crores then the margin cap is 12%.
  • If it is a Scheduled Commercial Bank, then the maximum interest rate must be under the base rate or the marginal cost of fund-based lending rate.

Application Process for Mudra Loan

To apply for a Mudra loan online, small business owners have to follow these steps:

  • Step 1: Visit the Udyamimitra portal online and you will be able to see all the details about the application process including the list of documents required.
  • Step 2: On the screen, find the ‘Programs’ menu and select the ‘Mudra Loan’ option.
  • Step 3: Next, find the ‘Apply here for registration’ option. Select the option and it will redirect you to a new page.
  • Step 4: Fill in the entrepreneur category you fall under New entrepreneur, existing entrepreneur and self-employed professional. Once you have selected the category, you can register with your name, mobile number and OTP sent to the given mobile number. This will complete your registration process.
  • Step 5: In the next step, you have to fill out the application form with relevant details. Make sure to cross-check before submitting.
  • Step 6: You will be asked to select the loan category from the Shishu, Kishor and Tarun schemes. Select according to your business needs.
  • Step 7: Next, you have to fill in the details of your business. Make sure to keep ownership and other business documents ready.
  • Step 8: Submit all the documents as required and your application process is complete.

Remember that once your application form is submitted successfully, you will be provided with a unique application number that can be used to track the status of your loan application.

Over to You

The Pradhan Mantri Mudra Yojana has changed the fate of small businesses in India by making financial assistance easily accessible. Applying for a loan under the scheme is completely hassle-free and requires minimal documentation. All you have to do is ensure that you are meeting the eligibility criteria and fill in the application form correctly.

At Lendingkart, the aim is to promote and empower small businesses by promising a simple and easy application process and helping businesses find the right solutions.


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BSV Staff

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