Mudra Loan’s Latest Guide in 2021, You Will Regret Missing!

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Mudra Loan – The best kind of loan for MSMEs. Mudra Loan helps you fulfill your working capital needs and develop your company. It can also assist in keeping funds flowing during difficult times. 

In today’s uncertain economic climate, business loans such as SBI eMudra Loan can help you maintain financial security through difficult times. 

Thus, while choosing a flexible loan, has an affordable interest rate, convenient repayment options, and is easy to avail of, you can consider SBI eMudra Loan

But how can one avail Mudra Loan or SBI eMudra Loan? What is Mudra Loan Eligibility? What is the procedure of Mudra Loan Apply Online? What is Mudra Loan Interest Rate? You might be having similar questions in mind.

Don’t worry. You have come to the right place. This article is a one-stop solution to all your queries relating to Mudra Loan, and we will discuss A to Z about it so you can reap the benefits of this great scheme. 

What is Loan?

A loan is a form of credit instrument. An amount of money is given to another party in consideration for the future return of the loan’s value or principal amount.

Mostly, the lender will additionally add interests and/or financing charges to the principal amount, which the debtor will have to repay in addition to the extra to the principal sum.

There are various types of loans that you can get. However, for simplification, we have categorized these loans below. Once you understand the types of loans, you can also understand Mudra Loan or eMudra Loan’s Type.

What is the general process to get loans?

The process to get loans depends on several factors. However, the general steps are as follows. 

  • Firstly, When someone needs funds to pay for their expenses, they apply for a loan from a bank or company, government or another institution. 
  • The person who is borrowing the money will also need to provide specific information including the reason for the loan, their financial background and the Social Security Number (SSN) and other details. 
  • In the next step, The lender reviews the data, which includes the person’s debt-to income ratio to determine whether the borrower is able to pay the loan back. 
  • Then, The lender either declines or approves the loan application in accordance with the applicant’s creditworthiness.
  • If the loan request is denied the lender has to explain the reason. If the loan application gets approval, both the parties agree to a contract that outlines the conditions of the agreement.
  • Lastly, The lender transfers the money and takes custody of collateral if any. 

Type of Loans

There are several types of Loans. However, these are categorized into two types. The two major types of Loans are as follows.

Secured LoansUnsecured Loans
Secured Loans have collateral in order to decrease the risk relating to lending for lenders.Unsecured Loans do not have any collateral.
If a debtor fails to repay their loan, a bank can take the collateral, auction it, and use the gains to settle the loan.In Unsecured Loans, Lenders can reduce this risk by disclosing defaults to credit score organizations, engaging with debt collectors, and reselling their debts on the resale market.
The interest Rate is lower as these loans have collateral backing them.These types of loans have high-interest rates as no collateral is involved.
Example – Mortgages and Auto Loans. Example – Wedding Loan and Term Loans.

What is Mudra Loan?

  • The Micro Units Development and Refinance Agency (MUDRA) Loan Scheme or Mudra Loan under PMMY, or Pradhan Mantri Mudra Yojana, is a government programme that provides loans to people and MSMEs through banks and NBFCs.
  • The other popular names of these schemes are eMudra Loan or SBI eMudra Loan or SBI Mudra Loan.
  • Mudra Loan is available in three lending schemes: 
    • Shishu, 
    • Kishor, 
    • and Tarun. 
  • Loans under the Mudra plan are collateral/security less loans made available by financial institutions with payback terms ranging from 12 months to 5 years and variable EMIs.
  • To avail Mudra Loan, you can visit any Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs. You can also avail benefits by completing the process of Mudra Loan Apply Online. The process is discussed later in the article. 
  • The nomenclature under eMudra Loan or Mudra Loan i.e. Shishu, Kishor and Tarun signify various stages of growth of MSMEs and also highlight the next stage of business expansion. 

What is MSME?

MSME is an acronym that stands for Micro, Small, and Medium Enterprises. In a developing country like India, MSME industries are the engine of economic growth. 

When these industries prosper, the nation’s economy as a whole improves and grows. These industries are often referred to as microenterprises (SSIs).

Even if the business is in the production or service industries, registrations for both can be obtained under the MSME act.

However, The government has not yet made the MSME Registration mandatory, but it is advantageous to have one’s businesses registered under this since it gives several benefits in terms of taxes, business setup, lines of credit, grants, and so on. 

For example, by getting MSME Registration, you also become eligible for Mudra Loan or SBI Mudra Loan

Important Note: MSME Registration and UDYAM Registration are the same.

Classification of MSMEs as per MSME Registration

Previously, the MSME categorization was based on factors such as investment in plant and machinery or equipment. As a result, in order to reap the benefits of the MSME scheme, MSMEs must limit their investment to a lower level.

SectorCriteriaMicroSmallMedium
ManufacturingInvestment< Rs.25 lakh< Rs.5 crore< Rs.10 crore
ServicesInvestment< Rs.10 lakh< Rs.2 crore< Rs.5 crore

However, as per the latest updates by the Ministry of Finance, The government changed the MSME categorization under the Atma Nirbhar Bharat Abhiyan (ABA). It was done by including composite criteria of both investment and yearly turnover. In addition, the MSME definition no longer distinguishes between the manufacturing and service industries.

Now, the latest MSME Categorization is as follows. 

CriteriaMicroSmallMedium*
Investment & Annual Turnover< Rs.1 crore & < Rs.5 crore< Rs.10 crore & < Rs.50 crore< Rs.50 crore & < Rs.250 crore

What is Mudra Loan Eligibility? 

To avail of the Mudra Loan, you have to fulfill the eligibility criteria. The eligibility criteria for Mudra Loan are as follows.

  • Applicants must be 18 years or above.
  • The age of Applicant must be less than 65 years.
  • Both existing MSMEs and Newly registered MSMEs are eligible for Mudra Loan.
  • In a mudra loan, you don’t need to provide any collateral or any other security fees or assets.
  • To fulfil the Mudra Loan Eligibility, applicants need to apply to Public Sector Banks, Private Sector Banks, Regional Rural Banks, Micro Finance Institutions.
  • To get the eMudra Loan, you need to have and provide the certain documents that are discussed later in this article.
  • Anyone who runs a small business enterprise is eligible to apply for a mudra loan or SBI Mudra Loan. Moreover, Mudra yojana loans can be availed only under three different categories.
  • Both Service Industry and Goods Industry fulfil the Mudra Loan Eligibility Criteria.
  • To get a Mudra Loan Debit Card, you need to have a Mudra Loan Account first.

What is a Mudra Card or Mudra Loan Debit Card?

Only a few people know that under Mudra Loan for eMudra Loan, you are also eligible for a Mudra Card.

Mudra Card is a debit card issued against the MUDRA loan account for the loan’s working capital part. 

The borrower can utilize the MudrA Card for numerous withdrawals and credits to manage the working capital limit in a cost-effective way while keeping the interest burden to a minimum.

Mudra Card also aids in the digitization of MUDRA transactions and the establishment of a credit history for the borrower.

A Mudra Card or Mudra Loan Card may be used to withdraw cash from any ATM or mini ATM in the nation, as well as to make payments at any ‘Point of Sale’ machines. 

However, it is important to note that Mudra Card is a RuPay card and cannot be used for international transactions.

Understand the products under Mudra Loan 

The Mudra loan is available in three different varieties: Shishu, Kishor, and Tarun. These are classified depending on the micro company’s level of expansion and financial requirements. Once the loan is approved, the cash can be allocated to financial requirements, wages, substantial additional expenditures, and so on. Let us now understand the products under Mudra Loan. 

Shishu Yojna – 1st Product under Mudra Loan 

Micro or small company owners have the greatest benefit in this category since they can apply easily for up to Rs. 50,000. The Shishu yojana works well for businesses that require a little amount of cash to get started.

To be eligible for this category, company owners must provide precise data about their business plans, as well as the nature and concentration of machinery required for purchase. You might also need to provide the machinery supplier’s contact information.

The odds of loan acceptance are high if this information is provided. Following are the necessary requirements for Shishu Yojna-

  • All acquisitions, including machinery and equipment, must be quoted.
  • All purchases should be mentioned in detail.
  • Details about the supplier that will deliver the machines and equipment should also be mentioned.

Kishor Yojna – 2nd Product

Kishor is a Mudra plan category that is excellent for company owners that have an established firm and want to develop it further. Applicants can apply for loans ranging from Rs. 50,000 to Rs. 5 lakhs. 

To be eligible to apply for Kishor, candidates have to fill an application form together with the necessary papers that prove the legality and existence of their firm. 

The following papers will be necessary for the Kishor Yojna- 

  • Account statements over the last six months from an existing banker (if any)
  • Balance sheet from the previous two years
  • Association Memorandum (MOA) (if any)
  • AOA (Articles of Association) (if any)
  • A projected balance statement for one year and the loan’s whole term.
  • Statement of sales performance in the current fiscal year prior to loan application
  • Returns on sales and income taxes
  • An analysis that will establish the company’s technical and commercial viability.

Tarun Yojna

Tarun Yojna is a plan that provides financial assistance in the form of loans across any small company owner wanting to develop their firm. Borrowers can apply for a loan of up to Rs. 10 lakhs if they fulfil the qualifying requirements. The documentation required for this loan are as follows:

  • Balance sheet from the previous two years
  • An analysis that will establish the business’s technical and commercial viability.
  • Association Memorandum (MOA) (if any)
  • AOA (Articles of Association) (if any)
  • Account statements over the last six months from an existing banker (if any)
  • A projected balance statement for one year and the loan’s whole term.
  • Account of successful sales in the current fiscal year prior to loan application
  • Returns on sales and income taxes
  • Identity proof (PAN card, Aadhar card, driver’s licence, voter’s ID, etc.)
  • Address proof (passport, driver’s licence, Aadhar card, etc.)
  • Certificates regarding SC, ST, OBC, and so on (if any)

What are the benefits of Mudra Loan ?

Mudra Loan is the greatest choice for obtaining loans. The reason being it offers multiple benefits as this plan also guarantees that small enterprises receive tailored financial assistance from banks, private sector banks, urban cooperative banks, regional rural banks, microfinance institutes, and non-finance firms. Some of the other main benefits of or eMudra Loan are as follows.

  • The or eMudra Loan provides loans ranging from Rs. 50,000 to Rs. 10 lakh to start-up companies, small business units, and MSMEs. Through simple funding programmes, the credit products assist micro-units or small enterprises in growing and expanding their operations or managing operational demands. Thus, Loans cover all the basic amounts that we might need in our journey as a MSME.
  • Mudra Loan is an unsecured form of business loan, which implies that the loan debtor does not have to pledge important assets as security to the lender. Hence, there is no collateral involved while availing Mudra Yojana
  • For too long, the Micro, Small, and Medium Enterprises (MSME) sector has been neglected due to a lack of trustworthy financial data and the assumption that they cannot create as much income. As a result, the expansion of this extremely powerful industry has been stifled and has suffered the consequences of insufficient funding. The plan tackles this issue by providing the MSME sector with rapid services and simple approvals, all of which greatly aids the industry.
  • The Mudra Yojana or Loan Scheme is aimed at vendors and shopkeepers, and it provides working capital loans via Mudra Cards, as well as technology funding for micro-units and transportation vehicle loans. The eMudra Loan also provides a lending option for any sort of fund or non-financial related necessity. People who choose the Pradhan Mantri Mudra Loan can obtain business loans for small sums at low interest rates from authorised lenders. Therefore, Mudra Yojana is a multi-purpose loan that businesses under MSME Registration can utilise for different purposes. 
  • Under the Mudra Scheme, people are provided Micro Credit Schemes for certain income-generating micro-enterprise activities. For example,  the smallest business units, such as shopkeepers and food vendors. This initiative provides financial assistance for the strengthening of sub companies and msmes. Also, The government guarantees the lender’s credit under the Mudra Loan. That means, if the loan debtor fails to repay the loan, the authorities take responsibility for the credit. 

In addition, Mudra Loan also has several other indirect advantages that are important to know. 

Mudra Loans are available for almost every sector under MSMEs. For example – 

Transportation: for the purchase of vehicles such as rickshaws, three-wheelers, small cargo vehicles, taxis, and so on.

Personal services such as men’s saloons, beauty salons, gyms, boutiques, dry cleaning, pharmaceutical shops, tailoring businesses, and so on.

Food manufacturing and packaging facilities such as papad making, jam making, sweet shops, ice cream making, canteen services, and so on.

Agriculture and related services such as pisciculture, poultry, cattle, Agro-processing, beekeeping, raising, and so on.

Handloom, khadi activity, traditional needlework, car accessories, and so on are examples of textiles.

Traders, shopkeepers, service firms, non-farm income activities, and so forth.

What are the features of Mudra Loan?

There are multiple features of Mudra Loan that make it different from other government schemes. The most important ones are as follows.

  • The duration of a mudra loan might range from three to five years, depending on the terms agreed upon at the time of application.
  • The mudra website and app are both well-equipped to allow anyone to apply straight online.
  • Businesses have unlimited freedom to use the money received through this loan for a variety of purposes, including the acquisition of equipment, machinery, company development, restructuring, recruiting qualified employees, and extra working capital.
  • The plan has interest rates ranging from 8.40 to 12.45 percent, which are quite cheap and sensible.
  • A small processing fee may be levied, depending on the Mudra Loan a specifics mentioned in your lender’s loan fine print. 
  • The charge for the ‘Shishu’ category is usually waived by most lenders.
  • This loan also allows you to use the overdraft facility up to Rs.5000.
  • One can also apply for a MUDRA debit card, which gives them immediate access to extra funds without any difficulty.
  • Recently, the Government has announced new benefits such as Borrowers in the Mudra Shishu category would receive up to Rs.1,500 crore in assistance.
  • MUDRA Shishu borrowers would receive a Rs.1,500 crore interest subsidy.
  • The Government of India would offer a 2% interest rate reduction to fast beneficiaries for a period of one year.

What are the documents required for Mudra Loan Apply Online or SBI Mudra Loan? 

The documents required for MUDRA Loan can be listed as follows:

ParticularsType of Document
Application FormDuly filled up the application form on the basis of the loan category
Proof of IdentityAadhaar card, Voter’s ID card, driving license, passport, etc.
Proof of AddressUtility bills (electricity bill, telephone bill, and so on), Aadhaar card, Voter’s ID card, passport, etc.
Photographs2 passport-sized photographs of the applicant
Caste CertificateIf applicable
Other documentsQuotation of the commodity or items which are to be bought and used for the business

How to apply for SBI Mudra Loan or Mudra Loan? 

You can also get Mudra Loan from SBI(State Bank of India). It is also known as SBI Mudra Loan or SBI eMudra Loan. Customers who have an ongoing relationship with SBI in the format of a Bank Account or a Current Account (Personal) can apply for an e-MUDRA loan of up to Rs. 1,00,000 by accessing the SBI e-mudra website and following the procedures below:

  • From the drop-down option, choose Pradhan Mantri Mudra Yojana Application Form.
  • Go to https://emudra.sbi.co.in:8044/emudra on the SBI official website and click on ‘Proceed.’
  • Provide the necessary information, such as the applicant’s Aadhar card, to UIDAI for e-KYC purposes, since e-KYC and e-sign must be performed using OTP authentication for loan processing and payout.
  • After the SBI formalities and loan procedure are finished, the candidate will receive an SMS instructing them to proceed to the next step by returning to the e-MUDRA site.
  • This procedure must be executed within 30 working days of receiving the loan approval SMS.

Thing To note: The document must be sent in JPEG, PDF, or PNG format, with a maximum file size of 2MB.

What is the purpose of Mudra Loan for eMudra Loan SBI? 

MUDRA loans can be used for a variety of purposes, including job creation and revenue generation. Micro, small, and medium-sized companies (MSME) also contribute significantly to the country’s economy. Therefore, eMudra Loan SBI or Mudra Loan under the government’s Atam Nirbhar Bharat has a variety of purposes. The main ones are as follows – 

  • Equipment financing for small business units Business loans for shopkeepers, dealers, vendors, and other service-oriented businesses
  • MUDRA cards can be used to get a working capital loan.
  • Loans for transportation vehicles
  • Mudra Loans are available to those who work in agri-allied non-farm income-generating industries like poultry farming, beekeeping, pisciculture, and so on.
  • A Mudra Loan is available to those who utilise tractors, tillers, or two-wheelers for business purposes.
  • The creation of an enabling framework for supporting “Small Business Finance Entities” will contribute to the formalisation of the economy, which is now classified as informal.
  • The Indian government has taken a number of initiatives to encourage the formation of new businesses in the nation. One of the most important is the “Make in India” initiative. Make in India is a major national initiative aimed at facilitating investment, fostering innovation, improving skill development, securing intellectual assets, and constructing world-class manufacturing infrastructure.
  • The National Skills Development Corporation (NSDC) is already working on skill development at a national level. By collaborating with NSDC, MUDRA will be able to improve the technical skills of industry participants.
  • In the future, MUDRA intends to take a credit-plus strategy and provide Growth and Care systems to the population of interest. It will serve as a trading platform and create an ecosystem with the ability to offer value in a cost-effective and long-term way.
  • Another major purpose of Mudra Loan is to formalise and institutionalise last-mile financiers / grass-roots organizations because a new type of financial institutions, namely Small Business Finance Companies, may be established and an ecosystem constructed to support their growth.
  • Another major purpose is for involvement and assistance in rural developments at the micro enterprise / unit level. Support for Micro Units would be provided in the form of incubators. It would assure that there is an environment for invention and nurturing of innovations from literate rural youths that’d sprout into successful micro firms at the country’s most grassroots levels.

What are the interest rates under eMudra Loan SBI or Mudra Loan? 

The interest rate for MUDRA loans is determined by the RBI’s MCLR (Marginal Cost of Lending Rate), which is broken down as follows.

Up to Rs.50000:

Micro Enterprises: MCLR + SP

Small Enterprises: (MCLR + SP) + Bank Load

Above Rs.50000 up to Rs.2 lakhs:

Micro Enterprises: (MCLR + SP) + Bank Load

Small Enterprises: (MCLR + SP) + Bank Load

Above Rs.2 lakhs up to Rs.10 lakhs:

Micro Enterprises: (MCLR + SP) + Bank Load

Small Enterprises: (MCLR + SP) + Bank Load

FAQs on eMudra Loan

What is a mudra loan

Mudra Loan is a government scheme that assists Banks, MFIs, and NBFCs in refinancing loans to micro-enterprises with loan requirements of up to ten lakh rupees.

How to apply for Mudra Loan

To apply for Mudra Loan, you should visit your nearest branch or you can also apply online on SBI’s Website.

How to get Mudra Loan

To get Mudra Loan, One has to fulfill the eligibility criteria and get the necessary documents ready. Afterwards, you can apply for the application form and get a Mudra Loan.

Who is eligible for Mudra Loan

The applicant must be at least 18 years old, with a maximum age limit of 65 years for Mudra Loans. Non-farm income-generating enterprises in commerce, manufacturing, and services can apply for loans. The credit limit must be less than ten lakh rupees.

Which bank provide Mudra Loan

Corporation Bank
Dena Bank
Federal Bank
HDFC Bank
Allahabad Bank
Andhra Bank
Axis Bank
Bank of Baroda
J&K Bank
Karnataka Bank
Kotak Mahindra Bank
Oriental Bank of Commerce
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
IDBI Bank
Indian Bank
Indian Overseas Bank
United Bank of India
Syndicate Bank
Tamilnad Mercantile Bank
UCO Bank
Union Bank of India
Punjab and Sind Bank
Punjab National Bank
Saraswat Bank
State Bank of India
ICICI Bank