MUDRA Loan Documents – Required Documentation for Mudra Yojana

Small and microbusiness enterprises have been on the rise in recent times. There are millions of businesses that emerge every year with unique business ideas. Catering to such a huge audience is a big deal, and financing them to grow their business is equally tough. Because of the lack of enough financing options, the growth of these businesses is inhibited. 

To tackle this issue, the government of India launched the MUDRA loan initiative under the MUDRA Yojana scheme in the 2016 Union Budget. This initiative funds microfinance institutions, non-banking financial institutions, societies, trusts, etc. These institutions then provide loans to the MSMEs (Medium, Small and Micro enterprises) at subsidised interest rates. 

In this article, you will come across topics like the MUDRA loan, its features, the eligibility criteria, the benefits, and the documentation requirements to apply for it. 

What exactly is a MUDRA loan, and what is its purpose? 

MUDRA, which stands for Micro Units Development and Refinance Agency, is a loan-providing scheme that targets microfinance institutions, non-banking finance agencies, societies, rural banks, trusts, and other informal sources of credit. MUDRA loan refinances these institutions to provide credit to small and micro businesses at subsidised rates. 

Since the emergence of small business units at an exponential rate, it has become difficult for them to get finance from the banks because of a lack of exposure and collateral. According to government statistics, more than 90 percent of these units do not get credit from banks, which acts as a massive bottleneck. 

What does the MUDRA loan offer to small business units? 

To refinance small financing institutions, the Government of India has formed three categories under which credit is provided to small business units. They have been named: Sishu, Kishor, and Tarun. According to these categories, the financial limits of different groups have been set. 

• For the Sishu category, the maximum amount of money you can spend is 50 thousand rupees at a discounted rate.
• For the Kishor category, the financial limit is above 50 thousand rupees, and the upper limit is below 5 lakhs. 
• Similarly, the Tarun category’s financial range is between 5 lakhs and 10 lakhs. 

What business sectors does the MUDRA loan touch on?

These are some of the sectors that the MUDRA loan touches upon:

• Transport Sector: A MUDRA loan is given for purchasing rickshaws, autorickshaws, taxis, etc. 
• Day-to-day service sector: This includes saloons, parlors, medicine stores, gyms, tailors, milk booths, etc. 
• Agriculture sector: MUDRA loans also focus on financing poultry, dairy, livestock, horticulture, rearing, etc. 
• Textile industries: This includes mostly handlooms, weaving, shoemaking, etc. 
• Food production: This includes pickles, jaggery, Papads, sweets, cold-pressed oils, etc. 
• MUDRA Loan also gives financial assistance to traders, shopkeepers, service enterprises, etc. 

What are the benefits of applying for a MUDRA loan? 

The exclusive benefits of applying for a MUDRA loan are as follows:

• No collateral or security deposit is required to get a MUDRA loan.
• The loan amount can be up to Rs. 10 lakhs, which is a huge amount for a developing business. 
• MUDRA loan is available for businesses in both rural and urban areas. 
• Extra perks and benefits are given to women entrepreneurs to expand their businesses and increase their revenues. 
• The interest rate is quite low for businesses in both urban and rural areas, which mostly ranges between 8.40 percent per year and 12.45 percent per year.
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• The tenure to repay the loan amount can be extended up to 7 years, which is a pretty decent amount of time to repay the loan. 
• You can also claim a MUDRA loan debit card, which you can use to withdraw and perform other related transaction services. 

What are the important documents required to apply for a MUDRA loan? 

Here is the list of documentation that shows the minimum documentation required to apply for a MUDRA loan:

1. Identity Proof: This includes your Aadhar card, voter ID card, driving license, PAN card, etc. 
2. Address Proof: Any legal document that shows your address, like your voter ID card, Aadhar card, domicile certificate, etc. 
3. Income Proof: You must show your bank statements or ITR for the financial year as your source of income proof. 
4. You have to show your MUDRA loan application form and passport-size photographs. 

What are the eligibility criteria to apply for a MUDRA loan? 

1. You must be an Indian citizen to be eligible to apply for a MUDRA loan under the MUDRA Yojana. 
2. You must either have a business or a business plan for any non-farm income-generating activities like textiles, manufacturing, the service sector, etc. 
3. Your credit requirement must be up to Rs 10 lakhs, the maximum limit for obtaining a Tarun loan.

Summing it up

Of several government schemes, MUDRA Yojana stands to be one of the most profound because of the scale of business it caters to. MUDRA loan has different interest rates for different categories. For the Shishu category, the interest rate is 8%–12% per annum. For the Kishore category, the interest rate is about 14% to 17% per annum. For the Tarun category, the interest rate is mostly above 16% per annum. For women entrepreneurs, there are several offers, and the interest rates are much lower. 

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