How does Pradhan Mantri Mudra Yojana (PMMY) work?

For the exponential rise of SMEs and MSMEs in India in the past decade that engage a workforce of 12 Crore (approx) – availing formal finances can be challenging. Whether it is boosting the working capital, purchasing assets or for any market-related expenses – borrowing from informal financial sources is not only an expensive affair but is also detrimental to your business’s success. Hence, the Government of India rolled out the Pradhan Mantri Mudra Yojana (PMMY) scheme as a helping hand to these SMEs and MSMEs.

To demystify MUDRA loans, it is essentially a financial impetus provided to small-scale businesses, micro trading units, entrepreneurs and the manufacturing & service sector. This credit scheme helps these enterprises to meet their working capital requirements in the early stages of their growth.

To gain a better insight on what is MUDRA Yojana, here is everything you need to know of Pradhan Mantri Mudra Yojana –

What is MUDRA loan scheme?

MUDRA Yojana constitutes of 3 types of financial products offers to micro and small business owners to set-up their new line of businesses.

These include:

  1. a) Shishu – Loans of up to Rs. 50,000.
  2. b) Kishore – Advances ranging between Rs. 50,001 to Rs. 5 Lakh.
  3. c) Tarun – Credits from Rs. 5, 00,001 up to Rs. 10 Lakh.

Ever since the launch of PMMY, several SMEs and MSMEs have been benefited from this scheme. For instance, Rs. 321,722 Crore of credits were sanctioned between FY 2018-19. Similarly, provisional data reveals that Rs. 35,002 worth of advances has already been sanctioned for the Financial Year 2019-20.

Now, that you are aware of the MUDRA Yojana details, take a look at how you can benefit from this flagship scheme –

Benefits of MUDRA scheme

The programme offers the following advantages:

  1. This credit, like any other business loan, does not require pledging any collateral. Therefore, you can borrow the sum without risking your business assets.
  2. The GOI takes the responsibility of paying off the advance in case you default.
  3. Women entrepreneurs benefit from lower interest rates.
  4. The PM Mudra Yojana is available for SMEs and MSMEs in both rural and urban areas.
  5. This tailor-made credit facility helps you to set-up your micro or small-scale business, maintain the working capital needs, expand your business operations, etc.
  6. You can also apply for a comprehensive MUDRA debit card facility that offers you instant access to finances in a hassle-free way.
  7. The repayment tenor of MUDRA loans can extend to up to 7 years for your convenience. However, you can repay the sum within a shorter tenor as per your financial portfolio.
  8. This credit facility also allows you to avail benefits of an overdraft facility amounting up to Rs. 5,000 as a part of the PMJY (Pradhan Mantri Jan-Dhan Yojana) scheme.

Eligibility criteria for MUDRA loan

One can apply under mudra yojana if he/she is qualifying the Mudra loan eligibility which have been set as follows:

  1. The applicant must be an Indian citizen.
  2. Must be a part of NCSBS (Non-Corporate Small Business Segment) to be eligible for this credit facility.

The following sectors are eligible for this loan facility –

  • Small manufacturing or trading sector.
  • Service sector.
  • Owns a food-service unit.
  • Machine operators.
  • Artisans, etc.

Now, that you are of the multi-fold benefits that Pradhan Mantri Mudra Yojana has to offer, prepare your business to avail this customised loan facility. Make sure to comply with all the rules and regulations before applying.

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