Small business owners need funds to keep their businesses
afloat and to generate an income to support their livelihood. Recognising this
need, the Prime Minister Narendra Modi-led Government of India has taken
measures to ensure that such business owners can get the necessary funds
without having to take on high-interest, high-value debts. The Pradhan Mantri Mudra loan
is a scheme devised to help upcoming entrepreneurs as well as small business
owners avail the funds needed to keep their business afloat. Here are a few
essential facts you need to know about this scheme.
The loan is classified into three categories
Applicants who wish to avail the Mudra bank loan can apply
for it under three main categories – the Shishu category, the Kishor category
and the Tarun category. Under the Shishu (infant) category, micro and small
business owners, looking to start a business, can avail loans of up to ₹50,000.
Applicants who fall under the Kishor (adolescent) category can avail loans of ₹50,000
to ₹500,000 and should already have established their business. Finally,
applicants falling under the Tarun (mature) group can avail loans of up to ₹1,000,000,
to expand the established business.
Applicants can avail this loan at low-interest rates and
repay it within flexible tenures
What makes the Mudra loan scheme an
attractive scheme for small business owners is that, that banks levy an
incredibly low-interest rate on the loans. Public sector banks like Bank of
Baroda and Bank of India respectively, are offering these loans at low-interest
rates of 8.40% and 8.35%, respectively. Also, applicants can repay the loan in
tenures of 3 to 5 years, based upon the lender chosen by them. Some banks also
offer top-up loans under the Mudra scheme, wherein borrowers can extend the
repayment tenures to 7 years.
The Government serves as the guarantor
Since the Mudra loan Yojana is the brainchild of the
Government of India, the entity serves as the guarantor. This way, the bank
does not have to lose its investment. If the borrower is unable to repay the
EMIs, the government bears the responsibility for the losses endured by the
bank. If an applicant is unable to repay the loan, the government compensates
it on the applicant’s behalf, enabling the bank to recover its investment.
Entrepreneurs from different fields and varied categories
may avail a loan
To ensure that entrepreneurs from all sections of the
society can benefit from the Mudra loan scheme, the Government has defined
various categories under which small business owners can avail the loan. The
notable categories under which applicants can avail this loan are:
Community
Personal service
Social activities
Purchasing transport vehicles
Food products and production
Traders
Shopkeepers
Textile products and production
Non-farming-based agriculture and allied activities like
purchasing tractors, machinery and essential equipment’s.
The applicant needs to check the category under which they
are eligible for the loan and then apply. Note that while you can avail loans
under the allied agricultural activities, the Mudra loan does not offer finance
for purchasing agriculture-specific products likes seeds, fertilisers,
pesticides, and so on.
