Pradhan Mantri Mudra Yojana: All You Need to Know

Whether you are self-employed or a salaried person, there are times when you would need just an extra hand to help you get through your expenses. For this, there are options like a personal loan or a credit card that can help you with immediate funding needs. But the interest rate and changes associated with these are quite high. 

Now the question is, what other option is available for you? Well, this is where you can go for the government-backed loans that offer you funds and help you manage your expenses or even start with some new venture. One os these is the Pradhan Mantri Mudra Yojana.

This is a plan that was started in 2015 and is a non-corporate and non-collateral scheme for loans. But there is more that you need to know about the same. So, read this guide and explore every single detail you need. 

What is Pradhan Mantri Mudra Yojana?

The Pradhan Mantri Mudra Yojana (PMMY) is a financial initiative. It was launched by the Government of India in April 2015. The main aim was to support small and micro enterprises. It offers collateral-free loans up to Rs.10 lakh. 

The loan application is processed through banks, NBFCs, and microfinance institutions. These loans can be used for starting a new business, expanding an existing one, or meeting working capital requirements.

The scheme is specially designed to help with the following aspects:

• Promote self-employment

• Strengthen rural and semi-urban enterprises

• Increase job opportunities

The PMMY removes the basic barrier of collateral. This simplifies the process of applying for and securing the loan, even for first-time entrepreneurs.

Pradhan Mantri Mudra Yojana Details

It is important to note that the Pradhan Mantri Mudra Yojana is not just any other loan scheme. This is aimed at offering better credit facilities to every person, even those with a low credit score. So, here are the basic details that you need to know:

Objectives of Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana was launched with the vision of creating a supportive financial ecosystem for small businesses in India. Its core objectives include:

• Financial Inclusion

This is a prime benefit to small entrepreneurs. If you are an entrepreneur in rural and semi-urban areas, which are places where the formal banking system is missing.

• Collateral-Free Credit

It aims to make loans easily accessible. This is available without demanding security or collateral. This is quite helpful in reducing barriers for first-time borrowers.

• Employment Generation

It is quite helpful to create self-employment opportunities. This can also help to support job creation by strengthening micro and small enterprises.

• Business Growth Support

To provide affordable funding, which is quite helpful for enterprises to expand operations. You can use it to purchase equipment or meet working capital needs.

• Economic Empowerment

To empower women, youth, and marginalized groups by enabling them to start or expand their ventures.

Eligibility for Pradhan Mantri Mudra Yojana

The Mudra Yojana is designed to support a wide range of small businesses and first-time entrepreneurs. To qualify for a loan under this scheme, the applicant must meet the following criteria:

• Individuals between 18 to 65 years of age

• Small business owners, proprietors, partnership firms, artisans, vendors, and micro enterprises

• Non-farm income-generating activities in manufacturing, trading, and services (including allied agricultural activities)

• Satisfactory credit history with no major defaults

• Loan must be used strictly for business purposes

Documents Required for Pradhan Mantri Mudra Yojana

When you apply for the PMMY loan, you will need to have certain documents to complete the application process. These are a different set of documents that you would need here. So, let us explore the common ones as follows.

Shishu Loan (Up to Rs.50,000)

For very small businesses or startups under the Shishu category, you’ll need to provide:

• Identity Proof: Aadhaar Card, PAN, Voter ID, Passport, Driving Licence, or any government-issued photo ID (self-attested).

• Residence Proof: Utility bill, property tax receipt (not older than two months), Aadhaar, Passport, Voter ID, domicile certificate, or attested bank statement/passbook.

• Photographs: Two passport-size pictures.

• Purchase Details: Quotation or invoice of machinery/items to be bought, including supplier details and cost.

• Business Documents: If already running a business, submit a license, registration certificate, or any document proving ownership/address of the unit.

Kishore, Tarun, and Tarun Plus Loans (Above Rs.50,000 to Rs.20 lakh)

For higher loan categories, lenders usually expect additional financial and business records. These include:

• Identity Proof: Aadhaar, PAN, Voter ID, Passport, or Driving Licence.

• Residence Proof: Recent telephone/electricity bill, property tax receipt (within two months), Aadhaar, Passport, or Voter ID of proprietor/partners/directors.

• Photographs: Two recent passport-sized photographs.

• Business Documents: Registration certificates, licenses, or documents that can show the nature and location of your business.

• No Default Record: Declaration that says that the applicant is not a defaulter in any way.

• Bank Statements: Last six months from the current banker.

• Past Financials: Balance sheets of the last two years and it should have the complete set of ITR or GST returns (mandatory for loans above Rs.2 lakh).

• Future Projections: Projected balance sheet for one year (working capital loans) or for the tenure of the loan (term loans above Rs.2 lakh).

• Sales Records: Proof of turnover achieved during the current financial year.

• Project Report: A feasibility report highlighting technical and financial viability of the proposed activity.

• Legal/Ownership Documents: Memorandum & Articles of Association (for companies), partnership deed (for firms).

• Net Worth Details: Statement of assets and liabilities of the borrower/partners/directors if there is no third-party guarantor.

Conclusion

The Pradhan Mantri Mudra Yojana (PMMY) is more than just a loan scheme. It serves as a lifeline for small entrepreneurs and allows you to get collateral-free credit easily. This allows you to start your business or even go for expansion. 

So, if you are planning anything as such, PMMY can be the right opportunity. Visit Rupeezy to explore more about the financial tools. Compare and check all the investment options. Start with a plan that not just supports you in wealth creation but also in financial security.

FAQs

Q1. Who is eligible for the Mudra Yojana?

Individuals between 18 and 65 years engaged in non-farm business activities like manufacturing, trading, services, or allied agriculture can apply.

Q2. What is the highest loan amount available under this scheme?

If you consider the Tarun Plus, the highest amount that you can avail is Rs.20 Lakh.

Q3. Are Mudra loans collateral-free?

Yes, all loans up to Rs.10 lakh under PMMY are collateral-free, making it easier for small entrepreneurs to access funds.

Q4. How long is the repayment period for Mudra loans?

The repayment tenure can be up to 5 years for loans below Rs.5 lakh. And it is up to 7 years for loans above Rs.5 lakh. There are also the moratorium options.

Q5. Can I apply online for a Mudra loan?

Yes, applications can be made online through banks and financial institutions offering Mudra loans, though offline applications via bank branches are also accepted.