MUDRA Yojana Loan

MUDRA Yojana Loan: A Complete Guide to Funding Your Small Business

Starting a small business in India is an exciting journey, but securing funds can be a major roadblock. That’s where the Pradhan Mantri MUDRA Yojana (PMMY) comes in—a government-backed loan scheme designed to empower entrepreneurs, small traders, and micro-enterprises.

Whether you’re a street vendor dreaming of opening a small shop or a skilled artisan looking to expand, MUDRA Yojana could be your financial lifeline. In this guide, we’ll break down everything you need to know—what MUDRA Yojana is, its benefits, eligibility, and a step-by-step application process.

What is MUDRA Yojana?

Launched in April 2015, the Micro Units Development and Refinance Agency (MUDRA) Yojana is a flagship scheme under the Indian government to provide affordable loans to small businesses. The goal? To fuel India’s MSME (Micro, Small, and Medium Enterprises) sector, which employs over 110 million people and contributes 30% of India’s GDP.

Key Objectives of MUDRA Yojana

  • Provide low-interest loans to small entrepreneurs.

  • Support non-corporate, non-farm sector businesses.

  • Encourage self-employment and financial inclusion.

  • Boost women entrepreneurs (30% of loans are reserved for women).

Types of MUDRA Loans (Shishu, Kishor, Tarun)

MUDRA loans are categorized into three tiers based on funding needs:

1. Shishu Loan (Up to ₹50,000)

  • Ideal for new startups, street vendors, and small artisans.

  • Minimal documentation.

  • Helps with initial working capital or small equipment purchases.

Example: Raju, a tea stall owner in Mumbai, took a Shishu loan to buy a new tea-making machine, boosting his daily sales by 40%.

2. Kishor Loan (₹50,001 to ₹5 Lakh)

  • For businesses needing expansion funds.

  • Supports hiring staff, buying inventory, or upgrading tools.

Example: Priya, a tailor in Jaipur, used a Kishor loan to buy advanced sewing machines and hire two assistants, doubling her income.

3. Tarun Loan (₹5 Lakh to ₹10 Lakh)

  • Designed for established businesses looking to scale.

  • Can be used for machinery, shop renovation, or marketing.

Example: Sanjay, a small grocery store owner, took a Tarun loan to open a second outlet, increasing his monthly revenue by ₹1.5 lakh.

Who is Eligible for a MUDRA Loan?

MUDRA loans are not for large corporations but for small, non-farm income-generating activities. Here’s who qualifies:

✅ Small business owners (shopkeepers, traders, vendors)
✅ Micro-enterprises (handicrafts, food processing, tailoring)
✅ Service providers (beauty parlors, repair shops, transport services)
✅ Startups & self-employed professionals (tutors, freelancers)
✅ Women, SC/ST, and OBC entrepreneurs (special focus)

Note: You don’t need collateral for loans up to ₹10 lakh under the Credit Guarantee Fund for Micro Units (CGFMU) scheme.

How to Apply for a MUDRA Loan? (Step-by-Step Process)

Getting a MUDRA loan is simple and paperless in most cases. Here’s how:

Step 1: Choose Your Loan Type (Shishu/Kishor/Tarun)

Decide how much funding you need based on your business stage.

Step 2: Approach a Participating Bank/NBFC

MUDRA loans are disbursed through:

  • Public Sector Banks (SBI, PNB, etc.)

  • Private Banks (HDFC, ICICI, Axis)

  • Regional Rural Banks (RRBs)

  • Microfinance Institutions (MFIs)

Step 3: Submit Required Documents

  • Identity Proof (Aadhaar, PAN, Voter ID)

  • Address Proof (Utility bill, Rental agreement)

  • Business Proof (GST registration, Shop Act License)

  • Bank Statement (Last 6 months)

  • Passport-size photos

Step 4: Fill the Application Form

You can apply:

  • Online (via bank websites or Udyamimitra portal)

  • Offline (visit the nearest bank branch)

Step 5: Loan Approval & Disbursement

  • Processing time: 7 to 15 days (varies by lender).

  • Once approved, funds are directly credited to your account.

Interest Rates & Repayment Terms

  • Interest Rate: 8% to 12% (varies by lender and loan type).

  • Repayment Tenure: Up to 5 years (with flexible EMIs).

  • Moratorium Period: Some lenders offer 3-6 months before repayment starts.

Success Stories: How MUDRA Loans Changed Lives

Case Study 1: From Street Vendor to Shop Owner

Ramesh (Chennai) sold fruits on a cart but dreamed of owning a store. With a MUDRA Shishu loan of ₹40,000, he rented a small shop. Today, he earns ₹25,000/month, up from ₹8,000 earlier.

Case Study 2: Empowering Women Entrepreneurs

Meena (Lucknow) took a Kishor loan of ₹2 lakh to start a homemade pickle business. She now supplies to local supermarkets and employs 5 women from her community.

 

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