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Pradhan Mantri Mudra Yojana (PMMY): Loan Categories, Eligibility and Benefits

Team AckoJan 18, 2024

The Pradhan Mantri Mudra Yojana is an ambitious government scheme introduced by the Government of India to provide financial support and empower small and micro-enterprises. Under this initiative, loans are offered to eligible individuals, helping them start or expand their businesses.

This article explores the various aspects of the Pradhan Mantri Mudra Yojana, including its objectives, loan categories, eligibility criteria, and frequently asked questions.

Contents

What is Pradhan Mantri Mudra Yojana?
What are the objectives of Pradhan Mantri Mudra Yojana?
Loan categories under Pradhan Mantri Mudra Yojana
Eligibility criteria of Pradhan Mantri Mudra Yojana
Pradhan Mantri Mudra Yojana loan application process
Benefits of Pradhan Mantri Mudra Yojana
Wrapping up
Frequently Asked Questions (FAQs)

What is Pradhan Mantri Mudra Yojana?

The Pradhan Mantri Mudra Yojana (PMMY) was launched in April 2015 by the Prime Minister of India. The scheme aims to offer financial assistance to small and micro-enterprises, particularly those operating in the informal sector, by providing them with loans through various financial institutions across the country.

What are the objectives of Pradhan Mantri Mudra Yojana?

The primary objectives of the Pradhan Mantri Mudra Yojana are:

Promoting Entrepreneurship: The scheme encourages individuals to start their own businesses and become self-employed, thereby promoting entrepreneurship and reducing unemployment.
Financial Inclusion: It aims to provide financial access to individuals who may not have easy access to formal banking services, especially those from marginalised sections of society.
Sustainable Growth: By offering financial assistance, the scheme seeks to enable small businesses to grow, generate employment opportunities, and contribute to the overall economic development of the country.

Loan categories under Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana provides loans under three categories, catering to different stages and types of businesses:

Shishu: This category offers loans up to INR 50,000 for businesses in their initial stages. It aims to support small businesses during their early phases and help them establish a strong foundation.
Kishore: Under this category, loans ranging from INR 50,001 to INR 5,00,000 are provided. It is suitable for businesses that have already started and need financial assistance for expansion and growth.
Tarun: This category offers loans from INR 5,00,001 to INR 10,00,000 for well-established businesses that require higher funding to scale up their operations.

The loan amount sanctioned under the Pradhan Mantri Mudra Yojana does not require any collateral security or guarantor.

Eligibility criteria of Pradhan Mantri Mudra Yojana

To avail the benefits of this scheme, individuals need to fulfil certain eligibility criteria. The scheme is open to:

Small Business Owners: Individuals who own small businesses in sectors such as manufacturing, trading, and services can apply for loans under this scheme.
Micro-Enterprises: Micro-enterprises engaged in income-generating activities, including artisans, shopkeepers, fruit/vegetable vendors, and others, are eligible for loans.
Non-Corporate Small Business Sector: This category includes entities such as partnerships, proprietary concerns, and limited liability partnerships (LLPs).

Applicants are required to provide necessary documents, such as identity proof, address proof, and business-related documents, to establish their eligibility for the scheme.

Pradhan Mantri Mudra Yojana loan application process

Obtaining a loan under the Pradhan Mantri Mudra Yojana involves the following steps:

Research and Documentation: Applicants should gather the required documents, including identity proof, address proof, business-related documents, and a well-prepared business plan.
Choose the Loan Category: Based on the stage of their business, applicants need to select the appropriate loan category (Shishu, Kishore, or Tarun).
Approach a Financial Institution: Applicants can approach any participating bank or financial institution and submit their loan application along with the necessary documents.
Loan Processing and Approval: The financial institution will process the loan application, review the documents, and evaluate the viability of the business. Once approved, the loan amount will be disbursed to the applicant's bank account.
Loan Repayment: The borrower needs to repay the loan amount in regular instalments as per the agreed-upon terms and conditions.

Benefits of Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana offers several benefits to small businesses and aspiring entrepreneurs:

Access to Finance: The scheme provides easy access to affordable credit, enabling individuals to start their own businesses or expand existing ones.
No Collateral Security: Unlike traditional loans, the Pradhan Mantri Mudra Yojana does not require collateral security or guarantors, making it more accessible for small businesses.
Flexible Loan Amount: With three loan categories catering to different business needs, the scheme offers flexibility in choosing the loan amount based on the stage of the business.
Competitive Interest Rates: The interest rates charged under the scheme are competitive and affordable, reducing the financial burden on borrowers.
Economic Growth and Job Creation: By promoting entrepreneurship and supporting small businesses, the scheme contributes to economic growth and job creation in the country.

Wrapping up

The Pradhan Mantri Mudra Yojana has emerged as a significant initiative by the Government of India to promote financial inclusion and support small and micro-enterprises. Through its various loan categories and simple eligibility criteria, the scheme has opened doors for aspiring entrepreneurs and existing business owners to access the necessary funds for growth and development. By providing easy and affordable credit, the Pradhan Mantri Mudra Yojana continues to empower individuals and contribute to the socio-economic progress of the nation.

Frequently Asked Questions (FAQs)

Here are some common questions about Pradhan Mantri Mudra Yojana.

What is the interest rate charged under the Pradhan Mantri Mudra Yojana?

The interest rates charged under the Pradhan Mantri Mudra Yojana may vary from bank to bank. However, they are generally affordable and competitive compared to other forms of financing.

Is there any processing fee for Mudra loans?

Yes, banks may charge a nominal processing fee for Mudra loans. However, the fee amount is usually minimal and depends on the loan category and the bank providing the loan.

Can I apply for a Mudra loan online?

Yes, many banks and financial institutions provide an online application facility for Mudra loans. Applicants can visit the official websites of these institutions and follow the specified procedure to apply online.

Can I apply for a Mudra loan if I have a bad credit history?

While a good credit history can increase the chances of loan approval, individuals with a less-than-perfect credit score may still be eligible for Mudra loans. The decision ultimately lies with the bank or financial institution providing the loan.

What is the repayment period for these loans?

It depends on the loan category and the nature of the business. It can range from a few months to several years, allowing borrowers to repay the loan in convenient instalments.

Can I avail multiple Mudra loans for different businesses?

Yes, eligible individuals can apply for multiple Mudra loans to support different businesses. However, the loan amount and eligibility will be assessed based on the nature and performance of each business.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.