Schemes

The Entrepreneurial Loans of India: MUDRA Yojna & Stand-up India

Author: Alok Shubham

With “start-up” & “entrepreneurship” occupying a significant space in our political and daily discourse, the present dispensation has come up with some schemes to enhance the start-up ecosystem in India. Scheme like Start-up India was introduced to encourage young entrepreneurs by easing the compliance hurdles, whereas, schemes like Mudra Yojna and Stand-up India provide financial assistance. In this article, I would like to demystify the Mudra Yojna and Stand-up India schemes.

MUDRA Yojna: A SIDBI Subsidiary

Pradhan Mantri Mudra Yojana (PMMY) is a government of India undertaking aimed at promoting entrepreneurship, by providing non-corporate small businesses easy access to credit through MUDRA Loans. Micro Unit Development & Refinance Agency (MUDRA) is a refinancing agency and not a direct financial institution disbursing loans. It is a subsidiary of SIDBI. It acts as a facilitating agency which connects financial lending institutions with applicants eligible to avail the loan. It was announced during the budgetary session of the Parliament in 2016.

Eligibility criteria for Businesses

  • All non-corporate small businesses
  • All non-farming micro businesses that generate income and are in need of monetary aid below or up to INR 10 lakh
  • The eligible firms can be Sole Proprietors, Partnership Firms, Manufacturers, Machinery Businesses (the list is indicative and can include other categories as well)
  • Example/indicative fields of businesses eligible for MUDRA loan: Food Service Units, Truck Operators, Vegetable & Fruit Vendors, Repair Shops, Fashion Store, Artisans, Small Industries, Ford Processing Units, Shopkeepers, Service Sector Units, Potters, Carpentry, RO Water Purifier etc.

Eligibility criteria for Applicants

  •  Minimum 18 years of age
  • A comprehensive Business Plan consisting of the structure, investment plans, nature of product, marketing and future plans.

Participating Lending Institutions

Any of the below mentioned category of institutions can voluntary participate in the MUDRA loan scheme:

  • Public Sector Banks
  • State Co-operative Banks
  • Micro Finance Institutions
  • Non-Banking Financial Companies
  • Regional Rural Banks

Categories & Amount of Loans

How to apply for the loan under MUDRA? 

  • Identify the nearest Bank offering the loan
  • Visit the Branch in person and Submit the loan application with below mentioned documents:
  1. Comprehensive Business Plan
  2. Identity Proof
  3. Address Proof
  4. Passport size photographs

Interest Rates under MUDRA

The rate of interest for the loan would be as per RBI guidelines. The rate would typically vary between 9% - 12% depending on the category of loan and the Bank.

As per the last report, almost all major Banks including State Bank of India, Union Bank of India, Corporation Bank, ICICI Bank and Axis Bank have already enrolled as lending institutions under this scheme.

Any special preference for Women or SC/ST under MUDRA?

When it comes to applicants who are women or belong to special category (SC, ST & OBC), no reservation or specific benefits in terms of loan amount or interest rate has been specified by the government. It has only clarified that Applicants under above mentioned categories would be given preference while disbursing loans under MUDRA scheme. What constitutes ‘preference’, given to such category of applicants has not been defined.

 

Stand-up India

 Stand-up India is a Governement of India initiative aimed at providing financial assistance to women and SC/STs. According to the scheme, a loan in the range of INR 10 lakhs to 1 Crore is provided to at least one SC or ST and at least one woman borrower per bank branch for setting up an enterprise in an undeveloped segment.

The entreprise can be set up in manufacturing, services or trading sector.

In case of non-individual enterprises, the majority and controlling stake (51 percent or more) must be held by the woman or SC/ST entrepreneur.

You may apply for the loan online under Stand-up India scheme.