One of the flagship schemes launched by the government under the aegis of Prime Minister Narendra Modi in the economic sector was MUDRA or Micro Units Development and Refinance Agency Bank. This was an initiative to empower budding entrepreneurs who were looking for capital to kickstart businesses. 

This was supported by Pradhan Mantri MUDRA Yojana (PMMY), it’s a scheme to finance income-generating small business enterprises, which was launched on April 8, 2015, by the Prime Minister, whereby all banks are to finance micro entrepreneurs up to Rs 10 lakh, irrespective of whether they avail of refinance support from MUDRA or not.

While many poor and lower-middle-class youth have benefited from the scheme, the knowledge of how to utilise this scheme must reach farther and wider.

As far as the role of the state is concerned, for the financial year 2019, the banks need to disburse Rs 1 lakh crore to meet the MUDRA target. Therefore, it is less than a month to fulfil the target.

As per the Budget 2018-2019, the government intends to pay loans of up to Rs 3 lakh crore in the current financial year ending March 31. Despite the pressure from the Union government, the banks are yet to meet the said lending targets.

As the government data stood on February 22, the total loan expended under the MUDRA scheme stood at Rs 2,02,668.9 crore as against sanctioned amount of Rs 2,10,759.51 crore.  The latest data of the finance ministry said over 3.89 crore MUDRA loans have been sanctioned so far in this financial year.

While presenting the Union Budget 2019-2020, the finance minister said the government had sanctioned 15.56 crore loans amounting Rs 7.23 lakh crore under the MUDRA scheme, of which majority beneficiaries were women. 

The finance minister as on February 1, enhanced the lending target under the MUDRA Yojana, which funds the self-employed people to Rs 3 lakh crore for the 2018-2019. 

MUDRA has been set up for ‘funding the unfunded’ microenterprises in the country. MUDRA will refinance all banks, Micro-finance Institutions (MFIs) and other lending institutions, which are in the business of lending to micro / small business entities, engaged in manufacturing, trading and services activities. Thus, MUDRA will strengthen the financial institutions by extending refinance and other development support to expand their outreach. This will, in turn, help micro businesses across the length and breadth of the country.

MUDRA’s mandate includes developing the microenterprise sector into a viable economic sector as well, for which various developmental interventions including financial/ business literacy programmes are planned.

The PMMY scheme provides loans to the non-corporate, non-farm small and/or micro-enterprises. These loans are given by commercial banks, RRBs i.e. regional rural banks, small finance banks, cooperative banks, MFIs i.e. microfinance institutions and NBFCs (Non-Banking Financial Companies).

Stages of capital requirement by businesses

•    The borrower can approach any of the lending institutions mentioned above or can apply online through the portal MUDRA. 
•    Under the PMMY, MUDRA has three products namely Shishu, Kishore and Tarun to signify the stage of growth and development and funding needs of the beneficiary micro unit of entrepreneur and also provide the entrepreneur with the opportunity to grow.
•    A start-up can apply for a loan of up to Rs. 50,000 which is known as Shishu loan. 
•    A business that needs capital to establish itself is eligible for a loan of Rs. 50,000 to Rs. 5 lakh which is called Kishore loan.
•    An established business that needs capital for expansion can apply for a MUDRA loan of Rs 5 lakh to Rs 10 lakh that is known as Tarun loan.  

Rs 4.6 lakh crore credit has been sanctioned under the scheme so far to 10.38 crore beneficiaries.

Empowering women and underprivileged

On all the total loan accounts, 76% are of women and more than 50% belong to SCs, STs and OBCs.  The said yojana proposes to set a target of Rs 3 lakh crore for lending under MUDRA for 2018-2019 after apparently having successfully exceeded the targets in all previous years.  

The Budget for the current fiscal had announced a loan target of Rs 2.44 lakh crore under the MUDRA which loans are available for non-agricultural activities up to Rs 10 lakh and activities allied to agriculture such as dairy, poultry, beekeeping are also covered under it. 

Who can get a MUDRA loan? What are the terms?

1.    Any Indian citizen who has a business plan for an income-generating micro or small business activity in manufacturing, processing, trading or service sector, and whose credit need is less than 10 lakh can approach a Bank and/or MFI for availing of MUDRA loans under PMMY. 
2.    The usual terms and conditions of the lending agency may have to be followed for availing of loans under PMMY. 
3.    The lending rates are as per the RBI guidelines issued in this regard from time to time.  Loans under the PMMY scheme are available to non-farm micro or small enterprises engaged in income generation through manufacturing, trading and services.
4.    Enterprises involved in allied agricultural activities can apply for MUDRA loans too.  

MUDRA card

The MUDRA card is an innovative credit product wherein the borrower can avail of credit in a hassle-free and flexible manner. It provides a facility of working capital arrangement in the form of an overdraft facility to the borrower. 

Since MUDRA card is a RuPay debit card, it can be used for drawing cash from ATM or business correspondent or make a purchase using point of sale (POS) machine. 
A facility to repay the amount, as and when, surplus cash is available exists, thereby reducing the interest cost.

Key benefits of MUDRA loan

The MUDRA loan scheme offers credit facilities to micro and small enterprises engaged in income generation.

One of the key benefits of a MUDRA loan is that borrowers are not required to provide security or collateral. Additionally, there are no processing charges on MUDRA loans.

The credit facilities extended under the PMMY can be for any type of fund or non-fund based requirements. Hence, borrowers can use the MUDRA loan scheme for a variety of purposes. The credit from MUDRA loans can be used for term loans and overdraft facilities, or to apply for letters of credit and bank guarantees.

There is no minimum loan amount for MUDRA loans.

Top 10 Public Sector Banks providing MUDRA loan as per the total number of accounts as on October 11, 2015 are
1. UCO Bank: 4,79,476 MUDRA loan accounts
2. State Bank of India: 4,67,062
3. Canara Bank: 3,35,270
4. Bank of India: 2,73,784
5. Syndicate Bank: 2,14,228
6. Indian Bank: 1,90,129
7. Punjab National Bank: 1,83,594

Top 10 private sector banks providing MUDRA loan as per the total number of accounts as on October 11, 2015 (MUDRA Loan Accounts):

HDFC Bank: 5,57,41

IndusInd Bank: 4,95,954

Axis Bank: 4,36,323

ICICI Bank: 34,311

Ratnakar Bank: 28,408

Yes Bank: 9,627

Karnataka Bank: 4,958

Karur Vysya Bank: 3,222.

MUDRA creates an inclusive, sustainable and value-based entrepreneurial culture, in collaboration with the government and the financial institutions in achieving economic success and financial security to the small business.