MSMEs often find it difficult to avail loans from banks via traditional borrowing channels due to lack of security and inadequate funds for paying off high-interest rates. To solve this, the Government of India launched the Pradhan Mantri MUDRA Yojana (PMMY) in 2015, which would help accelerate the growth and development of small and medium-sized businesses.

In this blog, we have covered everything you need to know about Mudra loan.

What is Mudra loan

Mudra loan is a financial aid of up to Rs. 10 Lakh provided by the Micro Units Development and Refinance Agency to businesses in the non-corporate, non-farm, trading and manufacturing sector.

Eligibility for Mudra loan

The loans under the PMMY scheme can be availed by small businesses for commercial purposes, as listed below.

  • Purchasing autos, cars, two-wheelers or any other vehicle 
  • Working capital
  • For plant and machinery
  • Revamping or remodelling business space

Mudra also operates a unique refinance scheme for female entrepreneurs to empower women in business, called Mahila Uddyami Scheme.

Mudra loan categories

Mudra loan is granted under three categories, depending on the loan amount needed to grow your business. 

Shishu Kishore Tarun
Covering loans up to Rs. 50,000/- Covering loans above  50,000/- and up to Rs. 5 Lakh Covering loans above Rs. 5 Lakh and up to Rs. 10 Lakh


How to apply for Mudra loan online

Businesses can apply for Mudra loan via the official website of Commercial banks, RRBs, small finance banks, MFIs and NBFCs.

To register for the Mudra loan, follow these steps: 

  1. Download the loan application form from the bank’s website
  2. Fill in the required details 
  3. Submit the form along with the necessary documents, as mentioned below
  4. Proceed with the formalities as directed by the bank representative 
  5. The bank will approve and disburse the loan amount after processing and verifying the loan application form and attached documents,

    Now, borrowers can also file online applications for Mudra loans on the Udyamimitra portal

How to apply for Mudra loan offline

  1. Visit the nearest branch of the desired bank that can provide Mudra loan
  2. Present the self-written business plan to the concerned authorities
  3. Submit the downloaded and duly filled loan application form
  4. Submit the required documents as directed by the concerned authorities
  5. The bank shall approve and disburse the loan amount after verification

Documents required to apply for Mudra loan 

In order to successfully apply for Mudra loan, applicants must attach a copy of the following documents along with the application form. 

  • Comprehensive business plan
  • Duly filled application form that can be downloaded from the bank’s website
  • 2 recent passport-sized photographs
  • Proof of Identity; this may be your passport, voter’s ID card, driving license or Aaadhar card
  • Proof of age or date of birth
  • Proof of address
  • Last 6 months’ bank statement
  • Special category proof in case the applicant belongs to SC/ST/OBC or any other special category.

Limitations of Mudra loan

  • The maximum loan amount that can be disbursed is Rs. 10 lakh
  • The repayment period is between 3 to 5 years, including a moratorium of up to 6 months, depending on the activity/ income generation. WC/TL to be reviewed annually
  • The processing fees are nil for Shishu and Kishore, but 0.50% (plus applicable tax) of the loan amount is applicable for Tarun loan categories

Get Collateral-free loans for your business with Razorpay 

We, at Razorpay, understand that getting loans for MSMEs via banks or other government schemes is not easy. So, we built a solution to help businesses get funds for their capital requirements easily.

Razorpay Capital can solve cash flow challenges for your business via 

Working Capital Loans

Razorpay’s NBFC and banking partners offer loans for businesses collateral-free, at competitive rates with flexible repayments. You can apply for the loan online hassle-free and get the cash-in-hand quickly.

Cash Advance

Razorpay Cash Advance offers an unsecured line of credit to manage cash requirements prior to customer payments. You can withdraw cash up to your credit limit, repay when customers pay and borrow again when in need. 

RazorpayX Corporate Credit Cards

You can get a 50-day interest-free credit limit for your business with RazorpayX Corporate Credit Cards. And, simplify digital payments towards Google Ads, AWS, Facebook Ads, etc.

Ensure access to working capital and accelerate your business growth with Razorpay.

Author

A potterhead finding magic in words | Content Marketer @ RazorpayX

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