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Mudra Loan Subsidy

PMMY Subsidy Details

Last Updated 01st Dec 2020

  • The mudra loan subsidy was launched under the Pradhan Mantri Mudra Yojana with a motive to provide financial assistance to micro and small scale business setups.
  • The scheme does not offer any subsidy as such; however, the loan is offered to the business units with easier terms and conditions.
  • Subsidy on Mudra loan is offered through three Mudra loan types which are Shishu, Kishor and Tarun.
  • The rate of interest offered on Mudra loan varies across banks and ranges from 8.05% to 11.05%.
  • Mudra loan subsidy is offered for a maximum period of five years.

Mudra Yojana Subsidy

MUDRA stands for Micro Units Developments and Refinance agency. The mudra loan subsidy was launched under the Pradhan Mantri Mudra Yojana with a motive to provide financial help to micro, medium and small scale business setups. Though the scheme is regulated by the Government, yet it is the banks who offer the Mudra loan. The loan can be availed from any commercial bank, regional rural bank, cooperative banks, small finance banks and financing institutions like NBFCs or Microfinance institutions. The scheme does not offer any subsidy as such; however, the loan is offered to business units with easier terms and conditions. The scheme covers various industries including non-corporate, non-farm and medium industry types.

Types of Mudra Loan

The Mudra loan subsidy is distinguished in three types based on the growth stage of a business unit:

  • Shishu: The Shishu Mudra loan subsidy is ideal for business units that are at the initial stage of development. The subsidy can also be availed to start a new business. As per this loan, one can borrow up to ₹ 50,000 .
  • Kishor: The Kishor Mudra loan subsidy is ideal for already established business units which require additional funding to undertake day-to-day activities. The funding is ideal for enhancing business operations. As per this scheme, one can borrow a minimum loan amount of ₹ 50,000 , whereas a maximum up to ₹ 5 Lakh can be borrowed.
  • Tarun: The Tarun Mudra loan subsidy is also offered to established business enterprises; however, it is for enterprises who are well established for a long period of time. With this mudra loan type, funds can be borrowed in the range of ₹ 5 Lakh to ₹ 5 Lakh.

Rate of Interest Offered

The interest rate offered on Mudra loans varies across banks and is dependent on various clauses such as the bank’s terms and conditions, the loan borrower’s income and repayment ability, and also the credit history. The interest rate on mudra loans varies in the range of 8.05% to 11.05%.

Purpose of Mudra Loan

In general, the mudra loan was set up with a border objective of making the small and micro-scale industry inclusive in business development. However, it also addresses various other purposes which are as follows:

  • To create laid out directives and principles for business enterprises set at a small scale.
  • To make a universal registration platform for all small scale business units
  • To help the small scale enterprises achieve infrastructure and monetary development and growth
  • To create self-employment opportunities for women and lower-income groups
  • To create employment opportunities in the rural and suburb areas
  • To help the lower-income groups of the society set up independent business units
  • To ensure easy availability of finance and credit for small and medium scale industries
  • To provide loans to the marginalized and suppressed sections of the society
  • To regulate various business activities such as trading, manufacturing and production in the small business setups.

FAQs

How can I get a subsidy in Mudra loan?

You can avail the Mudra loan subsidy by availing through any commercial bank, regional rural bank, cooperative banks, small finance banks and financing institutions like NBFCs or Microfinance institutions. However, one must meet the eligibility criteria for the mudra loan to get the subsidy.

How much is the subsidy on Mudra loan?

Mudra loan is a credit facility under the Pradhan Mantri Mudra Yojana that functions to fulfil the financial needs of small scale business enterprises. Though the scheme offers no subsidy on loan rates, yet the loan is provided with easier terms and conditions, with a comparatively lower interest rate than a regular business loan.

How do I apply for a Mudra Loan subsidy for my business?

You can apply for a Mudra loan subsidy for your business by contacting any commercial, regional rural, cooperative banks or small finance banks.

What happens if Mudra loan is not paid?

In case one fails to pay the Mudra loan, then the loan is considered as the non-performing asset. In addition, the lender has rights to take legal action against you if you fail to pay the loan. The lender may also seize the assets of the borrower and sell them off for loan repayment.


*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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