While the MSME sector is a significant contributor to India’s economic development, the lack of access to capital has constantly impeded its growth. To help tackle this issue, the Pradhan Mantri MUDRA Yojana (PMMY) was launched on 8th April 2015.
This scheme was designed to give MSMEs an easily accessible credit source with relaxed repayment tenures of up to 7 years. Since different growth stages need different capital infusions, MUDRA loan interest rates vary as per the selected stage-specific loan and the loaned amount. Such loans are available through private and public banks, micro-finance institutions, NBFCs, small finance, and regional rural banks.
Nonetheless, all MUDRA interest rates are reasonably low to ensure that small and medium businesses don’t worry about paying hefty interest on the borrowed sum. Thus, if you’re the owner of a non-farm enterprise and in need of affordable credit, opting for a MUDRA loan will be quite prudent.
A Guide to MUDRA Loan Interest Rates
Interest rates for such loans vary from one bank to another and depend on the profile of the applicant and the growth stage of the business. To get a better understanding of this, you can go through the following MUDRA loan interest rates guide:
Types of Schemes under the MUDRA Yojana
- Shishu- If your business is still in its nascent stage of development, you will qualify for a loan of up to Rs. 50,000 under this scheme. The interest rates for such loans can vary from 1% to 12%, as per RBI guidelines.
- Kishore- Designed to fulfil the capital infusion needs of MSMEs, this scheme offers business owners loans starting from Rs. 50,000 to Rs. 5 lakhs. Generally, while the actual payable interest rate and the tenure vary from lender to lender, the rate falls somewhere between 8.60% to 11.5% p.a.
- Tarun- This scheme offers Rs. 5 to 10 lakhs to SMEs for growth and expansion purposes. The payable MUDRA loan interest rate will depend on the amount borrowed. Usually, the rate of interest for such loans ranges from 11.15% to 20% p.a.
It is important to note that no collateral is needed when applying for a MUDRA loan. Additionally, your CIBIL score can affect the loan amount sanctioned and interest charged.
Funding Support Plans and Features of the MUDRA Yojana
- Micro Credit Scheme– Loans up to Rs. 1 lakh are offered to MSME enterprises by micro-finance institutions.
- Women Enterprise Program– Under the Mahila Udyami Yojana, loans are offered to aspiring and established women in the MSME sector. The MUDRA loan interest rates for such loans are also eligible for a concession of up to 0.25%.
- Refinance Scheme– Bank loans of up to Rs. 10 lakhs to the MSME enterprises can be refinanced under this scheme. Of course, the interest rate remains capped at a very nominal point.
- Mudra Card– This debit card is issued against a MUDRA loan account. Once the loan amount is disbursed to the linked account, you can use this card to withdraw the same or access working capital, whenever needed.
Eligibility Criteria and Documents Needed to Enjoy Low MUDRA Loan Interest Rates
Mudra loans are available to those involved in non-farm businesses like the manufacturing, service and trading sectors. Microenterprises and those in the non-corporate small business segment can apply for schemes under the MUDRA Yojana.
To be eligible for low MUDRA loan interest rates, you have to present the following documents:
- Carefully filled out MUDRA loan application form
- KYC documents (Voter ID, Aadhar Card, PAN Card, etc.)
- Passport size photographs
- Caste certificate (if applicable)
- Bank statement
- Income and business continuity proof
Conclusion
If capital infusions are needed for the growth of your small business, you can apply for a MUDRA loan against a nominal interest rate. With the MUDRA Yojana, the government has ensured that MSMEs have a source of collateral-free credit readily available to them. While the PMMY has various schemes tailored to fit the specific needs and growth stages of MSMEs, all of them have competitive MUDRA loan interest rates.
