Pradhan Mantri MUDRA Yojna (PMMY)

With an objective to develop Indian economy on 8^th April, 2015 Prime Minister Narendra Modi had launched the Micro Units Development and Refinance Agency or the MUDRA Bank under Jan Dhan Yojna.

As a flagship scheme of the Government of India Jan Dhan Yojna was launched by PM Narendra Modi on 28 August 2014 with an aim to abolish financial untouchability by catering bank accounts to the poor.

About MUDRA Bank

The Government of India has set up MUDRA Bank (Micro Units Development and Refinance Agency Bank) as a new institution for development of micro units and refinancing of Micro Finance Institutions (MFIs) to promote entrepreneurship in India by funding the non-corporate small business sector.

MUDRA Bank, as it is not a full-fledged bank, in its refinancing scheme, is going to provide loan through NBFCs, MFIs, Rural Banks, Nationalized Banks, Private Banks, Primary lending Institutions and other intermediaries.

MUDRA Bank is a financial initiative that is created to facilitate the micro units and cater them sufficient funds for their development. It has been felt that small businesses are often not able to get loans from banks due to lack of insufficient funds to pay off the interest. In India there are almost 577 crore small businesses at present functioning, and according to the PM, helping these businesses to grow can create an environment for the development of India economy.

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Responsibilities of MUDRA Bank

Responsibilities of MUDRA consist of – preparing and launching the policy guidelines, registration and regulation of MFIs entities, running a credit guarantee scheme, and creating architecture for serving Micro business by providing them loan (financial assistance).

Eligibility Criteria for Participating Banks and Financial Institutions

To take part in the PMMY scheme the government of India has put some eligibility criteria which Banks and financial institution have to fulfill:

For Scheduled Commercial Banks

All Scheduled Commercial Banks in public private sector having, three years of continuous profit track record, net NPA not exceeding 3 per cent, minimum net worth of Rs100 crore and not less than 9 per cent CRAR are eligible to give loan under PMMY.

For Regional Rural Banks (RRBs)

All restructured RRBs with net NPA under 3 per cent (can be relaxed in deserving cases), having profitable operations and not carrying any accumulated losses and not less than 9 per cent CRAR are eligible to give loan under Prime Minister Mudra Yojna (PMMY).

MFIs and Small Business Companies can also take part if they fulfill requirements.

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Three categories of MUDRA Bank Scheme or Yojna

In order to signify the growth state, Development and Funding the small business or micro units have been classified into three categories: “Shishu (Child Category)”, Kishore Category” and “Tarun Category”.

“Shishu” : All those businesses which have been just started, that is Start ups, have been grouped into this category. A loan cover of Rs. 50,000 will be provided to all micro units grouped under this category.

Under this MUDRA Shishu Yojna banks have to cater loan upto Rs. 50,000. For this basic scheme banks are charging the interest rate that may vary from 10% to 12%. However, nationalized banks are charging less interest rate than private banks.

“Kishore”: Under this category come those businesses, which have been started but in dire need of their establishment.

Under this MUDRA Kishore Yojna banks have to provide loan between Rs. 50,000 to 5 Lakh. As it is a middle scheme that comes in the category of unsecure loan, its interest rate is high that varies form 14% to 17%.

“Tarun”: All small businesses, which have been established, have been grouped under this category. However, they require loan for their betterment.

Under this MUDRA Tarun Yojna an applicant can apply for the loan of between Rs. 5,00,000 to 10,00,000. It is also an unsecured loan therefore its rate of interest is high and begins from 16% and may vary from bank to bank. In every case an applicant must keep it in mind that the interest rate between Nationalized Banks and Private Banks are always different, so one must check the difference before applying for the loan.

Applying for PMMY

Before applying for a loan under PMMY, the applicant must prepare a business idea since she/he would have to present the idea along with the application form.

After preparing the business proposal the applicant should consult the Private or Commercial Bank nearest to her or his location.

The applicant has to keep in mind that along with his application form and business plan she/he has to provide proof of identify, proof of address and recent passport size photo.

All above formalities need to be fulfilled by the applicant as per the instructions of the bank.

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