What Govt.-Based Schemes were Launched to Encourage Small-Scale & Agro-Businesses?

mudra loan

Characterised as ‘growth engines,’ small businesses have tremendous contributions to India’s economy. Around 69% of the country’s employment is provided by the SME sector. Equally contributing is the agricultural sector which engages 60% of the nation’s population.     

Despite these, small scale and agricultural businesses face growth hindrances due to their size, nature and finance. The Indian government has, therefore, introduced several schemes to encourage these enterprises for growth and development.

One of the key schemes for small businesses is the Pradhan Mantri MUDRA Yojana or PMMY. Known as MUDRA loans, this policy aims to financially support non-corporate and non-farming small scale organisations.  

  • Nearly 5.5 crore PMMY loans have been sanctioned as of FY2019-20
  • MUDRA loans of Rs.28,3314.31 crore were sanctioned during 2019 and 2020.

What makes a MUDRA loan advantageous?

Introduced in 8th April 2015, Pradhan Mantri MUDRA Yojana primarily brings the expansive SME/MSME sector within a formal financial fold. The government also promotes a value-based entrepreneurial culture through this mission.

MUDRA loans are categorised into 3 groups based on business vintage:

  1. Sishu: This category comprises entrepreneurs who are either willing to start a business or already in the process. Borrowers can avail up to Rs.50,000 under Sishu.       
  2. Kishor: This category of MUDRA loan is for existing businesses looking to expand. The maximum amount sanctioned is of up to Rs.5 lakh. 
  3. Tarun: This third category is for well-established businesses looking to diversify or grow further. Eligible borrowers can avail up to Rs.10 lakh under this category.     

These categories, however, involve some stringent requirements which borrowers must fulfil. Make sure to know everything about PMMY beforehand. 

Besides the category, there are other features and benefits of this business finance.

  1. No guarantor or collateral needed.
  2. Zero processing fees involved.
  3. Affordable rates of interest.   
  4. No minimum loan amount.  

Businesses must fulfil the eligibility criteria to enjoy these benefits efficiently. Enterprises qualified to apply are those:

  • Engaged in trading, manufacturing and services sector.
  • Who are non-farm or non-corporate firms.
  • Who are into allied agriculture services.

How can businesses utilise the fund?

Borrowers can utilise MUDRA loans for diverse purposes in their ventures.

  1. For many small entrepreneurs, advertising and marketing at profitable rates become challenging.
  2. Small/ medium scale enterprises usually use old and obsolete technology which hampers their production.
  3. Opening a new branch, introducing a product line or restocking products – everything requires significant investment amount. 
  4. Maintaining a healthy working capital is crucial to keep the venture running smoothly.

Loans under PMMY can address such necessities for a business’ growth and expansion adequately.

How to apply for a MUDRA loan?

The government allows various financial institutions in India to sanction PMMY loans. Eligible borrowers can approach a reputable lender for MUDRA loan apply. Primarily, the process includes:

  1. Arrange all the required documents

Eligible borrowers need to submit certain documents for the MUDRA loan. Ensure to keep those updated and handy:

  1. Proof of address – Utility bills like telephone bill, electricity bill, water bill, etc.
  2. Proof of identity – PAN card, voter ID, Aadhaar, etc.
  3. Business proof – Certificate of business registration.     
  • Choose a preferred and reliable financial organisation

Various financial organisations provide these loans for business finance. So, assess their offers and select the most reliable lender.

  • Fill in the online application form   

Access the online application form for MUDRA loan apply, and fill up with accurate business and personal information. Once you submit the form, the lender sanctions the amount directly to your account after successful processing.

Agricultural businesses can apply for policies like NMSA or National Mission for Sustainable Agriculture.  There are various sub-schemes under NMSA, including SHM, SMAF, RAD, NCOF, etc. 

Alternatively, if you need high financing with more flexibility, you can avail customised Business Loans from lenders like Bajaj Finserv. Seek up to Rs.30 lakh at nominal rates and repay conveniently over 12 to 60 months. Also, enjoy features like minimal documentation, fastest approval, collateral-free, online account access and more. 

  • As estimated, India houses 42.50 million registered and unregistered SMEs currently.

Hence, small businesses should plan to boost their ventures and penetrate potential avenues strategically. MUDRA loans are designed to support such promotional and developmental activities sufficiently. Reputed financial organisations also bring higher flexibility and convenience with their tailored business loans for individuals to borrow.