COVID-19 Relief Package For MUDRA Loans: What Are They, How It Impacts You

MUDRA loans are given under three different categories - Shishu (for tiny business units), Kishor (slightly bigger units), Tarun (relatively bigger units)

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Launched in the year 2015, Micro Units Development and Refinance Agency (MUDRA) is a Non-Banking Finance Company (NBFC) set up by the government to support the micro-enterprise sector.

During the Finance Minister’s announcement of the COVID-19 package, small businesses, amongst the hardest-hit segments, have been given liquidity support through the MUDRA scheme.

What is the Purpose of MUDRA?

  • The intent, while launching this scheme, was to support the small-scale businesses that don’t have access to formal channels of borrowing.
  • According to reports, more than 90 per cent of the non-corporate small business (NCSB) sector does not have access to formal sources of finance.
  • MUDRA provides refinance support to many financial institutions, including public and private sector banks, regional rural banks, state cooperative banks, microfinance institutions, and non-banking finance companies.

Who is Eligible for a Loan under MUDRA?

Source: Pixabay
  • Any entrepreneur running a small business enterprise is eligible to apply for this loan.
  • MUDRA loans are given under three different categories
    – Shishu (for tiny business units) which covers loans upto Rs 50,000,
    – Kishor (slightly bigger units) which covers loans above Rs 50,000 and upto Rs 5 lakh and
    – Tarun (relatively bigger units) which covers loans above Rs 5 lakh and upto Rs 10 lakh.
  • Over and above this, MUDRA also operates a special refinance scheme for women entrepreneurs, called Mahila Uddyami Scheme.

How Can One Apply for a MUDRA Loan?

Applicants need to have the following documents ready – proof of identity (Aadhaar, Voter ID, PAN, Driving License, etc.), address proof (electricity bill, telephone bill, gas bill, water bill, etc.), proof of business (business registration certificate, etc.)
• Applicants need to approach a financial institution to avail this loan.
• Upon filling the application form, and furnishing all details as required, they also have to fill out the amount they need.
• Once these steps have been carried out, the bank or financial institution will sanction the MUDRA loan.

COVID-19 Impact on MUDRA

• A 2 per cent interest rate subvention for 12 months to prompt loan payees under the Mudra scheme.
• Special loans of up to Rs 10,000 to provide working capital for street vendors to restart businesses.
• This scheme is likely to benefit more than 30 million credit takers.

(Edited by Saiqua Sultan)

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