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What is Mudra Shishu Loan: Benefits, Eligibility and Documents Required

what is mudra shishu loan

“There are various sub-program included in the MUDRA loan scheme, one of them being the Mudra Shishu Loan.” Let’s understand everything about the Mudra Shishu loan.

Small scale enterprises and MSMEs are the backbones of India. After the agriculture sector, MSMEs are the biggest job creators in India, with more than 50 crore people, indirectly or directly, getting employment via MSMEs.

With 8-10 crore small entrepreneurs in India, Govt wants this sector to flourish and thrive: Even a tiny percentage of positive change in this sector can cause a ripple effect of progress, growth, and development for the entire country.

To help small, micro, and medium enterprises in India and to enable them to access capital and funding without any hassles, the Govt of India launched the Pradhan Mantri MUDRA Yojana scheme in 2015.

Mudra Offering StructureSource: https://www.mudra.org.in/offerings

Rs 20,000 crore was allocated for this scheme, and Rs 3000 crore of credit guarantee scheme was announced, aiming to empower 5.33 crore entrepreneurs by providing low-interest, collateral-free business loans. Later, a special corpus of Rs 1 lakh crore was allocated to make this loan scheme a super success phenomenon. In fact, within two years of launching this loan scheme, more than 1.6 crore Indians were able to get a new job or start a new business. There are various sub-program included in the MUDRA loan scheme, one of them being the Mudra Shishu Loan.

The article will cover how the MUDRA loan works and what is Mudra Shishu loan, besides sharing the Mudra Shishu loan limit and Mudra loan eligibility age limit. In the end, you will come to know everything about this loan facility, including Mudra Shishu loan benefits and Mudra Shishu loan eligibility. Will also share how you can get the required Mudra Shishu loan documents.

Let’s understand everything about the Mudra Shishu loan, but before, let’s find out how this innovative loan scheme works?

Pradhan Mantri Mudra Yojana (PMMY): How it Works?

Pradhan Mantri Mudra Yojana (PMMY) in a one-of-its-kind fund of funds, which works this way:

  • Govt allocates a yearly sum, which is provided to non-banking financial institutions (NBFCs), micro-finance institutions, and related organizations via Micro Units Development and Refinance Agency Bank.
  • Micro Units Development and Refinance Agency Bank itself functions as a non-banking financial company and works as a subsidiary of the Small Industries Development Bank of India (SIDBI).
  • Small scale entrepreneurs and MSMEs can then avail business loans from the NBFCs, MFIs that have received the funding from Micro Units Development and Refinance Agency Bank, at low interest and zero collateral.
  • The objective of Pradhan Mantri Mudra Yojana is to help small, micro, and medium scale businesses via indirect funding felicitated by Micro Units Development and Refinance Agency Bank and other NBFCs.
  • Entrepreneurs who could not secure business loans via normal banking channels were the targeted audience for this scheme.

Under the Refinance of Micro Units via NBFCs, there are three types of loans under Mudra: Shishu, Kishore, and Tarun. In this article, we will focus on the details about the Shishu category of Mudra business loans.

What is Mudra Shishu Loan?

Under the Mudra scheme, Shishu Loan is designed for new startups and new businesses, which need a small amount of business operations loans. These are categorized as micro-businesses. The Mudra Shishu Loan Limit is Rs 50,000. This means that a maximum loan of Rs 50,000 can be availed under the Shishu program.

The next category of loans under Mudra is Kishore Loans, which is between Rs 50,001 to Rs 500,000 for small businesses, and then Tarun Loan, which is between Rs 500,001 to Rs 10,00,000 for established medium scale businesses. The micro-segment of MSMEs were always under-represented and banks refuse to provide business loans of such a small amount to these entrepreneurs. This is where Mudra loans under the Shishu category come in, changing the dynamics of the loan sector in India. Mudra Shishu loan limit has been deliberately kept at Rs 50,000 to encourage micro-entrepreneurs to avail of this benefit and expand their businesses.

Mudra Shishu Loan Eligibility

One of the most important eligibility criteria for availing of Shishu loan under the Mudra category is non-agriculture-based business. In fact, the entire Mudra loan scheme has been devised for those entrepreneurs who are into non-agriculture businesses. Mudra Shishu loan eligibility includes:

  • Small manufacturing units
  • Purchase of transport vehicles like small pickups, auto-rickshaw
  • Service sector such as salons, beauty parlor, tailoring shop, repair shop, etc.
  • Artisans, handicraft creators
  • Fruit and vegetable dealers (not producers)
  • Kirana store owners, shopkeepers such as medicine shops, etc.
  • Trading and investment services
  • Agri-allied businesses such as bee-keeping, poultry, grading, livestock rearing, etc.

If we talk about the Mudra loan eligibility age limit, it’s between 18 and 65. Hence, be it a Shishu Loan, Kishore Loan, or Tarun Loan, the applicant should be aged between 18 and 65 years at the time of applying for the loan.

Mudra Shishu Loan Benefits

Some of the main benefits under the Mudra Shishu loan are:

  • There is no need for any collateral for availing Mudra Shishu loan or any other Mudra loans.
  • There are no processing fees involved.
  • Loans are provided under both the funded and non-funded category, and there is enough flexibility in the rules to enable the loan seeker to utilize the funds the way they want it.
  • There are several ways this loan can be taken; for example, you can convert it into a term loan or avail of an overdraft facility instead of taking a lump sum amount. Letters of credit and bank guarantee also works, which means more flexibility.
  • There is no minimum amount needed for availing of the loan.

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