Who Qualifies for an e-Mudra Loan and What Benefits Does It Provide?

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Setting up any business or growing your existing business requires a lot of funds. Young entrepreneurs often find it difficult to get access to funds that would help them grow their businesses. To help entrepreneurs set up and expand their business, the e-Mudra loan is offered under the purview of the government of India.

This has been made possible by the Micro Units Development & Refinance Agency Ltd., also known as MUDRA. MUDRA is a financial organisation that has been established in India to drive the growth of small and medium firms by helping them get financing.

Under the e-Mudra loan, entrepreneurs engaged in the farming, manufacturing and trading sector can get an unsecured, collateral-free loan of up to ₹10 Lakhs from reputed banks. This can include Mudra loans from leading financial institutions such as the Canara Bank Mudra loan and the Bank of Baroda Mudra loan.

Types of e-Mudra Loans Offered

There are three types of loans offered under the e-Mudra scheme. This classification is largely based on the loan amount.

  • Shishu Mudra Loan

Under the Shishu Mudra loan, you can get a loan of up to ₹50,000. This loan category is mainly targeted towards MSMEs that require very little funding. Additionally, there is no minimum loan amount that you can avail under this loan category.

  • Kishor Mudra Loan

Under the Kishor Mudra loan category, you can get a loan of up to ₹5 Lakhs. The Kishor Mudra loan category mainly caters to businesses that have been in operation  for a couple of years but need additional funding for expansion and development.

  • Tarun Mudra Loan

Under the Tarun Mudra loan category, you can get a loan of up to ₹10 Lakhs. This loan category is best-suited towards well-established businesses that are looking for funds to scale up.

Eligibility Criteria for the Digital e-Mudra Loan

Here are some basic criteria that you need to meet in order to be eligible for the e-Mudra loan:

  • The applicant should not have a history of defaulting on loan or credit repayments.
  • The e-Mudra loan facility is only available to individuals, public and private companies, partnership firms and proprietary concerns.
  • You must have the necessary skills needed to operate in specific industries (if applicable). Let’s assume you want to start a small chemical manufacturing unit, then you’d need to show necessary know-how related to chemical manufacturing.

Benefits of the e-Mudra Loan

  • Simplified Process

Financial transparency and access to money has always been a matter of contention with the MSME sector. This has made it so that many lenders are reluctant about offering business loans to MSME units. However, with the introduction of the e-Mudra loan, entrepreneurs have found it easy to avail unsecured loans for the development of their businesses.

  • Collateral-free Loans

When entrepreneurs are at the beginning of their careers, it might be difficult for them to offer up security. The idea of a collateral can sometimes deter entrepreneurs from seeking the financial aid that they require. In such a scenario, an unsecured loan can be a blessing.

  • Easy Access

The e-Mudra loan can be easily accessed as it is offered by almost all financial institutions across India. You can easily access the Canara Bank Mudra loan and Bank of Baroda Mudra loan by visiting their respective websites or bank branches.

  • Reasonable Interest Rates

Since the Mudra loan falls under the purview of the government of India, you can expect the rate of interest to be lower than other types of loans. Additionally, if you have a good credit profile, then you will also be able to negotiate the rate of interest further down.

  • Helps Strengthen the Economy

The Mudra loan is a great way for small and medium enterprises to get access to the funds they need to take their businesses to new heights. Since most of India is engaged in the unorganised sector, strengthening small and medium enterprises is a great way to help a large portion of the population become financially independent.

  • Fully Digital Process

One of the most important advantages of the e-Mudra loan is that it’s a fully digital loan. Which means that you can apply for your e-Mudra loan and have it processed entirely online, without the hassle of visiting physical bank branches. The digital e-Mudra loan is also a fully paperless process, this means that you need not carry around physical documents.

The digital e-Mudra loan is a great loan option for entrepreneurs who are looking for funding to set up their business or expand their existing business. You can get  collateral-free loans of up to ₹10 Lakhs under the digital e-Mudra scheme. This is also a fully digital and paperless loan which does not require you to take time off your busy schedule to visit a bank branch.