The Indian Government launched the Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana in April 2015. Also known as the PMMY scheme, it is aimed at “funding the Unfunded” and improving the accessibility of credit.
Under this scheme, applicants can apply for loans under three categories. These include:
1. Shishu Loan Scheme
2. Kishore Loan Scheme
3. Tarun Loan Scheme
The loan amounts offered under the above three categories vary between Rs 50,000 and Rs 10 Lakh.
Here, we dive deep into the Shishu Mudra loan and discuss what this is, its features, eligibility criteria, documents required, and the application process.
What is the Shishu Mudra Loan?
The Shishu Mudra loan is a category of loan offered under the PMMY scheme. It is specially designed to meet the financial needs of micro and small businesses and entrepreneurs who require a modest amount of financial assistance to start and grow their enterprises.
The maximum loan amount that an applicant can apply for is Rs 50,000. The tenure for the loan can range from three to five years and varies with financial institution.
The Mudra Shishu loan aims to empower regional and small businesses by fostering self-reliance at a nascent stage.
Features of the Shishu Mudra Loan
The Mudra Shishu loan helps businesses get access to a small amount of credit with ease. Here are some of the notable features that make it a popular choice for small enterprises and entrepreneurs:
Affordable Interest Rates
The interest rates charged on the Shishu loan are nominal, usually staying below 12%. While this may vary with financial institutions, the interest rate is substantially lower than that charged on standard business loans.
Comfortable Loan Tenures
The repayment tenure for offline as well as digital Shishu Mudra loans is between three to five years, allowing loan seekers to pay back the loan with ease.
Online and Offline Application Process
You can apply for a Shishu loan online as well as offline. For the former method, you can access the chosen PMMY-authorised financial institution's website. For the latter, you can visit their nearest branch to start the application process. Both modes are offered to make the loans easily accessible to all eligible entities.
Nominal Processing Fees
While the processing fees vary with financial institutions, it is generally much lower that the amount charged on standard business loans. Some financial institutions might charge fee upfront, while others might waive it off completely.
Be sure to ascertain the processing fee beforehand for a smooth application process.
Shishu Mudra Loan: Eligibility Criteria
Next, we discuss the eligibility criteria for the Shishu Mudra loan. Apply online or apply offline, but be sure that you meet the following criteria for a hassle-free process:
The applicant’s age must be between 18 and 65 years.
The loan must be required for business purposes such as working capital needs.
The applicant must own a business and need the loan to develop, improve, or modernise it.
The applicant must be an Indian citizen with no criminal record.
The applicant should ideally have no history of defaulting on loan payments.
The applicant can be a micro entrepreneur.
The applicant can be a new business owner or founder of a start-up who is in need of additional funds to grow their business.
The applicant can be engaged in the manufacturing, trading, allied agricultural service sectors, etc.
Be sure to check the eligibility criteria with your chosen PMMY-authorised financial institution before starting the Shishu loan applying process for a smooth experience.
Shishu Mudra Loan: Documents Required
While it might vary with financial institutions, here is a general list of documents you must keep ready when applying for the Shishu Mudra loan:
KYC documents such as Passport, Voter ID card, Driving License, Aadhaar card, Utility Bills (water or electricity), and PAN card
Documents in case the applicant belongs to SC/ST/any other special category
Proof of current address
Proof of income
Bank statement for the last six months
Business establishment certificate
Proof of continuity of business
Any other documents required by the financial institution
Shishu Mudra Loan: Application Process
Once you have all the documents ready, you can begin the Shishu Mudra loan online applying process. You can also apply for the loan offline. Here’s a look at the steps to follow in each case.
Shishu Mudra Loan Online Applying Process
Step 1: Download the loan application form from a PMMY-authorised financial institution’s official website. After filling it out, submit it with the required documents on the same website. You will receive a reference ID or number once the submission is successful.
Step 2: The financial institution’s representative will contact you to take the process forward. Be sure to keep your reference ID or number handy for a smooth process.
Step 3: Once your Shishu Mudra loan application form and attached documents are verified, the financial institution will disburse the loan amount directly into your account.
Shishu Mudra Loan Offline Applying Process
Step 1: Visit the PMMY-authorised financial institution’s nearest branch. Fill out the form, attach all the required documents and submit them with the financial institution.
Step 2: Complete any other formalities required by the financial institution.
Step 3: Once the Shishu Mudra loan application form and attached documents are verified, the financial institution will disburse the loan amount directly into your account.
Parting Thoughts
The Shishu Mudra loan offered under the Pradhan Mantri Mudra Yojana scheme helps entrepreneurs and business owners access additional funds without any collateral. Further, with its wide eligibility and easy application process, applicants can get loans without any hassle.
That said, the Shishu Mudra loan offers loan amounts of up to Rs 50,000. In case you want a loan amount greater than this, you can apply for the Kishore or the Tarun loan. However, even then, you can get a maximum loan amount of Rs 10 Lakh.
As a budding business, you might need additional funds to help meet day-to-day expenses or even big-ticket purchases such as the purchase of equipment and machinery. In such a case, you can apply for a business loan with Tata Capital.
With no collateral, flexible loan tenures, attractive interest rates, minimum documentation, doorstep services, quick approvals, and fast disbursements, Tata Capital helps you build your business with ease. For more information, visit the Tata Capital website or download the Tata Capital App now!
29 April 2024
6 mins read
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