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Tata Capital > Blog > Loan for Business > What is the Tarun Mudra Loan Scheme?

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What is the Tarun Mudra Loan Scheme?

What is the Tarun Mudra Loan Scheme?

The Tarun Mudra Loan under the Pradhan Mantri MUDRA Yojana (PMMY) might offer a viable financing option for entrepreneurs looking to borrow funds.

The Micro Units Development and Refinance Agency (MUDRA) is a refinancing institution primarily focused on loan extension. Originally established as a wholly-owned subsidiary of SIDBI (Small Industries Development Bank of India), MUDRA commenced operations as a refinancing company with a paid-up capital of ₹750 crore and an authorised capital of ₹1,000 crore.

Here, we discuss what is a Tarun Mudra Loan, applying online procedures, and more.

What is the Tarun Mudra loan scheme?

The Tarun category under the Pradhan Mantri Mudra Yojana (PMMY) is designed to provide financial assistance to small entrepreneurs who require higher loan amounts to expand their businesses. Tarun loans are offered to entrepreneurs who need loans amounting between Rs 5 lakh and Rs 10 lakh.

As of March 2023, a staggering Rs 4.51 lakh crore has been disbursed to 7 million borrowers under the PM Mudra Yojana Tarun loan.

Who is eligible for the Tarun Mudra loan scheme?

The business loans provided under the Mudra Tarun scheme can be utilised for various purposes, such as purchasing machinery, equipment, raw materials, inventory, working capital, and business expansion activities.

The eligibility criteria for the scheme are as follows:

1. Age:

Individuals aged between 18 to 65 years are eligible.

2. New and existing MSME units:

Both new ventures and Ministry of Micro, Small, and Medium Enterprises (MSME) units qualify.

3. Coverage:

Various sectors benefit, particularly the non-corporate micro-industry, a significant contributor to income generation and employment in India.

4. Eligible purposes:

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1. Working capital: Loans cater to both fixed asset procurement and working capital needs, with the option to utilise the Mudra Card for operational expenses.

2. Transport vehicles: Commercial vehicles like three-wheelers, auto-rickshaws, and others qualify.

3. Equipment and machinery: Necessary for micro-enterprises.

4. Agricultural activities: Including poultry, fishing, dairy, agri-clinics, etc.

5. Trades and small businesses: Small business loans extend to traders, vendors, shopkeepers, and other small business owners.

6. Food products sector: Covers activities like jelly or jam making, small bakeries, snacks, pickles, etc.

7. Textile producers and traders: Khaki, wool, silk, handicrafts businesses, etc.

8. Community businesses: Gyms, parlours, boutiques, bookshops, printing shops, mobile repair shops, etc., are also eligible.

What are the interest rates applicable for the Tarun Mudra loan scheme?

Interest rates for Tarun loan yojana are generally competitive and are decided by the lending institutions. These rates vary based on the applicant's creditworthiness, collateral offered (if any), and prevailing market conditions.

What are the financial requirements for the Tarun Mudra loan scheme?

Borrowers under the scheme have a maximum period of 7 years to repay the loan, which includes a possible moratorium period of up to 12 months. The processing fee for the loans is 0.50% of the loan amount, plus applicable taxes.

What are the collateral requirements for the Tarun Mudra loan scheme?

The scheme encourages collateral-free loans for loan amounts to promote accessibility to budding entrepreneurs who may lack tangible assets to pledge as security. However, additional documentation would be required, depending on the borrower's loan amount and credit profile.

What is the margin requirement for the Tarun Mudra loan scheme?

The term "margin" is the percentage of the total project cost the borrower needs to contribute from their funds, while the remaining amount is financed through the MUDRA loan.

For a Tarun category loan, a margin of 25% is set. This means the borrower needs to contribute 25% of the total project cost, and the Mudra loan covers the remaining 75%.

What is the application process for the Tarun Mudra loan scheme?

Entrepreneurs interested in availing of Tarun loans can apply through various financial institutions participating in the PMMY scheme, including scheduled commercial financial institutions, regional rural financial institutions, cooperative financial institutions, microfinance institutions (MFIs), and non-banking financial companies (NBFCs).

The application process typically involves submitting relevant documents related to the business, financial statements, KYC (Know Your Customer) records, and business plans, among others.

Here’s a breakdown of how to apply online for the Tarun Mudra loan:

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1. Visit the official website of the preferred lender and download the application form for the Mudra Tarun Loan.

2. Fill in the required details, including KYC information such as an Aadhaar card and voter’s ID.

3. Provide comprehensive business details, including purpose, income tax, and sales-related information.

4. Choose the needed loan amount and repayment tenure.

5. Review the loan terms and agreement carefully before submitting the application.

6. The financial institution will review and approve the application if the eligibility requirements are met.

Documents for business loan:

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1. Duly-filled Mudra scheme application form

2. Loan application form of the lending institution

3. Proof of identity and residence

4. Proof of business existence, ownership, and continuity

5. Balance sheet for the last two years and estimated balance sheet for the next financial year or loan tenure

6. Income tax returns and sales tax statement

7. Bank account statements and trade references

8. Record of sales made in the current financial year

9. Caste certificate for OBCs, SCs, and STs (if applicable)

10. A well-documented business plan

Final thoughts

It's important for potential borrowers to thoroughly understand the terms and conditions associated with the Tarun loan yojana to ensure successful utilisation and timely repayment. Additionally, consult financial advisors or experts for guidance tailored to your business requirements and financial goals.

Are you looking for a reliable financing partner for your small enterprise? Tata Capital MSME loans offer attractive interest rates and flexible repayment options, so you can focus on expanding your business without worrying about financial constraints.

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