Pradhan Mantri Mudra Yojana (PMMY) and MUDRA Bank
Pradhan Mantri Mudra Yojana (PMMY) is a scheme announced by Central Government for ensuring loans to enterprises in manufacturing, trading and service sectors whose credit needs are below Rs.10L. Farm income generating activities are excluded from the PMMY. Setting up a Micro Units Development and Refinance agency (MUDRA) to facilitate promotion of Pradhan Mantri Mudra Yojana was also announced in the Union Budget 2015-16 with the aim of ‘funding the unfunded’.
Promoting the small enterprises helps to
a. improve the quality of life of the entrepreneurs
b. contribute to job creation in the economy
c. improve income distribution and
d. reduce poverty.
Hence, Micro, Small and Medium Enterprises (MSME) always get support from governments in all countries.
Micro Units Development and Refinance Agency (MUDRA)
In India, it is estimated that around 6 crore small scale business units are engaged in trading, manufacturing, retail and other small scale activities without credit support from formal financial banking system. To address their issues, Government of India announced setting up a Micro Units Development and Refinance agency (MUDRA) through a statutory enactment in the Union Budget 2015-16. MUDRA Bank aims at bringing those living in rural and interior parts of India under the formal banking system. Building a suitable framework under the Pradhan Mantri MUDRA Yojana for ensuring smooth credit delivery to small and micro businesses is one of the major objectives of MUDRA.
Pradhan Mantri Mudra Yojana (PMMY)
MUDRA Bank has classified non- farm income generating enterprises in manufacturing, trading and service sector in to three segments:
1. Starters
2. Mid stage finance seekers
3. Growth seekers
To address the financial requirements of each segment, three loan categories have been announced.
1. Shishu – Loans up to Rs 50,000/-
2. Kishor – Loans above Rs 50,000/- and up to Rs 5L
3. Tarun – Loans above Rs 5L and up to Rs 10L
Department of Financial Services, Ministry of Finance has instructed all banks to extend loans below Rs. 10 L to non-farm income generating enterprises in manufacturing, trading and services as MUDRA loans under the PMMY. Separate targets have also been allotted to each bank.
Subsequent amendments have made the Mudra Loans more attractive. These amendments are:
1. Activities allied to agriculture are eligible to be considered under the scheme.
2. Waiver of Margin Requirement and Processing Fee for Shishu loans.
3. Introduction of a simplified one page application form and checklist for Shishu Loans
Pradhan Mantri Mudra Yojana (PMMY) – Other important points
1. There is no relation between the loan category (Shishu, Kishore and Tarun) and type of borrower. That means, a loan of Rs. 10 L (Tarun) can be sanctioned, if otherwise eligible, to a new business firm (starters). Classification of loan as Shishu, Kishore or Tarun is based on the quantum of finance extended. The quantum of finance is assessed on the basis of requirement and repaying capacity.
2. Requirement of co-obligancy is a must for PMMY loans.
3. Government sponsored schemes are not eligible to be considered under PMMY
4. Credit facilities to Self Help Group(SHG) and Joint Liability Group (JLG) can be considered under Mudra loan scheme.
5. Interest of loan is linked to the MCLR of the respective bank and internal credit rating, if applicable.
6. Banks normally follow the service area approach while extending credit facilities.
7. Certain limits are eligible to be covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Hence, said units are eligible to be financed without collateral.
8. Commonly assessed parameters by banks to extend credit facilities under PMMY are:
a. Competency of the applicant
b. CIBIL report
c. Service area concept
d. Present level of functioning and performance of the existing unit, if finance is for existing business unit.
e. Internal credit rating of the bank, if applicable.
What are the papers to be submitted for loans under Pradhan Mantri Mudra Yojana (PMMY)?
The following papers are required to be furnished to the bank for assessing the eligibility. The documents mentioned are only indicative and not exhaustive.
1. Know Your Customer (KYC) documents of the promoter/ firm which includes ID proof, address proof, photograph, certificate issued by Govt. Authority/Local Panchayat / Municipality, registration certificate etc.
2. Proof of SC/ST/OBC/Minority, if applicable
3. Statement of present account
4. Last 2 years unaudited/ audited balance sheet and P&L, as the case may be
5. Projected balance sheet and P&L for one year for working capital and till the end of repayment year for term loan.
6. Provisional balance sheet till a recent date of application along with VAT/SalesTax/ GST returns
7. Proforma invoice/ quotations relating to the assets to be acquired under term loan.
8. Asset and Liability statement of borrower/ co-obligant
9. Other applicable documents like Memorandum & Articles of Association ( for companies), Partnership deed for partners etc.
