What Is The Basic Purpose Of The Mudra Loan

Mudra is a subsidiary of SIDBI. It provides refinancing facilities to banks and MFIs against the loans which have been provided to MSMEs in order to promote their development. Mudra scheme was curated with the main aim to fund small businesses and entrepreneurs and to protect them from exploitation at the hands of informal lenders. It has helped over 1.5 crore new entrepreneurs in setting up their businesses.

This scheme works without collaterals and there is no fixed interest rate on the loans which will be availed under this scheme. Interests that are charged under this scheme is at a minimum of the base rate plus 1 to 7% depending on the lender. It may increase depending upon the risk involved and customer profile.

Mudra loan’s main purpose is income generation and employment creation. The loans are mainly for:

• Equipment Finance for Micro Units
• Tractors, tillers, two wheelers used for commercial purposes only.
• Working capital loan through MUDRA Cards
• Loans for agri-allied non-farm income generating activities
• Transport Vehicle loans used for commercial use only
• Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities.