Equity Capital to Micro Units Development Refinance Agency (MUDRA Bank) : Most Important Topic for 2021 RBI Assistant Exam

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  • Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of Government of India to “fund the unfunded” by bringing such enterprises to the formal financial system & extending affordable credit to them. It enables a small borrower to borrow from all Public Sector Banks such as PSU Banks, Regional Rural Banks & Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions (MFI) & Non-Banking Finance Companies (NBFC) for loans upto ₹ 10 lakhs for non-farm income generating activities. The scheme was launched on 8th April, 2015 by the Hon ′ ble Prime Minister.


  • Any Indian Citizen who has a business plan for a non-farm sector income generating activity such as manufacturing, processing, trading or service sector & whose credit need is less than ₹ 10 lakh can approach either a Bank, MFI, or NBFC for availing of Micro Units Development & Refinance Agency Ltd. (MUDRA) loans under Pradhan Mantri Mudra Yojana (PMMY) .

Types of Loans Provided

  • Under the aegis of Pradhan Mantri MUDRA Yojana, MUDRA has already created the following products/schemes.
    • Shishu: covering loans Upto 50,000/-
    • Kishor: covering loans above 50,000/- & Upto 5 lakh
    • Tarun: covering loans above 5 lakh & Upto 10 lakh
  • The interventions have been named ‘Shishu’ , ‘Kishor’ & ‘Tarun’ to signify the stage of growth/development & funding needs of the beneficiary micro unit/entrepreneur & also provide a reference point for the next phase of graduation/growth to look forward to. It would be ensured that at least 60 % of the credit flows to Shishu Category Units & the balance to Kishor & Tarun Categories.
  • There is no subsidy for the loan given under PMMY. However, if the loan proposal is linked some Government scheme, wherein the Government is providing capital subsidy, it will be eligible under PMMY also.

Sectors Covered

  • To maximize coverage of beneficiaries & tailor products to meet requirements of specific business activities, sector/activity focused schemes would be rolled out. To begin with, based on higher concentration of businesses in certain activities/sectors, schemes are proposed for:
    • Land Transport Sector/Activity - Which will inter alia support units for purchase of transport vehicles for goods & personal transport such as auto rickshaw, small goods transport vehicle, 3 wheelers, e-rickshaw, passenger cars, taxis, etc.
    • Community, Social & Personal Service Activities - Such as saloons, beauty parlors, gymnasium, boutiques, tailoring shops, dry cleaning, cycle & motorcycle repair shop, DTP and Photocopying Facilities, Medicine Shops, Courier Agents, etc.
    • Food Products Sector - Support would be available for undertaking activities such as papad making, achaar making, jam/jelly making, agricultural produce preservation at rural level, sweet shops, small service food stalls & day to day catering/canteen services, cold chain vehicles, cold storages, ice making units, ice cream making units, biscuit, bread & bun making, etc.
    • Textile Products Sector/Activity - To provide support for undertaking activities such as handloom, powerloom, chikan work, zari & zardozi work, traditional embroidery & hand work, traditional dyeing & printing, apparel design, knitting, cotton ginning, computerized embroidery, stitching & other textile non garment products such as bags, vehicle accessories, furnishing accessories, etc.

How to Apply

  • Borrowers, who wish to avail assistance under Pradhan Mantri MUDRA Yojana (PMMY) , can approach the local branch of any of the financial institutions in their region - PSU Banks, Regional Rural Banks and Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions (MFI) & Non-Banking Finance Companies (NBFC) . Sanction of assistance shall be as per the eligibility norms of respective lending institution.
  • Proof of identity – Self attested copy of Voter՚s ID card/Driving License/PAN Card/Aadhaar Card/Passport/Photo Ids issued by Govt. authority etc.
  • Proof of Residence: Recent telephone bill/electricity bill/property tax receipt (not older than 2 months) / Voter՚s ID Card/Aadhaar Card/Passport of Individual/Proprietor/Partners Bank passbook or latest account statement duly attested by Bank Officials/Domicile Certificate/Certificate issued by Govt. Authority/Local Panchayat/Municipality etc.
  • Applicant՚s recent Photograph (2 copies) not older than 6 months.
  • Quotation of Machinery/other items to be purchased.
  • Name of Supplier/details of machinery/price of machinery and/or items to be purchased.
  • Proof of Identity/Address of the Business Enterprise – Copies of relevant License՚s/Registration Certificates/Other Documents pertaining to the ownership, identity of address of business unit, if any
  • Proof of category like SC/ST/OBC/Minority etc.
  • Note: For all PMMY loans, the following are to be noted.
    • No processing fee
    • No collateral
    • Repayment period of loan is extended up to 5 years
    • Applicant should not be defaulter of any Bank/Financial Institution

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