Eligibility for Mudra Loan:
The MUDRA scheme works to provide financial assistance to startups and microenterprises located in a remote area that have no well-elaborated formal banking operations or functionalities. The initial target clients was about 5.8 crore of microenterprises. The MUDRA Yojana business financing scheme has a set of guidelines to determine which banks and financial institutions are involved in the scheme to provide borrowers with loans. Also, it has a framework of policies and objectives that ensure that implementation of the scheme is done efficiently. The banks involved in MUDRA Yojana scheme have to prepare and launch the policies according to the guidelines that have been approved by the scheme. Another priority is the involvement of MFIs or microfinance institutions in helping device the action plan for the scheme as well as the registration and regulation of those institutions. The scheme also focuses on making a strong foundation for the microfinance institutions as well as the micro businesses to attain their goals and capacities for efficiency.
Basic Eligibility for Small Businesses:
Under the MUDRA Yojana scheme, the target business clients have carefully been handpicked to ensure that they are the right entities to benefit from the project. These entities prove eligible to get the services offered by MUDRA Yojana scheme. The scheme, of course, has certain conditions that have to be satisfied by businesses to be eligible for the loan facilities. The eligible business units need to follow under one of these classes or categories.
- Small manufacturing units
- Vegetable and fruits vendors
The target businesses are further classed differently to get the credit facility. For example, there are those that are categorized under Shishu and they get up to Rs. 50,000. Those categorized in Tarun stage get up to Rs. 1,000,000.
For a business to be eligible for Shishu category loans (up to Rs. 50,000) they have to feature within the exclusive structure of startups needing financial help. In Kishor category, a small business needs to have been operating in the past but it hasn’t yet been established. In this category, they get loan facilities from Rs. 50,000 to Rs. 5 Lakhs. For a business to be eligible for Tarun category it should be fully established and functional but it lacks a sound financial foundation. Businesses in this category can get loans from Rs. 5 Lakhs to Rs. 10 Lakhs.
In addition to business eligibility, the MUDRA Yojana scheme defines the types of lending institutions that are able to get involved in the financing activity and offer their financial services to the businesses or eligible borrowers. Institutions like regional rural banks, urban and or state co-operative banks, scheduled commercial banks, and micro-financing institutions like trusts and societies are eligible to offer loans under the scheme. In addition, MFIs and NBCFs are screened and approved to offer loan services to businesses under MUDRA Yojana scheme, and they are also regarded as eligible institutions.
In total, there are about 27 public sector banks and 17 private sector banks that have been approved under the scheme. There are also 27 regional rural regional banks given the mandate to involve themselves in offering credit facilities to small business.