Rate of Interest on Mudra Loans:
If you are planning to apply for MUDRA loan, you probably want to know something about the interest rates. This helps you determine how comfortable you will be when repaying off the loan and what amount you can get so that you repay with ease. An important thing to note is that the rates of interest are dynamic because the institutions decide how much they charge for the MUDRA loans. However, they are supposed to work under the MUDRA Yojana scheme guidelines and the Reserve Bank of India guidelines to make sure the credit facilities are affordable and cost effective to the borrowers. The MUDRA Yojana scheme has not set any specific interest rates that should be applied by the individual lenders. So the lenders have to assess the risk criteria of the borrowers before they allocate the interest rates.
The Interest Rate for MUDRA Loan:
There are three categories of loans that are offered under the Pradhan Mantri Mudra Yojana scheme. Depending on the loan category and the specific lending institution (the affiliate lending institution mandated to provide the financial loans) you may have different interest rates.
For the Shishu loan, which is categorized as stage one of borrowing, it has a loan limit of INR 50,000. An applicant will have a grace period of five years or loan tenure of five years to clear the loan. This means you have to repay the loan principal amount together with the interest within the duration of five years. The interest loans for the Shishu loan is somewhere around 12 percent per annum. This rate may vary depending on the bank you get the loan from.
The Kishor loan category has a loan limit of INR 5 lakhs. The applications can get a loan from INR 50,000 but they cannot exceed INR 5 lakhs. The duration to repay back the loan or the loan tenure is mostly determined by the individual bank from where you borrow the MUDRA loan. The interest rate for the loan also depends on other underlying factors like credit history and the scheme’s guidelines.
The third category of MUDRA loans are the Tarun loan facilities. The applicants can ge granted a loan from 5, 00,000 (5 lakhs) but they cannot exceed INR 10,00,000 (10 lakhs). The lending institution determines the loan tenure or the period taken to repay off the loan. The lender may also factor in the credit history of the borrower and the scheme’s guidelines to find out the applicable interest rate for the applicants.
When looking at the three categories of MUDRA loans, you find that the Shishu loan is independent of the applicant’s financial history, their credit history, or the history of the business. It is also considered the cheapest loan facility that the MUDRA scheme offers. Before you apply and obtain the MUDRA loan, you want to know the interest rate that is charged by the individual lending institutions under the MUDRA scheme. Take for example as of 2017, Vijaya Bank charged an interest of 13.70 percent with tenure of 1 to 5 years. State Bank of Patiala had an interest rate that ranged from 13.2 percent to 14.65 percent and a tenure of1 to 5 years. It’s important you update yourself with the current interest rates charged by the financial institutions under MUDRA scheme.