Interest Rate in Mudra Yojana
Prime Minister Narendra Modi’s new policy is quite focused to develop the Indian economy. Several schemes have been born out of this policy, like Jan Dhan Yojana. Which has been quite successful and there is significant increase in number of people having a bank account. It was the objective of PM, through this scheme he had launched the MUDRA.
The MUDRA bank has become a new hope for people which come under the lower class and for middle class too. This initiative is to facilitate the micro units. And thereby provide them all an opportunity to develop, this can be achieved by giving them sufficient funds. Most of the people who want to open a small business do not get to avail loans from banks. This is due to unavailability of collateral fund or due to insufficient funds to pay off interest on time. Mr. Modi believes that helping small businesses to grow will eventually turn out to be very beneficial for the development of Indian economy. The analyzed data shows that at present, around 577 crore small businesses are running in the country. So, if they get the much needed financial support, it will show wondrous results in near future. But this MUDRA bank is yet not established as full fledged. Right now it is in its initial stages.
The process to get loans under this scheme is not tedious. There is no need for collateral or to pay fee for the loan application. You need not to spend a single penny to place an application to get the loan. The best and most attractive feature of this scheme is it’s interest rate. And that is what makes it special. The interest rate for this scheme is only 1 percent. The applicant has to repay the amount with only rate of 1%. Apart from this, other key features are the easy access to avail loan. Very systematic guidelines will be provided by the bank and the cost of finance is also sufficiently low. Such low interest rate will attract many small businesses from lower income groups. Entrepreneurs from the lower or middle class will develop and grow; there will be enhancement in social upward mobility of such businesses. This all will eventually turn out to be beneficial to develop the country’s economy also.
Three stages of MUDRA
Under this scheme, loans will be provided to micro institutions, small businesses from lower class. At present, the target of this yojana is only to provide adequate finance to these institution. The refinance will be provided in three stages;
Shishu: Under this scheme, small businesses can avail loan up to RS. 50,000 through the MUDRA. The interest rate will be 1 percent.
Kishor: Another stage is The Kishor Stage. Entrepreneurs from lower or middle class can apply for loan of amount ranging in between RS. 50,000 to RS. 5 lakh. They are likely to pay off the amount with an interest of 1 percent only.
Tarun: This is the third stage of intervention. And here the amount provided will be from Rs.5 lakh to Rs.10 lakh, with an interest of 1% again.
Benefits of low interest
The low interest rate will invite more peope from the micro or small enterprises. It will regulate and register all the micro finance Institutions. The small businesses will get the opportunity to grow or expand their enterprise further more. It will also assist the lower Income groups to set up new business and then to develop it. MUDRA will help them to establish responsible financial practices. This will prevent over borrowing too. This will serve the function to access the finance easily for the unbanked. Low interest will decline the cost of finance. 1% interest scheme will be beneficial for SC/ST too, they will be given more preference in lending the money.
All those Micro Finance Institutions which are at present dealing with manufacturing, trading and service will be regulated well. Small business units like food services, hair cutting saloon, vegetables and fruit vendors beauty parlors, repair shops, self help groups, hawkers, transportation services, artisans and several numerous professionals are eligible to avail the loan of Rs.10 lakh.
How to avail loan
After the application, loan is passed once all the documents are verified. After the approval, MUDRA card is provided to the applicant. This looks similar to that of a credit card. It has a limit up to 10 percent of the loan amount.
MUDRA is actually not an individual bank or a body. It’s not even a new or different bank as such. Under the scheme, several public and private sector banks are given the authority to provide loans under this category. So to avail loan, one needs to approach that particular bank or institutions, only after establishing a proper plan for the business they want to set up.