Mudra Loan Interest Rate
Mudra Loan interest rates – well that’s something really important if you are looking for a loan under Mudra Scheme. We will talk of the interest rates in a while but before we do, let us give you a simple idea of what Mudra Yojana is all about.
What really is Pradhan Mantri Mudra Yojana?
The Union Government of India launched Pradhan Mantri Mudra Yojana via MUDRA Bank (an institution created by the government, which goes by the name Micro Units Development and Refinance Agency Limited – abbreviated as MUDRA Limited) with the sole purpose of providing financial aid (in form of loans) to non-farm, non-corporate sectors that are engaged in activities of small and micro entities that generate income. The only condition here is that the credit requirements of such sectors should not exceed INR 10 lakhs.
That’s the brief about Pradhan Mantri Mudra Yojana. We will skip the details because you can come across plethora of information sources if you comb the internet.
Mudra Loan Interest Rate
This is the primary topic of the article. We know that you are interested in knowing the interest rates that are offered by various lending institutions for loans under Mudra Yojana. But before we start, let us inform you that Mudra Yojana offers three loan variants:
- Shishu Loan: The sanctioned loan amount under this variant cannot exceed INR 50,000. Loan tenure in this case is 5 years, which simply means that the borrower needs to repay the loan money with interest within a period of 5 years from the date of loan disbursal. In this variant of the loan, interest rate is around 12% per year but different banks can have different rates.
- Kishor Loan: The sanctioned loan amount under this variant cannot be less than INR 50,000 and cannot exceed INR 5 lakhs. In this variant, the tenure of the loan is determined by the bank which lends the money. Also, the interest rate that the bank will charge will be dependent on factors like applicant’s credit history, guidelines of the scheme etc.
- Tarun Loan: In this third category, the sanctioned loan amount cannot be less than INR 5,00,000 (5 lakhs) and cannot exceed INR 10,00,000 (10 lakhs). As in case of Kishor Loan, Tarun Loan’s repayment tenure is to be decided by the lender. Similarly, the lender will take account of borrower’s credit history, guidelines of the scheme etc. to determine the interest rate that will be charged.
This means that Shishu Loan is actually independent of business history, applicant’s financial history etc. It is also the cheapest loan variant out there under Mudra Scheme.
Now the big question…
“What is the interest rate charged by different lenders for loans under Mudra Scheme?”
To be honest, there is no fixed interest rate out there. Different banks have different interest rates. Remember that when we are saying banks, we actually mean eligible private banks, eligible cooperative banks and eligible public sector banks. Apart from that, there are non-banking lenders as well, which include micro finance institutes as well as NBFCs (non-banking financial companies).
Let us take a quick look at the interest rates for loans under Mudra Yojana charged by various lenders (both banks and non-banks). Please note that the table below gives the interest rates for the current year (2017):
|Serial No.||Banks / MFs / NBFCs||Interest Rate Range||Tenure|
|1.||Vijaya Bank||13.70%||1-5 years|
|2.||Union Bank of India||14.40%||1-5 years|
|3.||UCO Bank||14.1% – 15.1%||4-5 years|
|4.||Tata Capital||13.49% – 19.50%||1-5 years|
|5.||Tamilnad Mercantile Bank||14.4% – 16.4%||1-5 years|
|6.||State Bank of Travancore||13.2% – 13.45%||1-5 years|
|7.||State Bank of Patiala||12.65% – 14.65%||1-5 years|
|8.||State Bank of Mysore||16.90%||1-3 years|
|9.||State Bank of India||17.80%||1-4 years|
|10.||State Bank of Hyderabad||15.25% – 15.75%||1-3 years|
|11.||State Bank of Bikaner and Jaipur||13.2% – 14.2%||1-5 years|
|12.||Standard Chartered Bank||12.50% – 17%||1-5 years|
|13.||South Indian Bank||14.80%||1-4 years|
|14.||Oriental Bank of Commerce||11.2% – 12.95%||1-5 years|
|15.||Kotak Mahindra Bank||11.5% – 18%||1-5 years|
|16.||KarurVysya Bank||13.9% – 16.40%||1-3 years|
|17.||IndusInd Bank Ltd||12.99% – 18.25%||1-5 years|
|18.||Indian Overseas Bank||14.70%||1-5 years|
|19.||Indian Bank||12.65% – 13.65%||3 years|
|20.||IDBI Bank||12.75% – 13.75%||1-5 years|
|21.||ICICI Bank||11.49% – 17.50%||1-5 years|
|22.||HDFC||12.75% – 20%||1-5 years|
|23.||HDBFS||15.95% – 18.95%||1-3 years|
|24.||Fuller-n||19.50% – 37%||1-4 years|
|25.||Dena Bank||13 % – 14%||1-3 years|
|26.||Citibank||12.75% – 15.75%||1-5 years|
|27.||Central Bank||12.70%||1-3 years|
|28.||Capital First||13% – 20%||1-5 years|
|29.||Canara Bank||13.65%||1-3 years|
|30.||Bank of Maharashtra||15.20%||1-3 years|
|31.||Bank of India||12.7% – 14.7%||1-3 years|
|32.||Bank of Baroda||14.15%||1-3 years|
|33.||Allahabad Bank||13.70%||1-5 years|
|34.||Aditya Birla Finance Ltd||14%||1-3 years|
Some Important Questions and Their Answers
Question: Looks like interest rates are dynamic. Is that true?
Answer: Yes, that is true. Interest rates are dynamic because the rates are decided by the institutes that are lending the money under Mudra Scheme. Of course, they work under RBI (Reserve Bank of India) guidelines to ensure products remain cost effective. Also, they need to work under the scheme guidelines.
Question: Why are interest rates different for different banks / non-banks?
Answer: It is very evident from the table above that different lenders have different interest rates. The reason for this is that the Mudra Yojana has not set any particular rate of interest that needs to be followed by all lenders. In fact, lenders have that autonomy to decide on the interest rate and they calculate the interest rates based on various factors, which includes their own risk assessment criteria.
Question: Are the interest rates subsidized by Union Government?
Answer: No, they aren’t. The Union Government will not provide any subsidy to any borrower. The borrowers need to pay as per the guidelines of the lenders (who of course work under RBI and scheme guidelines).
Question: Will interest rates change in future?
Answer: If you have already take out a loan from any lender under Mudra Yojana, the interest rate that was applied on the loan at the time of loan approval, will continue till the repayment is complete. This means, there will be no change in interest rate for anyone who has already taken out a loan. However, those who are planning on taking out a loan under Mudra Yojana in next year or may be later, they may actually see fluctuations in interest rates. As we said earlier, interest rates are determined by various factors and if those factors change, rates of interest may also change.
That’s pretty much everything about Mudra Loan interest rates. In case you have any further queries, feel free to drop your messages.