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The easy access to business loans has boosted the ease of doing business in our country. India is one of the biggest startup hubs in the world with over 84,012 startups registered in 2022. The main reason behind such a drastic increase in startups from just 452 in 2016 is the startup toolkits and facilities under an excellent startup ecosystem. The startup toolkits and facilities are supported by the digitalization of the Indian economy, improvisation of the foreign direct investment(FDI) scheme and policies, seed funding schemes, implementation of GST, etc. The Central Government launched the Startup India initiative in January 2016 to set up a startup ecosystem.
Taking advantage of these facilities thousands of entrepreneurs dared to start their own businesses. The government of India encouraged startups by offering business loans to startups. Disbursal of business loans through the MUDRA Yojana scheme began in April 2015.
What is a business loan?
Business loans are credit funds offered by lending banks to any kind of business that may be a startup, small to medium-scale business, micro-small-medium enterprise (MSME), or a large established business. It has been in existence since ancient times.
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Businesses seek loans either to meet their specific growing needs or expand their business presence.
What is a MUDRA loan?
MUDRA loan or e-mudra loan is offered by the Government of India under the Pradhan Mantri MUDRA Yojana (PMMY) scheme in collaboration with financial institutions like commercial banks, RRBs, small finance banks, MFIs, and NBFCs.
Borrowers can either directly apply at this lending platform https://www.udyamimitra.in or can approach one of the banks listed below for assistance
- Public Sector Banks
- Private Sector Banks
- State Operated cooperative banks
- Rural banks from the regional sector
- Institutions offering microfinance
- Financial companies other than banks
MUDRA is an acronym for ‘Micro Units Development & Refinance Agency Limited’ and is a Hindi word meaning currency.
Mudra loan is not for all businesses, it’s limited only to micro-entrepreneurs/individuals. There are three products of Mudra loan namely Shishu, Kishore, and Tarun, and cover the different loan amounts.
| Product Name | Loan amount in INR |
| Shishu | Up to 50,000 |
| Kishore | From 50,000 up to 5L |
| Tarun | From 5L to 10L |
Key Differences Between MUDRA Loan and Business Loan
Although both are offered by banks and financial institutions their intent is not the same. The latter is for any kind of business whereas the former is limited to Indian micro businesses.
Below are the key differences:
| MUDRA Loan/e-mudra loan | Business Loan | |
| Offered by | Pradhan Mantri MUDRA Yojana (PMMY) scheme | Leading banks and Non-Banking Financial Companies(NBFC) |
| Offered to | Small business owners in India like small manufacturing enterprises, fruit/vegetable vendors, shopkeepers, and local artists (textile, ceramics, workshops, garage, jewelry, furniture, tool/tile, plywood, etc) and all business activities directly or indirectly related to agriculture. | Startups, existing companies ranging from small to medium to large companies |
| Intent | To financially assist sustain their business | To help entrepreneurs start a new business, expand an existing business, overcome losses, investments, and clear outstanding business dues. |
| Loan amount | Shishu(Up to INR 50,000),
Kishore(Above 50,000 and up to 5L) and Tarun(Above 5L and up to 10L) |
It depends on the business type and lending banks |
| Collateral required? | NO | YES |
| How to apply | Visit https://www.udyamimitra.in/
And click Apply for Mudra loans |
Visit the lending bank’s loan products page.
Example: HDFC Business Loan |
| Interest Rate and processing fee | Visit FAQ Mudra | It varies from business to business and bank to bank. For the latest interest rate contact the lending bank directly. |
| Types | 3 types
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8 types in India
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Conclusion
The Indian credit market is among the largest and most complex in the world. The economic survey 2022-23 says that the credit growth in the form of business loans to the MSME sector has grown over 30.5% during January- November 2022. In 2022-23FY the number of Mudra loans sanctioned was 6,23,10,598 with a total amount sanctioned INR 4.56,537.98 crores and a total amount disbursed INR 4,50,423.66 crores.
India’s step towards digitalization, startup ecosystem, and policy changes w.r.t ease of doing business are the driving forces of the world’s fastest-growing economy. Private players in the banking sector too have a significant role in supporting business loans.
Content Author – Shashikant Chaurasia
