December 4, 2024 · 10 mins read
Santosh Kumar
On April 8, 2015, the government of India launched a wonderful and extremely beneficial scheme for the country's small and micro business owners. The scheme was launched under the Pradhan Mantri MUDRA Yojna (PMMY) and has provisions of providing loans of up to Rs 10 lakh to non-corporate, non-farm small/micro enterprises. These MUDRA loans aim to provide financial aid to these emerging enterprises so that they can establish themselves and grow and develop well. The MUDRA yojna aims to help these micro enterprises achieve economic success and financial security.
Small businesses and enterprises often require financial aid such as loans for various reasons such as procuring raw materials, setting up machinery, hiring labourers, etc. To get a MUDRA (Micro-Units Development and Refinance Agency) loan, these micro enterprises can approach Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs. Depending upon the stage of growth and development of the micro-enterprise and its funding needs, the MUDRA yojana has created three products - Shishu, Kishore and Tarun. This provides a reference point for their next stage and phase of growth and development.
The CIBIL score or an individual's credit score is a number between 300 and 900 assigned to the person by the Credit Information Companies (CICs) of India, namely TransUnion CIBIL, Experian, Equifax and CRIF Highmark. This number, as the name itself suggests, is calculated on the basis of a person's credit behaviour in the past. This includes information about their repayment of loans, credit card bills, EMIs, etc, their credit utilisation ratio, length of their credit history, balance of secured vs unsecured credit taken by them, number of hard enquiries, etc.
The CIBIL score is important and significant because it is one of the major eligibility criteria whenever someone applies for any form of credit, be it a loan, a credit card, or something else. Banks look at an applicant's CIBIL score to see how creditworthy that applicant is. A high CIBIL score indicates that the person is financially responsible, and banks can trust him to repay the loan on time based on his past credit usage. Similarly, a lower score indicates being financially irresponsible, and banks find him to be a high-risk applicant. This increases the chance of their loan application being rejected.
The CIBIL score is also beneficial once the lenders approve loans and credit cards because it gives the borrower higher negotiation power. With an excellent credit score, they can request a higher loan amount, lower interest rates, longer loan tenure, higher credit card limits, etc.
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While a CIBIL score is required while applying for most types of loans, it is not a necessity when someone applies for a MUDRA loan. This is because the MUDRA Loan is a scheme to help out ventures and enterprises that are newer and smaller and at the starting stages of their establishment; it is quite natural if such micro-enterprise owners do not have an existing credit history and thereby a CIBIL score. Even without a CIBIL score, one can apply for the MUDRA loan. Having a good credit score will only add to your advantage and make the entire loan approval process comparatively quicker, easier and smoother.
While a CIBIL score is not required to apply for a MUDRA loan, other eligibility criteria must be met to get your application approved. Let's learn more about them.
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1. Age: The minimum age of the applicant who is applying for a MUDRA loan must be at least 18 years old. People below 18 years of age are not eligible to get a MUDRA loan. There is also a maximum age limit for getting the MUDRA loan. It is 65 years. People older than 65 cannot apply for the MUDRA loan.
2. Who can apply for the MUDRA loan? Individuals, self-employed professionals, owners of non-farm businesses, and income-generating businesses in services, manufacturing, and trading can apply. Women entrepreneurs and MSMEs can also apply. Startups are also eligible to apply.
3. The applicants can be traders, shopkeepers, retailers, artisans and vendors.
4. Type of Business: Not all types of small businesses and micro-enterprises are eligible for applying for a MUDRA Loan.
5. Loan Amount: Only applicants whose loan requirement is less than Rs 10 lakh should apply for the MUDRA loan because that is the scheme's upper loan limit. Suppose you need more money, you cannot apply for a MUDRA loan.
6. Past Credit Behaviour: While a credit score is not a requirement per se, the applicant must not have any past loan defaults with any financial institution.
7. Nationality: Only Indian citizens with no criminal records are eligible to apply for the MUDRA loan.
We have already informed you that not having a CIBIL score does not affect your eligibility for a MUDRA loan. Even if you are applying for a loan for the first time and have no credit history at all, you can still get a loan under the MUDRA scheme. It will only help you in building a credit history and a CIBIL score. Here is how to apply for a MUDRA loan:
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You can apply for the MUDRA loan online from the comfort and convenience of your home.
Step 1: You must first research which banks and NBFCs offer MUDRA loans and choose the one that best suits you.
Step 2: Visit the official website of that bank or NBFC, find the MUDRA loan application form, and fill it out very carefully.
Step 3: Upload the relevant documents along with the application form. Below is a list of documents that might be required while applying for a MUDRA loan.
Step 4: Once you have double-checked all the details, the provided information, and the uploaded documents, hit the submit button. You will receive a reference ID/number. Could you take note of it?
Step 5: Once your application has been reviewed, a representative of the particular bank will contact you. They will ask you for the reference ID to proceed with the loan formalities.
After this, you only have to wait to verify your details and approve the application before the loan amount is sanctioned.
You can also apply online on the website www.udaymimitra.in.
You can also apply for a MUDRA loan offline by visiting the nearest branch of the bank or NBFC that provides it.
Step 1: Visit the local bank branch and ask them for the MUDRA loan application form.
Step 2: Fill out the application form carefully with all the required details and information.
Step 3: Attach any and all required documents along with the application form. If necessary, self-attest the documents.
Step 4: Submit the application form and attached documents with a bank representative and wait for the verification of your details and approval of your application
Read More:: Reasons For Loan Rejection Despite Good CIBIL Score
Here is a list of all the documents that you will need if you want to apply for a MUDRA loan:
1. Your passport-size photographs
2. Identity proof such as a voter ID card, driving license, Aadhar card, passport, PAN card, etc. Keep a self-attested copy of the identity proof ready.
3. If you belong to a category other than general, such as SC/ST/OBC/Minority, etc., you will also require proof of belonging to that category.
4. Address proof of your business, i.e., the address that your business is registered at.
5. Your bank statement for the last 6 months.
6. Business-related documents such as licenses, registration certificates, etc.
7. Banks might also ask for documents that show proof of loan requirement.
Read More:: Benefits of Good Cibil Score
If you are a micro-enterprise owner and want to grow and develop your business, the MUDRA loans are a great way to get all the financial aid that you require for your business goals. Many people wonder if they can apply for a MUDRA loan even if they do not have a CIBIL score, and the answer is yes. CIBIL score is not required in order to be eligible for applying for a MUDRA loan. The eligibility criteria include nationality, minimum and maximum age limits ( 18 and 65, respectively), limitations on the type of enterprise, loan amount limits, etc., but a CIBIL score is not necessary. However, you must not have a track of any default payments with any financial institution in the past. Having said that, while a CIBIL score is not essential to gettinggetting a MUDRA loan, having a good credit score will be beneficial as it would show you as a creditworthy applicant. Applying for a MUDRA loan without a CIBIL score is straightforward and can be done online and offline.
1. How much loan can I get under the MUDRA scheme?
The maximum loan limit under the MUDRA scheme is Rs 10 lakh. However, based on your business stage and loan requirements, the loan is categorised into 3 smaller schemes. The Shishu scheme offers loans of up to Rs 50,000, the Kishore scheme offers Rs 50,000 to Rs 5 lakh, and the Tarun scheme offers Rs 5 lakh to Rs 10 lakh.
2. How much CIBIL score is required to get a MUDRA loan?
You do not require a CIBIL score to get a MUDRA loan. People without a credit history can also apply for it. However, having a good CIBIL score can be beneficial as it increases your creditworthiness and can give you access to much better loan terms.
3. Why is a CIBIL score needed for getting a loan?
Most banks, lenders, and other financial institutions need a CIBIL score in order to give out a loan because the score is an indicator of the applicant's creditworthiness. By looking at the score, the lender can tell how responsibly the applicant has handled available credit in the past and how likely he is to default on his payment.
4. Are women entrepreneurs eligible to apply for a MUDRA loan?
Yes, absolutely. Women entrepreneurs are eligible to apply for a MUDRA loan and can greatly benefit from it. You only need to meet other eligibility criteria, such as age, nationality, loan requirement, etc.
5. Is 550 a good CIBIL score?
Usually, 550 is not considered a good CIBIL score, and people with such a low score can find it highly challenging, if not altogether impossible, to get a loan. Even if they do get a loan, the terms and conditions will be highly unfavourable for them. A credit score above 700 is usually seen as a good enough score for getting loans and credit cards.
6. Can I calculate my CIBIL score myself?
No. You cannot calculate your CIBIL score yourself. In India, four Credit Information Companies (CICs) or credit bureaus are responsible for calculating the CIBIL scores of all people. These are TransUnion CIBIL, Experian, Equifax, and CRIF Highmark.
7. Does HDFC bank offer a MUDRA loan?
Yes, HDFC Bank offers its customers MUDRA loans. You can visit their website or apply online by filling out the application form along with all required documents. Apart from HDFC Bank, there are many other public and private sector banks, as well as Non-Banking Financial Companies (NBFCs), that offer Indian citizens loans under the MUDRA scheme.
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