Mudra loan query


I applied for a loan under the Mudra scheme but the bank denied by loan and want collateral security. Is this within the rules?


The bank reserves the final right to reject or accept your loan application under the Mudra scheme. If your loan request does not fulfill the requisite basic parameters or your business plan is not watertight as per the bank’s assessment they are well within their right to seek a collateral security. Nothing against the rules here but it’s a problem faced by many borrowers seeking loans in the Mudra scheme.


Hi Nisa,

The Mudra loan usually doesn’t require collateral. However, check the details of the scheme to see if you are eligible. Here are the details.

Pradhan Mantri Mudra Yojana is a scheme under Micro Units Development and Refinance Agency for developing and refinancing activities that are relating to micro units. This scheme was announced while presenting the budget for the 2016 financial year. The main purpose of this loan is to provide funds to non-corporate small business sectors.

Mudra Loans are meant for entities looking to invest in non-farm income generating activities which includes a broad range of activities and businesses. The interest rates on the Mudra Loans are decided individually by each lender.

The borrowers must be from the following Non-corporate Small Business Segment:
• Proprietorship
• Partnership firms
• Small manufacturing units
• Service sector units
• Shopkeepers
• Fruit or vegetable vendors
• Truck operators
• Food service units
• Repair shops
• Machine operators
• Small industries
• Food processors
• Other industries in rural and urban areas.
The eligibility criteria are
• Indian citizens
• Non-farm income generating activities
• Non-corporate entities
• Funds to be invested for business activities
• Small business owners like truck operators, vegetable vendors, shopkeepers, fruit vendors, repair shops, artisans, paper/food processing units etc. are all eligible for Mudra Loans.

Any grievance, complaints or feedback can be taken up with the respective bank/MFI higher authorities such as zonal or regional manager.

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BB Expert