Mudra Shishu loan for small businesses and cottage industries

Mudra Shishu loan for small businesses and cottage industries

Part of: GS-Prelims and GS-III – Economy

In News:

• The Central government has announced ‘Mudra Shishu loan’ for small businesses and cottage industries so that shopkeepers do not suffer due to the COVID-19 pandemic.

Key takeaways 

• A 1500 crore interest subvention has been announced. 
• 2% interest rate subvention for a period of 12 months shall be offered by the Government. 
• It shall benefit small borrowers under the Mudra Shishu loans up to ₹50,000.

Important value additions 

Micro Units Development and Refinance Agency (MUDRA) 

• It is a Non-Banking Financial Company which supports development of micro enterprise sector in the country. 
• It provides refinance support to Banks / MFIs for lending to micro units having loan requirement upto 10 lakh. 
• It provides refinance to micro business under the Scheme of Pradhan Mantri MUDRA Yojana.
• MUDRA offers incentives through these interventions:
  • Shishu : covering loans upto  50,000/-
  • Kishor : covering loans above  50,000/- and upto  5 lakh
  • Tarun : covering loans above  5 lakh and upto  10 lakh. 
• Generally, loans upto 10 lakh issued by banks under Micro Small Enterprises are given without collateral.