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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.

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