Union Bank of India Mudra Loan: How to Apply, Eligibility Criteria & More

Are you an aspiring entrepreneur or a small business owner in India looking for financial assistance to start, expand, or modernise your venture? The Union Bank of India Mudra Loan could be the key to unlocking your business potential. This scheme, under the Pradhan Mantri Mudra Yojana (PMMY), aims to provide affordable credit to non-corporate, non-farm small and micro-enterprises.

Understanding the Union Bank of India Mudra Loan

The Micro Units Development and Refinance Agency Ltd. (MUDRA) was established by the Government of India to support the growth of the micro-enterprise sector. Union Bank of India, as a participating financial institution, offers Mudra loans under three categories:

• Shishu: Loans up to ₹50,000. This category caters to startups and businesses in their nascent stages. Imagine a small tailoring unit wanting to purchase a new sewing machine; a Shishu loan could be ideal for them.
• Kishore: Loans ranging from ₹50,001 to ₹5,00,000. This category is for established businesses looking to expand their operations or upgrade their equipment. For instance, a small restaurant wanting to add more seating capacity could benefit from a Kishore loan.
• Tarun: Loans ranging from ₹5,00,001 to ₹10,00,000. This category supports businesses with more significant funding requirements for expansion or diversification. A small manufacturing unit looking to introduce a new product line might opt for a Tarun loan.

Key Benefits of Choosing Union Bank of India Mudra Loan

• Accessible Funding: Provides financial support to micro and small businesses, which often face challenges in accessing credit from traditional banking channels.
• No Collateral Required: One of the most significant advantages is that Mudra loans generally do not require any collateral security for loans up to ₹10 lakh. This makes it easier for new entrepreneurs and small businesses without substantial assets to obtain funding.
• Affordable Interest Rates: The interest rates are usually competitive and based on the bank’s guidelines and the borrower’s creditworthiness. While the exact rates may vary, the focus is on providing affordable financing.
• Flexible Repayment Terms: Union Bank of India offers flexible repayment schedules that can be tailored to the borrower’s cash flow and business cycle.
• Supports Women Entrepreneurs: PMMY has a special focus on empowering women entrepreneurs by providing easier access to credit.
• Encourages Job Creation: By supporting the growth of small businesses, Mudra loans indirectly contribute to employment generation in the country. According to the Ministry of Finance, as of March 2024, over ₹27 trillion has been disbursed under the PMMY scheme, benefiting millions of small businesses and contributing significantly to job creation in India.

ALSO READ – How to Secure Mudra Loan for Your Food Business?

Eligibility Criteria for Union Bank of India Mudra Loan

The Union Bank of India Mudra Loan aims to provide financial assistance to non-corporate, non-farm small and micro-enterprises. To be eligible for this loan, applicants need to meet specific criteria, which can vary slightly depending on the loan category (Shishu, Kishore, and Tarun). Here’s a detailed overview of the eligibility criteria:

1. Applicant Type:

• Individuals: Aspiring entrepreneurs or existing small business owners.
• Proprietorship Firms: Single-owner businesses.
• Partnership Firms: Businesses owned and managed by two or more partners (including Limited Liability Partnerships – LLPs).
• Private Limited Companies: Small-scale private companies.
• Other Eligible Entities: Any other legal entity deemed eligible by Union Bank of India.

2. Business Nature:

• The loan is intended for non-farm income-generating activities in sectors such as:
  • Small manufacturing units (e.g., food processing, handicrafts, small-scale production).
  • Service sector units (e.g., repair shops, beauty parlours, tailoring units).
  • Trading activities (e.g., small shops, retailers, vendors).
  • Professionals (e.g., doctors, chartered accountants, consultants).
  • Activities allied to agriculture (excluding direct agricultural activities). For instance, beekeeping, poultry, and fisheries might be considered.

3. Loan Requirement:

• The loan amount should fall under the permissible limits of the Mudra scheme:
  • Shishu: Up to ₹50,000.
  • Kishore: Above ₹50,000 and up to ₹5,00,000.
  • Tarun: Above ₹5,00,000 and up to ₹10,00,000.
  • Tarun Plus: Above ₹10,00,000 and up to ₹20,00,000 (This category is for existing Tarun loan borrowers with a good repayment history).

4. Bank Relationship:

• While having an existing account and a satisfactory banking relationship with Union Bank of India can be advantageous, it’s not always mandatory. New customers can also apply.
• For the Shishu loan, some sources mention that the applicant should have had a banking relationship (with Union Bank of India or any other bank) for at least 6 months.

5. Credit History:

• A satisfactory credit history is generally required. Applicants should not have any past loan defaults with any bank or financial institution.
• Union Bank of India will assess the applicant’s repayment capacity and past financial behaviour.

6. Age of the Applicant:

• For Kishore and Tarun loans, the promoter’s age should typically be between 21 to 65 years. Specific age criteria for the Shishu loan might vary, so it’s best to confirm with the bank.

7. Business Registration:

• The business entity should have a valid Udyam Registration Number (URN). This is part of the government initiative to register and recognise MSMES.

8. KYC Compliance:

• Applicants must fulfil the Know Your Customer (KYC) norms as per the bank’s requirements. This involves providing valid identity and address proofs.

9. Other Specific Requirements:

• For the Shishu loan, the applicant should be present at the business place while availing the loan.
• The mobile number of the applicant should be registered with the bank and UIDAI (for Aadhaar-based verification).
• The business should have a minimum 6-month-old bank account with any scheduled commercial bank for Kishore and Tarun loans.
• The borrower, promoter, or any sister concern should not be on any defaulter lists or the Caution List for Borrowers (CFR).

In summary, to be eligible for a Union Bank of India Mudra Loan, you generally need to be an Indian citizen involved in a non-farm income-generating micro or small business with a viable business plan, a satisfactory credit history, and the necessary KYC documents. The specific requirements might differ slightly based on the loan category.

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How to Apply for Union Bank of India Mudra Loan: A Step-by-Step Guide

Applying for a Union Bank of India Mudra Loan involves a structured process to ensure that the bank receives all the necessary information to assess your eligibility and business viability. Here’s a detailed, step-by-step guide on how to apply:

Step 1: Initial Inquiry and Information Gathering

• Visit the Nearest Union Bank of India Branch: Your first step should be to visit your nearest Union Bank of India branch. This allows you to directly interact with bank officials who can provide specific guidance based on your business needs and current policies.
• Enquire About the Mudra Loan Scheme: Clearly state that you are interested in applying for a Mudra Loan. The bank officials will provide you with information brochures, application forms, and details about the different categories (Shishu, Kishore, Tarun) and their respective features.
• Check the Bank’s Website: Union Bank of India’s official website is also a valuable resource. Look for the “MSME/SME Loans” or “Government Schemes” section, where you might find detailed information about the Mudra Loan, eligibility criteria, required documents, and even downloadable application forms.
  
  Click Here to Apply Union Bank of India’s Mudra Loan
  
• Understand the Different Loan Categories: Based on your funding requirement, determine which category (Shishu, Kishore, or Tarun) is most suitable for your business needs. Remember the loan amounts for each category:
  • Shishu: Up to ₹50,000
  • Kishore: ₹50,001 to ₹5,00,000
  • Tarun: ₹5,00,001 to ₹10,00,000
  • Tarun Plus: ₹10,00,001 to ₹20,00,000 (for existing Tarun borrowers with good repayment)

Step 2: Obtaining and Filling the Application Form

• Collect the Application Form: Obtain the physical Mudra Loan application form from the bank branch. Alternatively, if available, download it from the Union Bank of India website.
• Read the Instructions Carefully: Before filling the form, thoroughly read all the instructions and guidelines provided. This will help you avoid errors and ensure you provide all the necessary information.
• Provide Accurate Personal Details: Fill in your personal information accurately, including your full name, address, contact details, date of birth, and marital status.  
• Provide Business Details: Furnish all the required information about your business, such as:
  • Name of the business
  • Address of the business
  • Nature of business activity
  • Type of business entity (sole proprietorship, partnership, etc.)
  • Date of commencement of business (if existing)
  • Udyam Registration Number (URN)
• Specify the Loan Requirement: Clearly mention the specific loan amount you are seeking and the purpose for which you need the funds (e.g., working capital, purchase of machinery, business expansion).
• Provide Financial Information (if applicable): If your business is already operational, you might need to provide financial details such as turnover, profit and loss statements (for the last two years, if available), and existing bank account details.
• Declare Existing Liabilities (if any): If you have any existing loans or financial obligations, you need to declare them in the application form.
• Sign and Date the Application: Once you have filled in all the required details, carefully review the form and then sign and date it at the designated places.

Step 3: Preparing the Necessary Documents

Gather all the required documents as specified by the Union Bank of India. The list of documents can vary slightly, but generally includes:

• Identity Proof (any one of the following):
  • Aadhaar Card
  • PAN Card
  • Voter ID Card
  • Passport
  • Driving License
• Address Proof (any one of the following):
  • Aadhaar Card
  • Voter ID Card
  • Passport
  • Driving License
  • Utility Bills (electricity, water, telephone – not older than 3 months)
  • Bank Statement
• Business-related Documents:
  • Proof of Business Address: If your business operates from a location different from your residential address, you’ll need proof of the business address (e.g., rent agreement, utility bill in the business name).
  • Business Registration Certificate: Depending on the type of your business, you might need to provide a registration certificate (e.g., Shop and Establishment License, Udyam Registration Certificate). Having a valid Udyam Registration Number (URN) is crucial.
  • Project Report/Business Plan: This is particularly important for new businesses or for seeking a significant loan amount (Kishore and Tarun categories). The report should detail your business idea, market analysis, operational plan, financial projections (including projected income and expenses), and repayment capacity. A well-structured and realistic project report is highly recommended.
  • Quotation for Machinery/Assets (if applicable): If you plan to use the loan to purchase specific machinery or equipment, provide the relevant quotations from suppliers.
• Financial Documents (for existing businesses):
  • Bank Statements: Last six months’ bank statements of your business’s current account (if applicable).
  • Last Two Years’ Financial Statements (if applicable): Balance sheet, profit and loss account, etc., if your business has been operational for more than two years.
• Other Documents:
  • Passport-sized photographs of the applicant(s).
  • Any other documents specifically requested by the Union Bank of India branch.

Step 4: Submitting the Application and Documents

• Visit the Bank Branch Again: Once you have filled out the application form and gathered all the necessary documents, revisit the Union Bank of India branch where you initiated the process.
• Submit the Application to the Bank Officer: Hand over the completed application form along with all the supporting documents to the designated bank officer. Ensure you receive an acknowledgement receipt for your submission.

Step 5: Loan Processing and Appraisal

• Bank’s Review Process: The bank will then initiate the process of reviewing your application and verifying the submitted documents.
• Credit Assessment: They will assess your creditworthiness, repayment capacity, and the viability of your business proposal. This may involve checking your credit history with credit bureaus.
• Site Visit (if required): For certain loan amounts or business types, the bank might conduct a site visit to your business premises to assess the operations and infrastructure.
• Clarifications and Additional Information: The bank may contact you if it requires any further clarifications or additional documents during the appraisal process. It’s important to respond promptly to their queries.

Step 6: Loan Sanction and Disbursement

• Loan Approval: If the bank is satisfied with your application and the appraisal process, your loan will be sanctioned. You will receive a sanction letter outlining the loan amount, interest rate, repayment terms, and other conditions.
• Acceptance of Terms: Carefully read and understand all the terms and conditions mentioned in the sanction letter. If you agree to the terms, you will need to sign and return a copy to the bank.
• Documentation and Formalities: You might need to complete further documentation and legal formalities as required by the bank before the loan disbursement.
• Disbursement of Loan Amount: Once all the formalities are completed, the loan amount will be disbursed to your bank account as per the agreed terms. This might be a lump sum or in tranches, depending on the purpose of the loan.

Key Points to Remember During the Application Process

• Be Honest and Accurate: Provide truthful and accurate information in the application form and all supporting documents. Any discrepancies can lead to the rejection of your application.
• Maintain Clear Communication: Stay in regular contact with the bank officials and promptly respond to their queries.
• Follow Up Regularly: While the bank has its own processing timelines, you can follow up periodically to inquire about the status of your application.
• Understand the Terms and Conditions: Before accepting the loan, ensure you fully understand the interest rates, repayment schedule, any associated charges, and the terms and conditions of the loan agreement.

By following these steps diligently and providing all the necessary information and documents, you can navigate the application process for a Union Bank of India Mudra Loan effectively and increase your chances of securing the required financial assistance for your business.

ALSO READ – How to Get a Business Loan for a Startup in India? A Complete Guide

Essential Points to Remember

• Interest Rates: The interest rates on Mudra loans are determined by Union Bank of India and may vary based on factors such as the loan amount, the borrower’s credit profile, and the prevailing market conditions. It’s crucial to discuss the interest rates and other charges with the bank official before finalising the loan.
• Repayment Schedule: Understand the repayment terms and ensure that they align with your business’s cash flow. Discuss the available repayment options with the bank.
• Purpose of the Loan: The loan amount should be used for the stated purpose, which should be related to your business activities.
• Stay Informed: Keep yourself updated on any changes or new guidelines related to the Mudra Loan scheme announced by the government or the Union Bank of India.

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Conclusion

The Union Bank of India Mudra Loan serves as a vital financial lifeline for numerous small businesses and aspiring entrepreneurs across India. By providing access to affordable credit without the burden of collateral, it empowers individuals to realise their entrepreneurial dreams and contribute to the nation’s economic growth. Understanding the eligibility criteria, the application process, and the key features of the scheme is the first step towards leveraging this opportunity. If you have a viable business idea or are looking to expand your existing small enterprise, exploring the Union Bank of India Mudra Loan could be a significant step towards achieving your goals.

Frequently Asked Questions (FAQs)

1 . What is the maximum loan amount I can get under the Union Bank of India Mudra Loan?

• The maximum loan amount under the Mudra scheme is ₹10 lakh, categorised under the ‘Tarun’ scheme.

2 . Do I need to provide any collateral or security for a Mudra Loan from Union Bank of India?

• Generally, no collateral is required for loans up to ₹10 lakh under the Mudra scheme.

3 . What types of businesses are eligible for a Union Bank of India Mudra Loan?

• Non-farm income-generating small and micro-enterprises, including manufacturing, trading, and service sector units, are eligible. Examples include small shops, artisans, food processing units, and repair shops.

4 . What documents are typically required when applying for a Mudra Loan?

• Commonly required documents include identity proof, address proof, business-related documents (like registration certificate and project report), and bank statements.

5 . How long does it take to get a Mudra Loan approved from the Union Bank of India?

• The processing time can vary depending on the completeness of your application and the bank’s internal procedures. It’s best to inquire about the expected timeline at the branch.

6 . What are the interest rates on Union Bank of India Mudra Loans?

• Interest rates vary based on the loan category, borrower’s creditworthiness, and the bank’s prevailing rates. Contact your nearest branch for the most up-to-date information.

7 . Can women entrepreneurs avail of special benefits under the Mudra Loan scheme?

• Yes, the PMMY scheme encourages lending to women entrepreneurs, and Union Bank of India also supports this initiative. There might be specific schemes or slightly favourable terms for women borrowers.

8 . Can I use the Mudra Loan for any purpose?

• The loan must be used for business-related purposes, such as starting a new venture, expanding existing operations, purchasing machinery, or meeting working capital requirements.

9 . What if I have a poor credit history? Can I still get a Mudra Loan?

• A satisfactory credit history is usually required. However, the bank will assess each case individually. It’s advisable to discuss your situation with the bank.

10 . Can I repay the Mudra Loan early? Are there any prepayment charges?

• Yes, you can typically prepay your Mudra Loan. Check with Union Bank of India regarding any prepayment charges that might be applicable.