Weaver MUDRA Scheme: Loan, Margin Money and How to Apply

Reviewed by: WeCredit Research Team

The Weaver MUDRA scheme is a bank loan route for handloom weavers, weaver entrepreneurs and handloom organisations. The Ministry of Textiles describes a 6% interest rate for up to 3 years, margin money support and a credit guarantee for 3 years, and you apply at a participating bank.

Weaver MUDRA at a Glance

Item	What the official sources say
Official name	Concessional Credit/Weaver MUDRA Scheme (Ministry of Textiles). Banks use names such as Star Weaver Mudra Scheme and Weaver’s Mudra
Who it is for	Handloom weavers and weaver entrepreneurs. Some banks also lend to self-help groups and handloom organisations
Interest rate	6% for 3 years under the Ministry’s description, with the government interest subvention capped at 7%
Margin money	20% of the loan, with a rupee cap that depends on the source (see the margin money table)
Credit guarantee	Credit guarantee for 3 years. Banks say the guarantee fee is borne by the government
Loan size	Set by each bank. Bank of India lists up to Rs. 5 lakh. Canara Bank lists up to Rs. 2 lakh for individuals
Where to apply	A participating bank branch, often with help from a Weavers’ Service Centre or the state handloom department
Subsidy	Interest subvention and margin money assistance, paid through the bank

Who Can Apply

The Ministry of Textiles reply of 12 July 2019 says the scheme covers handloom weavers and weaver entrepreneurs across the country. The December 2022 reply also gives margin money for handloom organisations. The banks add their own detail:

• Bank of India says new and existing handloom weavers involved in weaving activity can apply, in rural and urban areas.
• Canara Bank lists individual handloom weavers and weaver entrepreneurs, self-help groups, joint liability groups, handloom organisations including primary and apex weavers’ cooperative societies and state handloom corporations, special purpose vehicles or consortia in mega clusters or handloom parks, and handloom producer companies.
• Canara Bank states the applicant must not be a defaulter of any bank and must show weaver status through a weaver ID card, a yarn passbook, a state ID or the organisation’s registration.

Weavers who work through a group can also read about self-help group loans, which follow different rules.

Loan Limits by Bank

The Ministry replies do not state a loan ceiling, so the limit is whatever the bank sets. The two bank pages show how much it can vary.

Item	Bank of India (Star Weaver Mudra Scheme)	Canara Bank (Weaver’s Mudra)
Cash credit	Minimum Rs. 0.50 lakh (Rs. 1.00 lakh for silk weaving), maximum Rs. 5.00 lakh	Working capital, valid 1 year
Term loan	Maximum Rs. 2.00 lakh	Maximum 36 months, including a repayment holiday of up to 3 months
Combined working capital and term loan	Maximum Rs. 5.00 lakh	Not stated separately
Overall ceiling	Rs. 5.00 lakh	Rs. 2,00,000 per individual, SHG or JLG; Rs. 10,00,000 per handloom organisation, producer company, SPV or consortium
Tenure	Term loan 3 to 5 years plus up to 6 months gestation; cash credit limit valid 3 years with yearly review	As above

Interest Rate and Credit Guarantee

The Ministry of Textiles reply of 21 December 2022 describes a subsidised loan at a concessional interest rate of 6% for a period of 3 years, with the interest subvention capped at 7% by the Government of India. In plain terms, the government meets the gap between the bank’s rate and 6%, up to 7 percentage points, and only for the first 3 years from the first disbursement.

The banks do not describe the 6% rate in the same way. Bank of India says the borrower rate is 6% to the handloom sector. Canara Bank says its rate is linked to its own lending rate and that the concessional 6% for 3 years goes to eligible handloom organisations only. Ask the branch which rate applies to you and get it written in the sanction letter.

Lending under the scheme comes with a three-year credit guarantee. Bank of India says every account should be covered under the CGTMSE and that the guarantee fee due on the beneficiary’s part is paid by the Ministry of Textiles. Canara Bank says the entire guarantee fee is borne by the Government of India for up to 3 years and that no collateral is taken on loans up to Rs. 10 lakh. To see how a guarantee protects the lender but not you, read the CGTMSE credit guarantee explained post.

Margin Money: What Each Source Says

Margin money assistance is a government contribution toward your own share of the project. The sources agree on 20% of the loan but differ on the rupee cap, so check which cap your bank applies.

Source	Individual weaver	Handloom organisation
Ministry of Textiles reply, 21 Dec 2022	20% of loan, maximum Rs. 25,000	20% of loan, maximum Rs. 20 lakh (Rs. 2 lakh for every 100 weavers or workers)
Canara Bank	20% of loan, maximum Rs. 25,000	Up to Rs. 2,00,000
Bank of India	20%, maximum Rs. 10,000 per weaver	Not stated
Ministry of Textiles replies, 2019	Maximum Rs. 10,000 per weaver	Not stated

Worked Example: A Weaver Borrowing Rs. 2 Lakh

Take an individual weaver who needs Rs. 2,00,000 for yarn and a loom repair. Twenty per cent of the loan is Rs. 40,000. Where the cap is Rs. 25,000, as in the Ministry’s 2022 reply and on the Canara Bank page, margin money assistance would be Rs. 25,000. Where the cap is Rs. 10,000, as on the Bank of India page, it would be Rs. 10,000. For a smaller loan of Rs. 1,00,000, 20% is Rs. 20,000, which sits under the Rs. 25,000 cap but above the Rs. 10,000 cap.

Now the interest. Assume, for illustration only, that the bank’s rate is 10% a year. The weaver pays 6% and the government meets the remaining 4 points, which is inside the 7-point cap. On Rs. 1,00,000 outstanding for a full year, the bank’s interest would be Rs. 10,000, the weaver would bear Rs. 6,000 and the government would meet Rs. 4,000 through the bank. If the bank’s rate were 14%, the gap of 8 points would exceed the 7-point cap, so the weaver would effectively pay 7%. These are illustrations, not quotes. Your bank sets the actual rate.

Documents to Prepare

Each bank sets its own list. Bank of India says documents are similar to those for its Mudra Card scheme or as per its current guidelines. The items below come from the two bank pages.

• Proof that you are a handloom weaver: weaver ID card, yarn passbook or state ID (or the organisation’s registration certificate)
• Customer identification proof and the MSME loan application form the bank uses (Canara Bank refers to form NF998)
• Address proof of the unit and the promoters
• Licences or permissions for the unit, where they apply
• Stock statement, plus financial statements for loans above Rs. 2 lakh (Bank of India); Canara Bank asks for three years of financials with income tax returns and projections
• Original bills or invoices for equipment, if you are taking a term loan (Bank of India)
• Guarantor details with proof of assets, where the bank asks for them (Canara Bank)
• A CIBIL report, which Bank of India lists as a requirement

How to Apply: Step by Step

1. Confirm that you are a handloom weaver, weaver entrepreneur or part of a handloom organisation, and collect your weaver ID card, yarn passbook or state ID.
2. Choose a bank that lists the scheme. Bank of India and Canara Bank both do. For any other bank, ask whether it takes part.
3. Contact your nearest Weavers’ Service Centre or state handloom department. The Ministry’s 2019 reply says these offices sponsor weavers’ applications to participating banks.
4. Submit the application and documents at the branch. Neither bank page names an online application route, and Bank of India directs applicants to the nearest branch.
5. The bank checks whether your proposal is viable. Bank of India states a disposal time of 2 weeks for loans up to Rs. 2 lakh and 4 weeks for Rs. 2 lakh to Rs. 5 lakh.
6. Read the sanction letter for the rate, margin, guarantee fee and repayment schedule.
7. Margin money and interest subvention are routed through the bank. The 2019 reply describes a Handloom Weaver MUDRA Portal built with Punjab National Bank that moves margin money to the loan account and subvention to the bank.
8. Repay on time. The interest subvention runs for a maximum of 3 years from the first disbursement.

Common Rejection Reasons and Fixes

These are patterns drawn from each bank’s stated conditions, not an official list of rejection reasons. The bank decides every case.

Likely reason	What to do
You are a defaulter at any bank (Canara Bank bars these applicants)	Clear the overdue amount and get a no-dues letter before applying
No proof of weaver status	Get a weaver ID card, yarn passbook or state ID from the handloom department
Weak credit report (Bank of India asks for a CIBIL report)	Check your report, fix errors and close small overdue accounts first
Missing stock statement or financials on a loan above Rs. 2 lakh	Prepare the statement and the account papers before you visit
Loan amount larger than the business can support (banks sanction on viability)	Ask for an amount that matches your yarn, wage and sales cycle
Applying as an individual for a concession meant for organisations (Canara Bank)	Ask the bank in advance which rate your category gets

Weaver MUDRA vs a Regular Mudra Loan

Do not confuse this scheme with the standard Pradhan Mantri Mudra Yojana, even though both use the Mudra name. A weaver can still ask about the regular route, for example a Mudra Kishor loan for amounts above Rs. 50,000 and up to Rs. 5 lakh, if the bank advises it.

Point	Weaver MUDRA	Regular Mudra (PMMY)
Who it is for	Handloom weavers, weaver entrepreneurs, handloom organisations	Individuals, proprietorships, partnerships and SHGs, per the Canara Bank page
Loan size	Bank-specific, from Rs. 2 lakh to Rs. 10 lakh on the two bank pages	Shishu up to Rs. 50,000; Kishor Rs. 50,001 to Rs. 5 lakh; Tarun Rs. 5,00,001 to Rs. 10 lakh; Tarun Plus Rs. 10 lakh to Rs. 20 lakh for borrowers who repaid a Tarun loan
Interest	6% for 3 years described by the Ministry, with subvention capped at 7%	Not stated on the bank’s standard page
Margin money assistance	Yes, 20% of the loan within a cap	Not part of the standard scheme page
Guarantee fee	Borne by the government for up to 3 years, per the banks	Not stated on the bank’s standard page

Is This Scheme Right for You? Checklist

• Do you work as a handloom weaver or weaver entrepreneur, or belong to a handloom organisation?
• Do you hold a weaver ID card, yarn passbook or state ID?
• Is your need within the bank’s limit, for example Rs. 5 lakh at Bank of India or Rs. 2 lakh for an individual at Canara Bank?
• Are you free of defaults at every bank?
• Can you show stock records and, for larger loans, financial statements?
• Has the branch confirmed that it is accepting Weaver MUDRA applications now?

Timeline of Official Statements

Date	What was stated
12 July 2019	Ministry of Textiles reply: 6% rate, subvention capped at 7%, 3-year credit guarantee, margin money 20% up to Rs. 10,000 per weaver
13 December 2019	Ministry of Textiles reply lists the Weavers’ MUDRA Scheme among its handloom schemes and mentions the MUDRA portal built with Punjab National Bank
21 December 2022	Ministry of Textiles reply: margin money up to Rs. 25,000 per individual weaver and up to Rs. 20 lakh per organisation; 1,17,678 loans sanctioned to the handloom sector over five years
Current bank pages	Bank of India and Canara Bank describe the scheme in the present tense. Neither page carries a date or an end date

Common Mistakes

• Assuming every bank offers the same limit, rate and margin money cap. They differ, as the tables above show.
• Paying an agent to arrange a scheme loan. Apply at the bank and through your Weavers’ Service Centre.
• Expecting the 6% rate or the subsidy to last for the whole loan. Both run for a maximum of 3 years.
• Applying without weaver proof, then losing weeks to a rejection.
• Treating the scheme as certain to be open. Confirm its current status with the branch before you spend on documents.

Frequently Asked Questions

Is the Weaver MUDRA scheme still open?

Bank of India and Canara Bank describe the scheme on website pages that carry no date. The latest Ministry of Textiles statement is a Lok Sabha reply of 21 December 2022, and no official page gives an end date or announces an extension or closure. Ask the branch whether it is taking applications.

Who can get a Weaver MUDRA loan?

Handloom weavers and weaver entrepreneurs, and at some banks self-help groups, joint liability groups, handloom cooperative societies, producer companies and other handloom organisations. You need proof of weaver status and no default at any bank.

How much can I borrow?

The bank sets the limit. Bank of India lists up to Rs. 5 lakh. Canara Bank lists up to Rs. 2,00,000 for an individual weaver, SHG or JLG and up to Rs. 10,00,000 for a handloom organisation.

What interest rate will I pay?

The Ministry describes 6% for 3 years, with the government subvention capped at 7%. Bank of India applies 6% to the handloom sector. Canara Bank links its rate to its own lending rate and gives the 6% to eligible handloom organisations only. Confirm your rate in the sanction letter.

Do I need collateral?

Canara Bank says no collateral is taken on loans up to Rs. 10 lakh, and Bank of India states no separate collateral. Loans are to be covered under the CGTMSE or CGFMU guarantee.

Who pays the credit guarantee fee?

Canara Bank says the Government of India bears the entire fee for up to 3 years. Bank of India says the fee due on the beneficiary’s part is paid by the Ministry of Textiles.

Does WeCredit sanction Weaver MUDRA loans?

No. WeCredit does not sanction government scheme loans. It explains how schemes work and compares options. Confirm current terms with the bank and on the official sources below.