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CS Professional · Banking and Insurance - Laws and Practice · Various Government Schemes

A bank sanctions Rs 8 lakh to Kiran Traders, a micro unit, under MUDRA at 11% simple interest per annum, with a single repayment of principal and interest at the end of 2 years. Separately, the owner asks which MUDRA category the loan falls in. Which pair of answers is correct?

The loan of Rs 8 lakh is in the Tarun category, which covers above Rs 5 lakh up to Rs 10 lakh. Simple interest for two years at 11% is 8,00,000 x 11% x 2 = Rs 1,76,000. Rs 88,000 is only a single year's interest.

  1. ATarun category; total interest Rs 1,76,000Correct
  2. BKishore category; total interest Rs 1,76,000
  3. CTarun category; total interest Rs 88,000
  4. DTarun category; total interest Rs 1,98,000

Explanation

Rs 8 lakh is above Rs 5 lakh and up to Rs 10 lakh, so it is Tarun. Simple interest = 800000 x 11 x 2 / 100 = Rs 1,76,000. Check: one year's interest Rs 88,000 doubled gives Rs 1,76,000. Rs 88,000 is only one year's interest. Kishore stops at Rs 5 lakh.

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