What is a MUDRA Loan?

3 minutes

The Pradhan Mantri Mudra Yojana (PMMY) provides loans to non-farming and non-corporate micro and small enterprises. These enterprises can avail loans up to Rs. 10 lakh under the Mudra scheme.

Disclaimer: We have discontinued this product (Mudra loan) at this time. Please contact us on +91-8698010101 to know more about the current financial services provided by us.

Features of the Pradhan Mantri Mudra Loan

Loan amount

Up to Rs. 50,000 under Shishu

From Rs. 50,001 to Rs. 5 lakh under Kishore

From Rs. 5,00,001 to Rs. 10 lakh under Tarun

Processing fee

Nil for Shishu and Kishore loan, 0.5% of the loan amount for Tarun loan

Eligibility criteria

New and existing units

Repayment period

Up to 7 years for Mudra

3 to 5 years for Mudra kishor and Mudra tarun loans.

1. Shishu Mudra loan

Under the Mudra loan scheme, Shishu loan provides up to Rs. 50,000 to entrepreneurs who are either in the nascent stages of business or looking to start one. Borrowers also have to provide details of the machinery supplier.

2. Kishor Mudra loan

Under the Mudra loan scheme, Kishor loan offers up to Rs. 5 lakh to those looking for additional funds to expand their operations. Borrowers also have to provide a report containing the economic and technical viability of the business.

3. Tarun Mudra loan

Under the Mudra loan scheme, Tarun sanctions up to Rs. 10 lakh if the business owner meets certain eligibility criteria.

While this scheme does offer financing, an unsecured business loan  from Bajaj Finance may give you access to a higher sanction. On meeting the simple criteria and furnishing minimal documentation, you can get approved for up to Rs. 80 lakh* in under 48 hours.

*inclusive of insurance premium, VAS charges, documentation charges, Flexi fees, and processing fees.

Benefits of MUDRA loan

MUDRA loan aims to promote entrepreneurship and self-employment among the underprivileged sections of society. Some of the benefits of MUDRA loan are:

  • Easy and affordable: MUDRA loan does not require any collateral or guarantor and has a low interest rate. The loans can be availed from various banks, NBFCs, MFIs, and other financial institutions. The loan application process is simple and online.
  • Flexible and customised: MUDRA loan has three categories - Shishu, Kishore, and Tarun - to suit the different stages and needs of the borrowers. The loan amount ranges from Rs. 50,000 to Rs. 10 lakh. The loan can be used for various purposes such as working capital, machinery, equipment, raw materials, etc.
  • Inclusive and empowering: MUDRA loan targets the marginalised and vulnerable groups such as women, SC/ST, OBC, minorities, rural and urban poor, etc. The scheme helps them to start or expand their own businesses and generate income and employment. The scheme also provides training, mentoring, and credit support to the borrowers.

Mudra loan eligibility

Mudra Loans, under the Pradhan Mantri Mudra Yojana (PMMY), aim to provide financial assistance to micro-enterprises and small businesses. Here are the eligibility criteria:

  • Individuals or entities engaged in income-generating activities such as manufacturing, trading, or services are eligible.
  • Loan applicants must be Indian citizens aged 18 to 65 years.
  • The business should fall under the non-farm income-generating category, excluding agriculture and allied activities.
  • Borrowers must have a viable business plan and demonstrate the ability to repay the loan.
  • Loan amounts vary depending on the borrower's business needs and repayment capacity.

Nature of financial assistance

When seeking financial assistance for business needs, various types of loans and credit facilities are available to cater to specific requirements:

  1. Term loan
  2.  Working capital loan
  3. Overdraft limit
  4. Composite loans

Required documents for Mudra Loan

When applying for a Mudra Loan, applicants need to provide specific documents to support their loan application. Here are the documents required for mudra loan:

  • Identity proof such as Aadhar Card, Passport, Voter ID, or Driving License.
  • Address proof, including utility bills, ration card, or rent agreement.
  • Business plan outlining the purpose of the loan and expected outcomes.
  • Proof of business ownership or registration documents, such as GST registration or business license.
  • Bank statements or financial documents demonstrating the applicant's repayment capacity.
  • Any other documents as specified by the lending institution, such as income tax returns or collateral documents.

Steps to apply for Mudra Loan online

To apply for a Mudra Loan online, follow these steps:

  • Visit the official website of the Mudra Loan portal or the website of a participating bank.
  • Register as a new user and create an account on the portal.
  • Complete the loan application form with accurate details about your business, loan amount required, and repayment capacity.
  • Upload the required documents, including identity proof, address proof, business plan, and financial statements.
  • Review the application carefully and submit it online.
  • Track the status of your application through the online portal or contact the bank for updates.
  • Once approved, complete any additional documentation and formalities required by the bank to disburse the loan amount.

Steps to apply for Mudra Loan offline

To apply for a Mudra Loan offline, follow these steps:

  • Visit a participating bank branch or financial institution offering Mudra Loans.
  • Request a loan application form from the bank's loan officer.
  • Fill out the application form with accurate details about your business, loan amount required, and repayment capacity.
  • Attach the required documents, including identity proof, address proof, business plan, and financial statements.
  • Submit the completed application form along with the documents to the bank officer.
  • The bank will review your application and verify the documents.
  • Once approved, complete any additional formalities required by the bank to disburse the loan amount.

Eligible applicants

Here are the types of eligible borrowers:

  1. Individuals
  2. Sole proprietorship
  3. Private limited company
  4. Partnership firm
  5. Public limited company
  6. Entities of any other legal forms

Nature of assistance

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Frequently asked questions

What is the MUDRA Loan?

MUDRA Loan is a business loan scheme under the Pradhan Mantri Mudra Yojana (PMMY) that provides loans up to Rs. 10 lakh to non-corporate, non-farm small or micro enterprises.

What will be the product offerings under Mudra?

Mudra offers three categories of loans based on the stage and needs of the borrowers: Shishu (up to Rs. 50,000), Kishor (Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs. 10 lakh). The loans can be used for various purposes such as working capital, machinery, equipment, etc.

What is the rate of interest applied on Mudra?

The rate of interest applied on MUDRA loans varies from bank to bank and depends on the risk factor and the loan amount. The interest rates start from 7.30% p.a. and can go up to 18% p.a.

What are the collateral security requirements under Mudra?

MUDRA loans do not require any collateral or guarantor from the borrowers. To mitigate the risk of default, a credit guarantee fund for micro units has been created to provide credit guarantee to the lenders.

What is the limit of the Mudra loan?

The Mudra loan limit is up to 20 lakhs, depending on the borrower's business requirements and repayment capacity. The loan amount is categorized into three schemes: Shishu (up to 50,000), Kishore (up to 5 lakhs), and Tarun (up to 20 lakhs).

Who is eligible for a Mudra loan?

Individuals, micro-enterprises, and small businesses engaged in income-generating activities such as manufacturing, trading, or services are eligible for Mudra loans. Indian citizens aged 18 to 65 with a viable business plan and the ability to repay are eligible to apply.

How to repay a Mudra loan?

To repay a Mudra loan, borrowers generally make regular instalments as per the agreed repayment schedule with the bank or financial institution. Some banks also provide options to repay the loan online.

What if the Mudra loan is not paid?

If the Mudra loan is not paid, it may affect your credit score, and you may face legal consequences. The lender might also take action to recover the loan such as selling the collateral, if any.

How much subsidy on Mudra loan?

The Mudra loan itself does not have a subsidy. However, certain government schemes associated may have interest subvention or credit guarantee features, subject to certain conditions.

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