Pradhan Mantri Mudra Loan Interest Rate: Everything You Need to Know

Know the range of schemes offered under Pradhan Mantri Mudra Loan Yojana for different enterprises and meet your financial goals. Additionally, explore the Pradhan Mantri Mudra loan interest rate to make informed financial decisions.
Business Loan
2 min read
19 September 2023

To help small businesses address financial challenges, the government launched the Pradhan Mantri Mudra Yojana on 8 April 2015. Mudra offers business loans tailored to three different stages of a business's growth, with repayment terms ranging from 1 to 5 years. Funding depends on the type of loan available and charged at the applicable Pradhan Mantri Mudra Yojana interest rate.

Explore the Pradhan Mantri Mudra loan interest rate to make informed financial decisions for your business.

Pradhan Mantri Mudra Yojana loan interest rates and limits

Shishu Mudra Yojana

You can avail of a Mudra loan under this phase if you are yet to establish your business or are in a nascent stage. The scheme offers a sanction of up to Rs. 50,000 for a tenure of 5 years. The following businesses are eligible for a Shishu Mudra loan:

  • Self-proprietors and partnership firms
  • Firms in the service sector
  • Micro enterprises and manufacturing firms
  • Vendors, truck owners, and repairing shops
  • Businesses providing food service

The Mudra Shishu loan interest rate ranges from 1% to 12% per annum. The RBI has directed 'commercial financial institutions' providing Mudra refinance to keep the interest rate at MCLR/ base rate.

The scheme also caps interest rates for RRBs and SCBs extending the loan at 3.5% over the Mudra refinance rate. For NBFCs, the cap stands at 6% for Mudra refinancing.

Kishore Mudra Yojana

This loan is tailor-made to help you sustain your business. The scheme offers a sanction that ranges from Rs. 50,000 to Rs. 5 lakh. The interest rate ranges from 8.60% and is based on the scheme's guidelines and your credit history. You have to repay the loan along with the interest within the tenure offered by the lender.

Tarun Mudra Yojana

You can avail of this loan variant when you wish to expand your business. Under this phase, you can access a sanction from Rs. 5 lakh to Rs. 10 lakh. The lender determines the PMMY interest rate based on the guidelines and your credit history. The interest rates range from 11.15% to 20%, and the lender decides the repayment tenure.

Additional read: MSME registration procedure

Factors affecting Mudra loan interest rates

Mudra loan interest rates in India are influenced by factors such as credit risk, loan amount, repayment period, business type, market conditions, lender policies, government initiatives, borrower's profile, and collateral.

The borrower's creditworthiness, loan amount, and repayment duration play crucial roles, with higher credit risk and shorter tenures potentially attracting higher rates. Government policies, market competition, and lender-specific criteria also impact rates.

Entrepreneurs should assess these factors to make informed decisions. It's advisable to check with the specific lending institution for the most up-to-date information on Mudra loan interest rates.

Tips to get Mudra loans at affordable interest rates

  1. Maintain good credit score: A higher credit score enhances credibility, potentially leading to lower interest rates.
  2. Choose the right Mudra category: Evaluate your business needs and opt for the appropriate Shishu, Kishore, or Tarun category, each with different loan limits and interest structures.
  3. Detailed business plan: Present a comprehensive and well-researched business plan to demonstrate viability and boost lender confidence.
  4. Shorter repayment period: Opt for a shorter tenure if feasible, as this may result in a lower interest rate.
  5. Explore government subsidies: Leverage available government schemes and subsidies that may contribute to reduced interest rates.
  6. Establish a strong financial profile: Showcase financial stability, business experience, and a positive track record to enhance your eligibility for favourable rates.
  7. Compare lenders: Research and compare interest rates offered by different financial institutions to identify the most competitive options.
  8. Ensure collateral-free eligibility: Confirm eligibility for collateral-free Mudra loans, as this can positively impact interest rates.
  9. Stay informed on government policies: Stay updated on evolving government policies and initiatives that may influence Mudra loan interest rates.

Mudra Yojana schemes

MUDRA Yojana offers a range of schemes customised to specific needs. These include the following.

  • Credit for micro-enterprise: This scheme focuses on increasing the inclusion of the general population into the business sector. Here, you can access a loan of up to Rs. 1 lakh with microfinance institutions.
  • Women enterprise programme: Also known as Mahila Udyami Yojana, this scheme offers loans at affordable Mudra interest rates with a concession of up to 0.25%.
  • Refinance scheme for banks: This scheme refinances loans extended by banks to MSMEs in the manufacturing and service sector. Refinance is only available if the scheduled commercial banks lend loans at their base rate. Rural, regional, and cooperative banks must limit their interest rate margin at 3.5% over their refinance rate.
  • Mudra Card: This debit card is related to the Mudra loan and helps beneficiaries access working capital, serving as a means to create a credit history for the user. You can use it to make cash withdrawals from ATMs and payments via POS devices.
  • Equipment finance scheme: This scheme aims to offer the financial impetus required by microenterprises to expand operations and acquire quality equipment. This way, micro-businesses can increase their production and make their ventures more sustainable as well.

Documents required to apply for Mudra loan

To apply for a Mudra loan, you need to submit the following documents:

  1. Application form for Mudra loan
  2. Identity proof, which includes Aadhaar card, Pan card, Voter ID card, or passport copy
  3. Address proof, which includes Aadhaar card, electricity bill, telephone bill, or other utility bills
  4. Business plan or project report, which outlines the details of the proposed business or expansion plan
  5. Quotation of machinery or equipment, which provides an idea of the costs involved in purchasing the required machinery or equipment
  6. Bank account statement, which shows the financial transactions of the existing business (if applicable)
  7. Proof of continuation (a copy of an office electricity bill, sales tax certificate, trade license, etc., for existing businesses)
  8. Income tax return (for the previous year) or sales tax returns (for the previous year) (if applicable).

Mudra loan eligibility

The eligibility criteria of Mudra loans are extremely simple. You can apply for a loan under the scheme if you are an Indian citizen and belong to the:

  • Non-farm small/ microenterprise segment
  • Non-corporate small business segment

You can also apply if you are a part of a business or as an individual operating as a

  • Shopkeeper
  • Food-service unit
  • Small manufacturing unit
  • Trade/ manufacturing sector unit
  • Fruit and vegetable vendor
  • Service sector unit
  • Truck operator
  • Repair shop
  • Machine operator
  • Artisan and more

In addition to the above, you should

  • Have a good credit history.
  • Have not defaulted on a loan.
  • Have the required skills or experience to start, continue, or expand a business.

Additional read: PMEGP loan process and eligibility

You can also apply for a Bajaj Finserv Business Loan and get up to Rs. 80 lakh. This is a collateral-free loan, so you simply need to submit basic documents to apply.


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Frequently asked questions

What is the interest rate of Pradhan Mantri Mudra Loan?

The interest rates for Pradhan Mantri Mudra Loan vary based on the category – Shishu, Kishor, or Tarun. Generally, they range from 8% to 12%. The specific rate is determined by the lending institution, and applicants should check with their chosen financial institution for the current applicable interest rate for their selected category.