Mudra Loan (PM Mudra Yojana): Categories, Eligibility, Age Limit and How to Apply

Mudra Loan Categories: Shishu, Kishore, Tarun and Tarun Plus

PMMY has four categories based on the amount borrowed. The business purpose and repayment capacity determine the appropriate request, while Tarun Plus has additional previous-borrowing requirements.

These uses are illustrative. A category does not automatically establish eligibility or guarantee the maximum amount.

1. Shishu Mudra Loan (up to Rs. 50,000)

Shishu finance suits eligible micro-enterprises with small funding requirements, including new ventures, street vendors, shopkeepers, artisans and service providers. It can support stock, tools or other approved business costs. Documentation and verification requirements depend on the lender.

2. Kishore Mudra Loan (Rs. 50,001 to Rs. 5 lakh)

Kishore finance covers requirements above Rs. 50,000 and up to Rs. 5 lakh. Borrowers may use it for approved equipment purchases, inventory or operating needs. The lender assesses the business proposal, supporting records and repayment capacity.

3. Tarun Mudra Loan (Rs. 5,00,001 to Rs. 10 lakh)

Tarun finance supports eligible requirements above Rs. 5 lakh and up to Rs. 10 lakh. Potential uses include machinery, additional capacity or business expansion. The lender determines the financial records, quotations and project details required for assessment.

4. Tarun Plus Mudra Loan (Rs. 10,00,001 to Rs. 20 lakh)

Introduced on 24 October 2024, Tarun Plus covers eligible borrowing above Rs. 10 lakh and up to Rs. 20 lakh. It is intended for entrepreneurs meeting the scheme’s previous Tarun borrowing and repayment requirements.

Successfully repaying a Tarun loan does not automatically guarantee further credit, identical terms or the maximum sanction. The lender must assess the new requirement and confirm eligibility.

For larger eligible business requirements, Bajaj Finance offers business loans of up to Rs. 80 lakh, subject to eligibility, verification and credit assessment. Review the sanctioned terms and applicable deductions before accepting an offer.

Purposes of MUDRA loans

Mudra loans support eligible income-generating activities in manufacturing, processing, trading, services and specified activities allied to agriculture. Permitted uses can include:

• Working capital: Raw materials, inventory and approved day-to-day operating expenses.
• Equipment and machinery: Purchasing or upgrading tools and production equipment.
• Commercial transport: Eligible vehicles used for business, such as auto-rickshaws, e-rickshaws, taxis, small goods carriers and commercially used two-wheelers. Confirm vehicle-specific eligibility with the lender.
• Business premises: Setting up or expanding an eligible shop, workshop, kiosk, salon, restaurant or service outlet.
• Agriculture-allied activities: Dairy, poultry, fisheries, beekeeping, agro-processing and other permitted activities. Crop loans and land-development activities such as irrigation are outside the scheme’s stated scope.
• Food processing: Eligible food production, preservation, catering and related activities.
• Textiles: Activities such as handloom, khadi, embroidery, dyeing, knitting and stitching.

The lender must approve the activity and intended use. A legitimate business expense is not automatically eligible under every Mudra product.

Which Mudra category fits your business?

PM Mudra Loan Eligibility Criteria

Mudra loan eligibility depends on the scheme’s requirements and the participating lender’s assessment.

• Applicant age: Individual applicants must meet the lender’s minimum-age and age-at-maturity conditions. Do not assume one upper-age limit applies across all lenders.
• Borrower type: Individuals, sole proprietorships, partnerships and other accepted business entities may apply. Company eligibility varies by lender and product.
• Business activity: The proposed or existing enterprise must undertake an eligible income-generating activity in manufacturing, processing, trading, services or specified activities allied to agriculture.
• Funding requirement: The amount must fall within the applicable Mudra category. Borrowing above Rs. 10 lakh and up to Rs. 20 lakh requires Tarun Plus eligibility.
• Credit record: Applicants should not be in default to a bank or financial institution.
• Repayment capacity: The business proposal and financial position must support repayment of the requested amount.

Eligible activities can include retail, food processing, repairs, transport, crafts and other small business services. Agriculture-allied activities such as dairy, poultry and fisheries may qualify; crop loans are not covered.

Who is not eligible

Applications may fall outside the scheme where:

• The purpose is ineligible: For example, personal consumption or crop-cultivation finance.
• The amount exceeds the applicable limit: Requests above Rs. 20 lakh are outside PMMY, while amounts above Rs. 10 lakh require Tarun Plus eligibility.
• The borrower does not meet the lender’s criteria: This may include an unaccepted business structure, existing defaults or insufficient repayment capacity.

What a lender checks for a Mudra loan

Collateral-free lending still requires a credit assessment. The lender generally reviews:

• Business activity: Whether the enterprise and intended use of funds qualify.
• Business proposal: What the money will fund, expected costs and how the activity will generate income.
• Repayment capacity: Cash flow, existing commitments and the affordability of repayments.
• Identity and business records: Whether the application is supported by valid, consistent documents.
• Credit history: Previous borrowing, repayment behaviour and outstanding obligations.
• Category-specific conditions: Including previous Tarun borrowing and repayment requirements for Tarun Plus.

Required documents for Mudra Loan

The checklist varies by lender, category, business structure and funding purpose. A document should not be treated as universally mandatory or exempt solely because of the loan category.

New businesses should ask which projections or alternative records are accepted when historical financial statements are unavailable.

Why Mudra loan applications are rejected

A lender may decline an application because it does not meet scheme requirements or its credit assessment criteria.

Ask for the specific reason for rejection in writing. If you believe there was a service or processing failure, use the lender’s grievance process. A complaint does not override eligibility requirements or guarantee approval.

Mudra Loan Interest Rates

PMMY does not prescribe a single interest rate. Each lender determines its offer under the applicable regulatory framework and pricing policy. The rate may be fixed or floating, so check the benchmark, spread and reset conditions where relevant.

Other costs and conditions to review include:

• Collateral: Mudra loans are collateral-free. However, the lender may create primary security over assets financed by the loan.
• Processing charges: Some lenders waive charges for Shishu loans. Fees for other categories depend on the lender’s policy.
• Repayment tenure: The lender assesses the funding purpose, asset life and repayment capacity before setting the schedule.
• Moratorium: An initial repayment concession may be offered, but interest can continue to accrue. Confirm what is deferred and how it affects later repayments.

Compare the APR, applicable charges and total repayment rather than the interest rate alone.

Mudra loan EMI example

The table given below shows repayments on a Rs. 5,00,000 reducing-balance term loan over 60 months. Please note that these are assumed rates, not actual lender offers.

EMI formula: P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1].

P is the principal, r is the monthly interest rate expressed as a decimal, and n is the number of instalments. At 12% p.a., r is 0.01.

Figures are independently rounded to the nearest rupee. Total interest uses the unrounded EMI. The examples exclude fees, moratorium effects and changes in interest rates.

Steps to apply for Mudra Loan online

The process depends on the participating lender and the application channel.

• Choose an official channel: Visit Udyamimitra, JanSamarth or a participating lender’s verified website and check whether the required facility is available.
• Check eligibility: Confirm the permitted activity, borrowing category and applicant requirements.
• Complete the application: Enter accurate personal, business and funding details.
• Submit supporting records: Upload the documents requested for your business stage and loan purpose.
• Retain the reference number: Use it to track progress and respond to verification queries.
• Review the sanction: Check the amount, pricing, charges, repayment schedule and conditions before accepting.
• Complete disbursal requirements: Fulfil the lender’s formalities so funds can be released as agreed.

An online application does not guarantee instant approval or eliminate every verification or branch requirement.

Steps to apply for a Mudra Loan offline

• Visit a participating lender: Discuss your activity, funding requirement and suitable Mudra category.
• Obtain the checklist: Ask for the application form and documents relevant to your case.
• Prepare the application: Explain the proposed use of funds and repayment plan accurately.
• Submit the records: Provide the completed form and supporting documents, and obtain an acknowledgement.
• Complete assessment: Respond to queries and any additional verification requirements.
• Review and accept the offer: Read the sanction terms before completing the documentation and disbursal conditions.

Funds may be credited to your account or paid to a supplier, depending on the approved purpose and terms.

Benefits of a Mudra Loan

• Collateral-free finance: Eligible borrowers can access funding without pledging additional collateral.
• Credit guarantee support: CGFMU cover protects participating lenders against specified losses without removing the borrower’s repayment obligation.
• Support for micro-enterprises: Eligible new and existing activities can seek finance, including specified agriculture-allied businesses.
• Different funding structures: Depending on the lender, finance may include term loans, working capital limits or a combination.
• Assessed repayment schedules: Tenure and any moratorium are determined according to the facility and repayment prospects.
• MUDRA Card access: Where offered, a card enables use of an approved working capital limit under the agreed conditions.

Limitations of the Mudra Loan Scheme

• Category limits: Shishu, Kishore and Tarun cover borrowing up to Rs. 10 lakh. Only eligible Tarun Plus borrowing extends above Rs. 10 lakh to Rs. 20 lakh.
• Additional Tarun Plus conditions: Previous Tarun borrowing and repayment requirements apply. A larger sanction is not automatic.
• Restricted purposes: Personal consumption, crop loans and other excluded activities do not qualify.
• Lender-specific borrower criteria: Accepted business structures and application routes vary. Do not assume that every company is eligible or that all companies are excluded.
• Credit assessment: Approval still depends on eligibility, documents, credit history and repayment capacity.
• Borrowing costs: Interest and applicable charges remain payable. PMMY does not automatically include a subsidy or debt waiver.

Mudra loan terms explained

These terms explain the institutions, funding conditions and documents mentioned on this page.

Common mistakes when applying for a Mudra loan

• Applying directly to MUDRA: Participating lenders assess and disburse loans. Use an authorised lender or supported official application channel.
• Paying for guaranteed approval: No intermediary can guarantee sanction. Verify any charges directly with the lender.
• Choosing the wrong category: Match the requested amount to the category and check any additional conditions, particularly for Tarun Plus.
• Submitting incomplete records: Follow the lender’s checklist and resolve discrepancies before submitting.
• Overestimating repayment capacity: Base the request on realistic cash flow and existing commitments, rather than optimistic sales forecasts.
• Misstating the funding purpose: Describe the actual business expense accurately and provide supporting quotations or estimates where required.

How to avoid Mudra loan fraud

Apply through a participating lender’s verified channels or official portals such as Udyamimitra and JanSamarth. MUDRA states that it does not appoint agents or middlemen to arrange Mudra loans.

• Guaranteed approval: Treat promises of certain sanction or faster approval in exchange for payment with caution.
• Requests for confidential details: Never disclose passwords, PINs or OTPs to callers or intermediaries.
• Unverified payment demands: Confirm charges independently before transferring money, especially to a personal account.
• Lookalike websites: Check the full address and access the official website independently rather than following an unsolicited link.

If financial cyber fraud occurs, contact your bank immediately and report it through 1930 or the National Cyber Crime Reporting Portal at cybercrime.gov.in. Retain messages, payment records and complaint references.