What is Mudra Loan?
Pradhan Mantri MUDRA Yojana (PMMY) provides loans up to Rs. 10 lakhs to micro/small enterprises. MUDRA stands for Micro Units Development and Refinance Agency. These loans are available through banks, NBFCs, and MFIs.
Mudra Loan Categories
| Category | Loan Amount | Best For | Interest Rate |
|---|---|---|---|
| Shishu | Up to Rs. 50,000 | New/early-stage businesses | 8% - 10% |
| Kishor | Rs. 50,001 - 5 Lakhs | Expanding small businesses | 8.5% - 11% |
| Tarun | Rs. 5,00,001 - 10 Lakhs | Established businesses | 9% - 12% |
No Collateral Required
All Mudra loans are collateral-free! No processing fee for Shishu loans. Banks cannot refuse Mudra loan without valid reason.
Eligible Business Activities
Shishu Loan (Up to Rs. 50,000):
- Street vendors and hawkers
- Home-based food businesses (tiffin services)
- Tailoring and embroidery shops
- Beauty parlors and salons
- Small repair shops
- Fruit and vegetable vendors
Kishor Loan (Rs. 50,001 - 5 Lakhs):
- Small retail shops
- Food processing units
- Textile and garment workshops
- Auto repair garages
- Service businesses (IT, transport)
Tarun Loan (Rs. 5-10 Lakhs):
- Manufacturing units
- Larger retail/wholesale businesses
- Trading companies
- Commercial vehicle purchase
- Equipment for business expansion
Eligibility Criteria
| Parameter | Requirement |
|---|---|
| Age | 18 years and above |
| Nationality | Indian citizen |
| Business Type | Manufacturing, Trading, Services |
| Existing Loan | Should not be defaulter |
| Business Plan | Required for Kishor/Tarun |
Documents Required
For Shishu Loans:
- Identity proof (Aadhaar, PAN)
- Address proof
- 2 passport photos
- Business proof (if existing)
For Kishor/Tarun Loans:
- All Shishu requirements plus:
- Business registration certificate
- Bank statements (6 months)
- Income Tax Returns (if filed)
- Business plan/project report
- Quotations for machinery/equipment
Where to Apply
| Lender Type | Examples | Best For |
|---|---|---|
| Public Banks | SBI, BOB, PNB, Canara | Lowest rates, larger amounts |
| Private Banks | HDFC, ICICI, Axis | Faster processing |
| NBFCs | Bajaj, L&T Finance | Flexible eligibility |
| MFIs | Bandhan, Ujjivan | Shishu loans, rural areas |
| Small Finance Banks | AU SFB, Equitas | Unbanked borrowers |
Application Process
- Step 1: Identify which category (Shishu/Kishor/Tarun) suits your needs
- Step 2: Prepare required documents and business plan
- Step 3: Visit nearest bank branch or apply online via Udyamimitra portal
- Step 4: Fill application form and submit documents
- Step 5: Bank verifies documents and business viability
- Step 6: Loan sanctioned and disbursed (7-15 days typically)
Online Application
Apply online at udyamimitra.in - the official government portal. You can compare offers from multiple banks and track application status online.
Interest Rates Comparison
| Bank | Shishu Rate | Kishor Rate | Tarun Rate |
|---|---|---|---|
| SBI | 8.60% | 9.00% | 9.50% |
| Bank of Baroda | 8.75% | 9.25% | 9.75% |
| PNB | 8.90% | 9.40% | 10.00% |
| HDFC Bank | 9.50% | 10.50% | 11.50% |
| Bandhan Bank | 10.00% | 11.00% | 12.00% |
EMI Calculation Examples
At 10% interest rate, 3-year tenure:
| Loan Amount | Monthly EMI | Total Interest | Total Payment |
|---|---|---|---|
| Rs. 50,000 (Shishu) | Rs. 1,613 | Rs. 8,068 | Rs. 58,068 |
| Rs. 2,00,000 (Kishor) | Rs. 6,452 | Rs. 32,272 | Rs. 2,32,272 |
| Rs. 5,00,000 (Kishor) | Rs. 16,130 | Rs. 80,680 | Rs. 5,80,680 |
| Rs. 10,00,000 (Tarun) | Rs. 32,260 | Rs. 1,61,360 | Rs. 11,61,360 |
Tips for Approval
- Start with Shishu for easier approval, then graduate to higher categories
- Have clear business plan with projected revenues
- Maintain good personal CIBIL score (even for collateral-free loans)
- Apply at bank where you have existing account
- Get Udyam Registration before applying
- Be prepared to explain how loan will be used
Frequently Asked Questions
Yes, for Shishu loans (up to Rs. 50,000), ITR is not mandatory. For Kishor and Tarun loans, banks may require ITR or accept alternative income proof like bank statements and GST returns.
Banks must provide written reason for rejection. Common valid reasons include existing default, incomplete documents, or unviable business plan. You can complain to banking ombudsman if rejected without valid reason.
Yes, after successfully repaying first Mudra loan. If you took Shishu earlier, you can now apply for Kishor. Many borrowers graduate from Shishu ? Kishor ? Tarun as their business grows.
No direct subsidy. However, Shishu loans have zero processing fee. Some state governments provide interest subvention (reduced interest) for specific categories like women entrepreneurs or SC/ST borrowers.
Conclusion
Mudra loans are excellent for starting or expanding small businesses with collateral-free financing at affordable rates. Start with Shishu for new businesses and grow to Kishor/Tarun as your venture expands. Apply through official channels and maintain good repayment track for future loan upgrades.
Use our Business Loan EMI Calculator to plan your Mudra loan!