MUDRA loan under PMMY — explained
The Pradhan Mantri MUDRA Yojana (PMMY) provides collateral-free loans up to ₹10 lakh (up to ₹20 lakh under the Tarun Plus category since 2024) to micro and small non-farm enterprises. Loans are refinanced by MUDRA (Micro Units Development & Refinance Agency Ltd) but disbursed by every scheduled commercial bank, RRB, small finance bank, and select NBFCs.
By Aditi Menon·Editor-in-Chief·reviewed by editor
Last updated: 15 June 2025
What MUDRA is (and what it is not)
MUDRA (Micro Units Development & Refinance Agency Ltd.) is a wholly owned subsidiary of SIDBI, set up by the Government of India in 2015. It does not lend directly to borrowers. Instead, it refinances Member Lending Institutions (MLIs) — essentially banks and NBFCs — that lend to micro enterprises under the PMMY framework.
So when someone says “I got a MUDRA loan”, what they actually have is a loan from their bank, extended under the PMMY refinance scheme, with the bank’s own product name and rate. MUDRA sets the framework; the bank sets the price.
The three loan tiers under PMMY
The tier name matches the loan size, not a separate application category — the bank you apply to selects the tier based on the amount you request and your file strength.
| Category | Loan amount | Typical borrower profile |
|---|---|---|
| Shishu | Up to ₹50,000 | Vendors, small kirana stores, home-based businesses |
| Kishor | ₹50,001 – ₹5,00,000 | Small workshops, service providers, small retailers |
| Tarun | ₹5,00,001 – ₹10,00,000 | Established micro enterprises scaling up |
| Tarun Plus | ₹10,00,001 – ₹20,00,000 | Successful Tarun borrowers seeking expansion (introduced 2024) |
Who is eligible
- Individual entrepreneurs, proprietorships, partnerships, LLPs, and small private companies.
- Business must be a non-farm income-generating micro or small enterprise (manufacturing, trading, services).
- Allied agricultural activities that are commercial (dairy, poultry, fisheries, beekeeping) are now covered.
- Age of applicant: typically 18–65 years.
- Existing business preferred; some banks allow start-ups with a business plan under the Shishu tier.
- No prior default on any bank or NBFC facility.
Documents you need to submit to the bank
- Filled MUDRA / PMMY application form (available at the bank branch or the JanSamarth portal)
- KYC — PAN, Aadhaar, and a proof of business (GST, Udyam Registration, Shop Act, or trade licence)
- Latest passport-size photograph
- Quotation or proforma invoice for the machinery / goods being financed (for term-loan use)
- Bank statement of the last 6 months, if you have an operating business
- Business address proof and residence proof
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How to apply
Two routes:
1. Visit a branch of any Scheduled Commercial Bank, RRB, cooperative bank, small finance bank, or MUDRA-empanelled NBFC. Ask for the PMMY application form and submit with documents. Turnaround varies from 7–30 working days.
2. Apply online through the JanSamarth portal (jansamarth.in). This is the Government of India’s common credit portal that routes your PMMY application to eligible lenders based on your inputs. Faster and paperless for the initial screening.
Banks are required by RBI to consider PMMY applications, but the final decision rests with each bank’s underwriting policy. If one bank declines, you can approach another.
Interest rates and processing charges
MUDRA does not fix rates. Each MLI sets its own rate, typically linked to its Marginal Cost of Funds (MCLR) or Repo Linked Lending Rate (RLLR) with a spread. Broad range observed in practice: 8.5% – 12% p.a. for Shishu/Kishor at public sector banks, 10% – 16% p.a. at NBFCs and small finance banks. Processing fee is often waived for Shishu (up to ₹50,000) at public sector banks under the PMMY framework.
Always ask the bank for the schedule of charges in writing before signing.
What you can use a MUDRA loan for
- Working capital — raw materials, inventory, wage payments (Kishor / Tarun via cash-credit or overdraft)
- Machinery and equipment purchase — as a term loan
- Vehicle purchase for commercial use (auto, tempo, tractor for allied agri activities)
- Small-scale infrastructure — shop fit-out, workshop expansion
- Business software or POS systems
Frequently Asked Questions
Sources & references
- MUDRA — official website & scheme guidelines — Micro Units Development & Refinance Agency Ltd.
- Pradhan Mantri MUDRA Yojana (PMMY) — Ministry of Finance — Department of Financial Services, GoI
- JanSamarth — unified credit portal for government-backed schemes — Government of India
Rates, fees, eligibility, and product terms cited on this page reflect the sources above at the time of publication and may have changed since. Always verify directly with the lender or regulator.