The Mudra loan refers to loans provided by banks and financial institutions to micro and small enterprises (MSEs) in India under the Pradhan Mantri Mudra Yojana (PMMY) scheme. The PMMY scheme was launched in 2015 by the Government of India with the aim of providing financial support and promoting entrepreneurship in the country.
Mudra loans are collateral-free loans, meaning you do not need to provide any security or collateral to avail of the loan. The loans can be used for various business purposes, including working capital, buying machinery or equipment, expanding business operations, and more.
For a deeper understanding of the Mudra loan details and to learn all about Mudra loan variants, read on.
No. of PMMY Loan Sanctioned
Loan Amount Sanctioned
Loan Amount Disbursed
The types of companies that can avail a loan under the Pradhan Mantri Yojana scheme include:
Private Limited Company
Limited Liability Partnership (LLP)
Small Scale Industries (SSI)
In short, any micro or small enterprise engaged in manufacturing, services, or trading can avail of Mudra Loans under the Pradhan Mantri Mudra Yojana scheme.
A key part of this PMMY scheme’s details is noting the industries that qualify. Here are some of the industries that are eligible for a Mudra Loan.
This includes farming, animal husbandry, poultry, fishery, beekeeping, and other allied activities.
This includes the manufacturing of packaged food, canned food, and other processed food items.
This includes the manufacturing of garments, clothing accessories, and other textile products.
This includes the manufacturing of various handicraft items such as pottery, ceramics, woodwork, and other handmade items.
This includes the transportation of goods, warehousing, and other related activities.
This includes the trading of goods, both online and offline, including the sale of consumer goods, electronics, and other items.
This includes various small businesses and service enterprises such as beauty parlours, repair shops, and other small service providers.
The scheme is open to micro and small enterprises engaged in any sector, as long as they meet the eligibility criteria.
The Mudra business loan has several defining features that distinguish it from other financial products offered by the government. Some of the features of Pradhan Mantri MUDRA Yojana (PMMY) are as follows:
It is targeted at businesses engaged in trading, manufacturing, or providing services.
The loan amount can be used to fulfil working capital requirements.
The funds can be employed for a diverse group of purposes such as the purchase of machinery, growth expansion, business restructuring, and meeting extended working capital requirements, among other things.
Both new and existing enterprises can apply for a Mudra scheme.
The loan repayment tenure ranges between 3 to 5 years.
One can apply for a Mudra Loan through the official www.Mudra.org.in portal.
The PMMY scheme offers three products namely Shishu, Kishore, and Tarun to eligible entities. The details of these three types of Mudra loan products are as follows.
Shishu loans provided under the Mudra scheme allow entrepreneurs on the threshold of starting a business to borrow up to ₹50,000. The following details need to be furnished to avail the Mudra Shishu loan.
Quotation of the machinery being purchased and other items that need to be purchased.
Details of the plant and machinery that has been purchased.
Details of the supplier who is providing the plant and the machinery.
Kishore loans stay within the range of ₹50,001 and ₹5,00,000. They are ideal for business people who require additional monetary resources for expanding their trade. Here is the checklist of the documents needed:
The balance sheet of the business goes back two financial years
Income Tax and Sales Tax returns
Bank account statements going back 6 months
Estimated balance sheet for the next 1 year or the duration of the loan sought
Memorandum of Association (MOA) and Articles of Association (AOA), if applicable
A report exploring the technical and economic sustainability of the applicant’s business
Tarun loans under the PMMY scheme range from ₹5,00,001 to ₹10,00,000. Business owners who wish to avail of a Tarun loan need to furnish these documents listed below:
Proof of address
Proof of identity
Certificate of SC, ST, OBC, if applicable
The primary purpose of the Pradhan Mantri Mudra Loan Yojana (PMMY) is to provide financial assistance and support to micro and small enterprises in India. The scheme was launched in 2015 with the aim of promoting entrepreneurship, creating employment opportunities, and encouraging financial inclusion.
The MUDRA loan can be availed from a range of financial institutions, including public sector banks, private sector banks, regional rural banks (RRBs), small finance banks (SFBs), and micro finance institutions (MFIs).
The eligibility for Mudra Loan is listed below.
New and existing units for service sector, trading, or manufacturing activities
Security or Collateral
No collateral or third-party security is required
Public Sector Banks, Private Sector Banks, Micro Finance Institutions, and Regional Rural Banks
Proof of identity, proof of residence, application form and passport size photos
Interest Rates: The Pradhan Mantri Mudra Yojana allows eligible applicants to borrow funds up to ₹10 Lakhs. The interest rate on the Mudra loan varies depending upon the applicant’s profile and business requirements as well as the discretion of the lending institution.
Processing Charges: No processing fee is applicable on a Mudra loan for amounts up to ₹50,000. For amounts ranging between ₹50,001 and ₹10 Lakhs, an interest rate of 10% and a processing fee of 0.50% are applicable in addition to GST.
Before you go ahead and apply for a Mudra loan, you must ensure that a handful of documents are at your disposal. To apply for Mudra Yojana, you will need:
Proof of identity: Aadhaar card, PAN card, Voter’s ID, passport, bank passbook, driving license
Proof of address: Aadhaar card, Residence Certificate, Electricity Bill, Water Bill, government-issued documents
Copy of your bank statement for the past 3 months
Copy of your caste certificate. This document will be crucial if you are from a reserved caste
Business Address Certificate that will count as your business identity and address proof.
Copy of Inventory Purchase Bill if you are
The Mudra loan scheme offers several benefits that should help your business objectives. Some of the most notable benefits are as follows:
No Collateral: It can be difficult for a new/upcoming business to provide collateral, and this is where financing through a Mudra loan can help.
Nominal Interest Rates: The interest rate on a Mudra loan does not exceed more than 1% per month. The interest rate is heavily driven by individual banks and dependent upon the type of borrower.
Easy Withdrawal: Once the loan is approved, the loan amount can be withdrawn using the Mudra Loan card at any given point in time, which negates the need for a beneficiary to visit the bank.
Flexible Loan Options: The Mudra loan scheme offers flexible loan options based on the stage of the business, which allows businesses to choose a loan amount that suits their financial requirements.
Boosts Financial Inclusion: The Mudra loan scheme aims to provide financial assistance and support to micro and small enterprises in India, thereby promoting financial inclusion and entrepreneurship.
The benefits of the Mudra loan are notable; hence, you must carefully go through the Mudra Loan eligibility criteria before applying. Staying well-informed about the offerings will help you avoid any inconveniences you may face during the application process.
The Mudra card is an innovative product that makes credit easily accessible to small businesses while providing flexibility to the card owner at the same time. It can be used as a credit card with an overdraft (loan) limit and can also be used as a debit card for making withdrawals at an ATM.
As such, the borrower can use a Mudra card to make multiple withdrawals and credits. Such cards also help with the digitalisation of Mudra transactions, which would be instrumental in creating a credit history for the borrower.
With the PMMY scheme, you can borrow up to ₹10 Lakhs. If your business needs more capital or funds, or if you don’t qualify to borrow under the PMMY scheme, you could always avail of a business loan at Bajaj Markets. At Bajaj Markets, you can apply for business loans as high as ₹75 Lakhs without the need of any collateral. The application process is online, making the procedure quite simple and easy, from approval to disbursal.
While it is smart to avail a Mudra loan, to apply and get funding successfully, you need to meet the terms. Small manufacturers, shopkeepers, artisans, and individuals carrying on agricultural activities like rearing livestock and raising poultry are all eligible to apply for the Mudra loan under the PMMY scheme.
All small businesses, whether they’re proprietary concerns or firms in rural or urban areas, can avail Mudra loans. Keep in mind that the applicant must be an Indian citizen above 18 years of age.
You can avail loans under any of the three products offered by the PMMY scheme and the maximum amount available is ₹10 Lakhs.
Your eligibility to apply for a Mudra loan does not depend on your credit score. So, anyone who fulfils the other criteria required to avail this loan can go ahead and apply for the same, irrespective of their credit history.
At present, there is no Mudra loan subsidy on offer. But, the interest rates are much lower than what banks charge. Through Mudra Loan, credit to small businesses is given at reasonable rates.
Yes, a bank can reject a Mudra loan application if the applicant fails to meet the eligibility criteria or if the bank finds the project or business plan to be unviable.
If a borrower fails to repay a Mudra loan, the bank can take legal action to recover the outstanding amount, including seizing the collateral, if any.
No, GST (Goods and Services Tax) registration is not mandatory to avail a Mudra loan. However, GST registration may be required depending on the type of business activity.
The Pradhan Mantri Mudra Yojana (PMMY) is aligned with other government initiatives such as Startup India, Digital India, and Make in India, which aim to promote entrepreneurship, innovation, and manufacturing in India.
The repayment period for Mudra loans varies depending on the type of loan. For Shishu loans, the repayment period can be up to 5 years, while for Kishore and Tarun loans, it can be up to 7 years.
Yes, you can complete the Mudra loan registration process offline by visiting any of the authorised financial institutions such as public sector banks, private sector banks, regional rural banks (RRBs), small finance banks (SFBs), and micro finance institutions (MFIs).
You can also download the Mudra loan application form from the official website of the Mudra Yojana and submit it offline to the nearest authorised financial institution.