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Shishu Mudra loans offer collateral-free funding of up to ₹50,000 for new and early-stage businesses under the Pradhan Mantri Mudra Yojana (PMMY). Learn about the loan limit, interest rate, eligibility criteria, documents required, and application process.
Last updated on: Aug 26, 2026
A Shishu Mudra loan is the entry-level category under PMMY, designed for first-time entrepreneurs and micro businesses seeking funding of up to ₹50,000. The scheme offers collateral-free credit for eligible non-corporate, non-farm enterprises and is commonly used for working capital, inventory purchases, and small business expansion. Most public sector banks waive processing fees for Shishu loans, while interest rates are decided by individual lenders. Understanding Shishu Mudra loan eligibility and application requirements can help borrowers choose a suitable funding option.
A Shishu Mudra Loan is a collateral-free business loan of up to ₹50,000 offered under the Pradhan Mantri Mudra Yojana (PMMY) for new and very small businesses. It is intended to support entrepreneurs during the initial stage of business development.
Key highlights include:
Loan amount up to ₹50,000
No collateral requirement
Available to non-corporate, non-farm enterprises
Offered by banks, NBFCs, MFIs, and other approved lending institutions
Intended for manufacturing, trading, service, and agriculture-allied activities
The table below outlines the key features and benefits of a Shishu Mudra Loan, including the loan amount, repayment terms, eligibility, and other important details:
| Feature | Details |
|---|---|
Loan Amount |
Up to ₹50,000 |
Collateral |
Not required |
Processing Fee |
Usually waived by most public sector banks |
Interest Rate |
Decided by the lender |
Repayment Tenure |
Generally up to 5 years, subject to lender policy |
Application Mode |
Online and offline |
Eligible Activities |
Manufacturing, trading, services, and agriculture-allied activities |
Guarantee Cover |
Covered under CGFMU guidelines |
PMMY was created to improve access to institutional credit for micro enterprises that may not have access to traditional business financing.
The Pradhan Mantri MUDRA Yojana does not prescribe a uniform interest rate for Shishu loans. Each Member Lending Institution, including public sector banks, private banks, Regional Rural Banks, Non-Banking Financial Companies, and Microfinance Institutions, sets its own rate based on internal benchmarks and the applicant’s risk profile.
The table below provides an indicative overview of interest rates and charges across different lender categories:
| Lender Type | Typical Interest Rate Range p.a. | Processing Fee | Key Terms |
|---|---|---|---|
Public Sector Banks |
Around 8.50% to 12.00% |
Usually waived or nil |
Rates are generally linked to the bank’s EBLR, RLLR, MCLR, or base rate, along with an applicable spread. |
Private Sector Banks |
Around 10.50% to 16.00% |
Usually waived or nil for Shishu loans |
Rates may depend on the applicant’s credit score, account history, income, and business profile. |
Regional Rural Banks |
Around 9.50% to 13.00% |
Usually waived or nil |
Loans are often structured for rural micro-enterprises and allied agricultural activities. |
NBFCs and Microfinance Institutions |
Around 18.00% to 24.00% or more |
May apply as per lender policy |
Higher rates may reflect the borrower’s risk profile, operating costs, and lender-specific pricing policies. |
Disclaimer: The final interest rate and charges may vary across lenders and applicants. Borrowers can review the sanction letter and loan agreement to understand the applicable rate and total borrowing cost.
Apart from the interest rate, a Shishu Mudra loan may involve the following charges and conditions:
Applicants must meet the lender’s age, citizenship, business, income, and credit-related requirements to qualify for a Shishu Mudra loan. The exact eligibility conditions may vary across financial institutions.
The main eligibility requirements are outlined below:
| Parameter | Requirement |
|---|---|
Applicant Age |
The applicant must generally be at least 18 years old. The maximum age may range from 60 to 65 years, depending on the lender’s policy. |
Eligible Entity |
Non-corporate, non-farm micro-enterprises, start-ups, street vendors, sole proprietors, and other micro-entrepreneurs may apply. |
Business Activity |
The business must carry out an income-generating activity in manufacturing, trading, services, or eligible allied agricultural sectors. |
Loan Amount |
The Shishu category covers loans of up to ₹50,000. |
Credit Track Record |
The applicant must be an Indian citizen and should not have an active default with a bank or financial institution. Some lenders may accept applicants with no prior credit history. |
Business Plan |
The applicant must present a viable business idea, working capital requirement, or equipment purchase plan. |
Eligibility remains subject to the lender’s internal assessment and credit policy.
The documentation process for a Shishu Mudra loan is generally simpler than that of larger business loans. Applicants usually need to submit identity, address, business, and bank account records.
A PAN card may not always be mandatory if the applicant qualifies under the applicable KYC relaxation norms for small accounts. However, the lender may still request PAN or another officially valid document based on its internal policy.
The documents commonly required are listed below:
| Document Type | Accepted Documents |
|---|---|
Identity Proof |
Aadhaar Card, Voter ID, Driving Licence, Passport, PAN Card, or another government-issued photo identity document |
Address Proof |
Aadhaar Card, Passport, recent utility bill, property tax receipt, rent agreement, or bank passbook |
Photographs |
Two recent passport-size photographs of the applicant, proprietor, or partners |
Business Proof |
Udyam Registration, business registration certificate, shop and establishment licence, permit, or other proof of business activity, where available |
Equipment or Purchase Proof |
Proforma invoice or quotation for machinery, tools, raw materials, or equipment |
Bank Account Proof |
Bank statements for the previous 6 to 12 months, where applicable |
Financial Statements |
Income tax returns and balance sheets are generally not required for Shishu loans of up to ₹50,000, subject to lender policy |
Applicants may be asked to submit additional documents depending on the business activity, loan purpose, and lender assessment.
Applicants can apply for a Shishu Mudra loan through official digital platforms or by visiting a participating bank or financial institution. The process varies depending on the application route and the lender selected.
The online application process generally involves the following steps:
The lender may contact the applicant for clarification, document verification, or additional information.
Applicants who prefer an in-person application can follow these steps:
The Pradhan Mantri MUDRA Yojana includes four loan categories based on the borrower’s funding requirement and stage of business development. Tarun Plus was introduced to increase the maximum loan limit to ₹20 Lakhs for eligible borrowers who have successfully repaid a previous Tarun loan.
The table below compares the four PMMY categories:
| Category | Loan Amount | Suitable For | Indicative Interest Rate and Documentation |
|---|---|---|---|
Shishu |
Up to ₹50,000 |
First-time entrepreneurs, street vendors, home-based businesses, and small shop owners |
Generally carries lower rates among bank lenders and requires basic KYC and business documents |
Kishore |
₹50,001 to ₹5 Lakhs |
Growing businesses that need funds for inventory, tools, working capital, or machinery |
May require bank statements, business registration records, sales details, and income proof |
Tarun |
₹5 Lakhs to ₹10 Lakhs |
Established small businesses planning expansion or major equipment purchases |
Usually requires financial records, income tax returns, bank statements, and business performance details |
Tarun Plus |
₹10 Lakhs to ₹20 Lakhs |
Eligible businesses that have successfully repaid a previous Tarun loan |
Requires a formal financial track record, repayment proof, loan closure documents, and detailed business records |
The suitable category depends on the loan amount, business stage, repayment capacity, and lender eligibility criteria.
The Government of India has introduced support measures for micro-borrowers under PMMY at different times. Some measures were temporary, while others continue through fee waivers and credit guarantee support.
A 2% annual interest subvention was previously provided to eligible Shishu loan borrowers as part of the COVID-19 relief measures. The benefit was available for a limited period of 12 months and applied to borrowers who maintained timely repayments.
The emergency interest subvention programme was a time-bound measure and is no longer available as a standard benefit for new Shishu loan applications.
Eligible borrowers may continue to benefit from the following provisions:
These benefits remain subject to the applicable lender and scheme guidelines.
A Mudra Card is a RuPay debit card linked to the working capital component of an eligible Mudra loan. It allows borrowers to access the sanctioned working capital limit according to their business requirements.
The main features of the Mudra Card include:
The availability and terms of the Mudra Card depend on the lender and the type of loan facility sanctioned.
A Shishu Mudra loan may take around 7 to 10 working days from complete application submission to disbursal. The actual timeline depends on document verification, credit checks, business assessment, and the lender’s internal process.
The typical processing stages are outlined below:
| Application Stage | Typical Timeline | Process Details |
|---|---|---|
Document Verification and Processing |
1 to 3 working days |
The lender reviews KYC records, credit bureau information, business details, and submitted documents. |
Sanction and Account Setup |
2 to 4 working days |
The lender completes the approval process, prepares the loan agreement, and links the loan account. |
Total Turnaround Time |
7 to 10 working days |
The period usually covers complete submission, verification, sanction, and disbursal. |
Digital Shishu Mudra applications may be processed more quickly for eligible pre-approved customers who already have an established relationship with the lender.
Note: The final approval and disbursal timeline may still vary according to lender policy.
The Shishu category supports a wide range of income-generating micro-enterprises in manufacturing, trading, services, and allied agricultural sectors. Direct crop cultivation is not covered under PMMY.
The table below highlights eligible and excluded activities:
| Business Category | Eligibility | Examples |
|---|---|---|
Manufacturing Units |
Eligible |
Handloom units, bakeries, garment stitching businesses, food-processing units, and small artisan workshops |
Trading and Retail |
Eligible |
Kirana stores, fruit and vegetable vendors, apparel shops, and mobile repair kiosks |
Services Sector |
Eligible |
Salons, tailoring shops, dry cleaners, repair garages, courier centres, and logistics businesses |
Allied Agricultural Activities |
Eligible |
Dairy farming, poultry farming, fisheries, beekeeping, and agri-clinic services |
Direct Crop Cultivation |
Not Eligible |
Seasonal crop production, seed purchases, fertiliser expenses, and other direct farming activities |
Direct crop cultivation and related field-level farming expenses are generally covered under agricultural credit products such as the Kisan Credit Card rather than PMMY.
Reviewer
The maximum loan amount available under the Shishu category of the Pradhan Mantri MUDRA Yojana (PMMY) is ₹50,000. This category is intended to support early-stage micro-enterprises in meeting initial business expenses, equipment purchases, or working capital requirements.
The minimum margin requirement for a Shishu Mudra loan is Nil. Under the PMMY guidelines, borrowers are generally not required to contribute margin money for loans sanctioned under the Shishu category.
The approval timeline for a Shishu Mudra loan depends on the lender and the completeness of the application. In many cases, applications are processed within 7 to 10 working days after the required documents and verification are completed.
Applicants with an existing business loan may be eligible for a Shishu Mudra loan, subject to the lender's assessment and the applicable PMMY guidelines. Approval depends on factors such as repayment history, existing debt obligations, and overall eligibility.
The repayment tenure for a Shishu Mudra loan generally extends up to 5 years, depending on the lender's policies and the nature of the loan. Some lenders may also provide a moratorium period based on the borrower's business requirements.
There is no fixed interest rate prescribed under the Pradhan Mantri MUDRA Yojana. The applicable interest rate is determined by the lending institution based on its internal lending policies and the borrower's credit assessment.
Insurance is not mandatory under the PMMY guidelines for a Shishu Mudra loan. However, some lenders may recommend or require insurance for assets or equipment financed through the loan, depending on their lending policies.
Lenders generally require applicants to provide basic details about the proposed business activity and the intended use of the loan amount. The documentation requirements may vary depending on the lender and the nature of the business.
The PMMY categorises loans based on the funding requirement. Shishu covers loans up to ₹50,000, Kishore covers ₹50,001 to ₹5 Lakhs, Tarun covers ₹5 Lakhs to ₹10 Lakhs, and Tarun Plus provides loans from ₹10 Lakhs to ₹20 Lakhs for eligible borrowers under the scheme.
The maximum loan limit under the Pradhan Mantri MUDRA Yojana has been increased to ₹20 Lakhs under the Tarun Plus category. This enhanced limit is available to eligible borrowers in accordance with the applicable scheme guidelines.
Shishu Mudra loans are generally collateral-free under the Pradhan Mantri MUDRA Yojana. Lenders do not typically require collateral or third-party guarantees for eligible loans sanctioned under this category.
A credit assessment may be carried out as part of the loan evaluation process. While lenders may review the applicant's credit history where available, eligibility is determined based on the lender's policies and the overall assessment of the loan application.
Shishu Mudra loan applications can be submitted online through participating lenders and government-supported digital platforms that facilitate PMMY applications. The exact application process and documentation requirements may vary across lenders.
The Pradhan Mantri MUDRA Yojana does not generally cover direct crop cultivation. However, eligible agri-allied activities such as dairy, poultry, fisheries, beekeeping, and similar income-generating businesses may qualify under the scheme, subject to the lender's assessment.
A Mudra Card is a RuPay debit card issued to eligible Mudra loan borrowers for meeting working capital requirements. It enables borrowers to withdraw funds as needed within the sanctioned limit, subject to the terms and conditions of the lending institution.
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