The Union Government offers collateral-free Prime Minister’s Mudra Loans to support micro, small and medium enterprises. This financial support helps entrepreneurs start, grow or expand their businesses according to their plans and capital needs.
Below is a clear overview of the Mudra loan scheme, including what it covers, eligibility requirements and required documents.
What is the Mudra Loan
Under the Pradhan Mantri Mudra Yojana (PMMY), Mudra loans provide funding for startups and growing non-corporate businesses. “MUDRA” stands for Micro Units Development and Refinance Agency Ltd. The scheme’s purpose is to enable small enterprises by improving access to affordable credit for working capital, equipment or business expansion.
Types of Mudra Loans
The PMMY classifies Mudra loans into three main categories to match the stage and needs of the borrower:
- Shishu: Loans up to ₹50,000
- Kishor: Loans from ₹50,000 up to ₹5,00,000
- Tarun: Loans from ₹5,00,000 up to ₹10,00,000
These tiers enable targeted support: Shishu for micro startups and very small units, Kishor for businesses in a growth phase, and Tarun for more established small enterprises seeking larger funds.
Mudra Loan Providers
Mudra loans are available through a range of scheduled lending institutions approved under PMMY. Typical lenders include:
- Public sector banks
- Private sector banks
- Non-Banking Financial Companies (NBFCs)
- Small Finance Banks (SFBs)
- Regional rural banks
- State cooperative banks
- Microfinance institutions (MFIs)
Eligibility For a Mudra Loan
General eligibility requirements for Mudra loans are intentionally broad to support diverse micro and small enterprises. Key criteria include:
Age
- Minimum: 18 years
- Maximum: 65 years
Eligible Entities
- Individuals: Proprietorships, partnerships, private limited companies, public companies and other legal entities.
- Enterprises: Non-farm enterprises engaged in manufacturing, trading and services; agriculture-allied activities are also eligible under PMMY.
- Organisations: Sole proprietorships, partnerships, LLPs, private and public limited companies, NGOs, trusts and cooperative societies.
Eligibility Criteria for Individuals
- Indian citizen
- No criminal record
- No history of default with banks or financial institutions
- Reasonable credit history
- Relevant educational qualifications or business experience may be required
- Active or planned income-generating business activity
Applicants should be able to demonstrate the skills, experience or knowledge necessary to run the proposed activity when requested by the lender.
Additional Criteria
- Applicants should be engaged in income-generating activities.
- Non-farm enterprises should be involved in trading, manufacturing or services.
Paperwork Required for Mudra Loans
Required documents vary by loan size and lender. Below are typical documents requested for each Mudra loan category.
Paperwork for a Shishu Loan
| Document Type | Details |
|---|---|
| ID Proof Self-attested |
Choose one: Aadhaar Card, Voter ID, PAN Card, Passport, Driving Licence or other government photo ID |
| Address Proof Self-attested |
Choose one: recent telephone/electricity bill, recent property tax receipt, passbook/bank statement attested by bank, Aadhaar, passport, voter ID, domicile certificate or a certificate from local authority |
| Applicant’s Photograph | Two recent colour photographs (not older than six months) |
| Quotation for Machinery/Items | Quotation listing supplier name and price for machinery or items to be purchased |
| Proof of Business Identity/Address | Relevant business licences, registration certificates or other documents proving business ownership and address |
Paperwork for Kishore and Tarun Loans
| Document Type | Details |
|---|---|
| Identity Proof Self-attested |
Passport, Aadhaar Card, Driving Licence, PAN Card or Voter ID |
| Address Proof Self-attested |
Recent telephone/electricity bill, property tax receipt (not older than 2 months), voter ID, Aadhaar or passport of proprietor/partners/directors |
| Photograph | Two recent colour photographs – not older than six months |
| Proof of Business Identity/Address | Licences, registration certificates or other documents proving business ownership and address |
| Default Status | Applicant should not be a defaulter with any bank or financial institution |
| Bank Statement | Last six months’ business account statement, if available |
| Financial Statements | Last two years’ balance sheets and income tax/sales tax returns for loans ₹2,00,000 and above |
| Projected Financials | Projected balance sheets for one year (working capital) or for the loan period (term loan), for loans ₹2,00,000 and above |
| Sales Achievement | Sales achieved during the current financial year up to the application date |
| Project Report | Project report covering technical and economic viability of the proposed activity |
| Company Documents | Memorandum and Articles of Association, partnership deed or equivalent documents |
| Asset & Liability Statement | Statement of assets and liabilities from the borrower and directors or partners if no third-party guarantee is provided |
Application Process for a Mudra Loan
There are two common routes to apply for a Mudra loan: offline at a lending institution or online through designated portals. Choose the method that best suits your convenience.
Offline Process
To apply offline:
- Locate the nearest eligible member lending institution.
- Collect and complete the loan application form with accurate details.
- Submit the form along with the required documents.
- Wait for document verification and loan appraisal.
- After approval, the loan amount is disbursed to your bank account.
Online Process
To apply online via the e-Mudra or Udyam portals:
- Gather all necessary documents digitally.
- Visit the official PMMY/Udyam portal and choose to apply.
- Select the applicant type: New Entrepreneur, Existing Entrepreneur or Self-employed Professional.
- Register with your name, email and mobile number and complete OTP verification.
- Fill in personal, business and banking details and choose a loan category (Shishu, Kishor or Tarun).
- Upload required documents and select a preferred lender if prompted.
- Submit the application and note the application number to track status.
Frequently Asked Questions on Mudra Loans
What is the interest rate of a Mudra loan?
Interest rates are set by individual lending institutions within RBI guidelines. Rates vary by lender and borrower profile, so compare options before choosing a lender.
What is the ₹10 lakh loan from the government?
The Tarun category of the PMMY provides loans up to ₹10,00,000 for small enterprises. Eligible businesses can apply through participating lenders.
What are the benefits of a Mudra loan?
Mudra loans offer several advantages, including easy eligibility norms, collateral-free lending up to specified limits, simplified disbursal processes and flexible use of funds for working capital, equipment purchases or business expansion.
Which bank is best for a Mudra loan?
There is no single “best” bank for Mudra loans. Public and private sector banks, small finance banks, regional rural banks and cooperative banks all participate. Compare interest rates, fees and processing times to select the lender that suits your needs.
Are there fees for a Mudra loan?
For loans up to ₹50,000 (Shishu), lenders often do not charge a processing fee. For higher amounts, lenders may levy a processing fee plus applicable GST. Check the lender’s fee schedule before applying.