Quick answer: PM Mudra Yojana (PMMY) gives collateral-free business loans of up to ₹20 lakh to non-corporate, non-farm micro and small businesses, in four categories: Shishu (up to ₹50,000), Kishor (up to ₹5 lakh), Tarun (up to ₹10 lakh) and Tarun Plus (₹10 lakh to ₹20 lakh, only for borrowers who have repaid a Tarun loan). You borrow from a bank, small finance bank, NBFC or MFI, either at a branch or online through the JanSamarth portal. The interest rate is set by each lender; there is no scheme-wide discount for women.
Who it is for
PMMY is for income-generating micro and small enterprises in manufacturing, processing, trading and services, including activities allied to agriculture such as dairy or poultry. That covers most small businesses: boutiques, parlours, tiffin services, kirana shops, home bakeries and small manufacturing.
You are generally eligible if:
- Your business is non-corporate and non-farm (proprietorship or partnership is the usual form; pure crop farming is not covered).
- The loan is for business use: buying equipment, stock, working capital or expansion. It is not for personal or consumption needs.
- You are not a defaulter with any bank or financial institution and have a satisfactory credit record.
- You have the skills or experience the activity needs. There is no fixed education requirement; it depends on the business.
New and existing businesses both qualify. Shishu loans are meant for people with no credit history and no collateral, which makes them a realistic first loan for a first-generation founder.
Government data for FY 2024-25 shows women held 59.81% of Mudra loan accounts but only 37.45% of the amount disbursed: women mostly borrow small sums.
What you get: the four categories
| Category | Loan amount | Who it suits |
|---|---|---|
| Shishu | Up to ₹50,000 | Very early stage or very small businesses |
| Kishor | Above ₹50,000 up to ₹5 lakh | Running businesses that need equipment or stock |
| Tarun | Above ₹5 lakh up to ₹10 lakh | Established units expanding |
| Tarun Plus | Above ₹10 lakh up to ₹20 lakh | Only borrowers who have taken and fully repaid a Tarun loan |
Tarun Plus was announced in the Union Budget 2024-25 and notified in October 2024, doubling the ceiling from ₹10 lakh to ₹20 lakh. It is not available as a first loan: the lender will want a repaid Tarun loan and a stable track record.
Form of loan: a term loan for assets, an overdraft or cash credit for working capital, or both. Working capital can come on a Mudra Card, a RuPay debit card you draw and repay within your limit.
Collateral and guarantee: Mudra loans are collateral-free up to ₹20 lakh. The lender takes a charge on the assets bought with the loan (hypothecation), not on your house or gold. Instead of collateral, the loan is covered by the Credit Guarantee Fund for Micro Units (CGFMU), run by the National Credit Guarantee Trustee Company (NCGTC). If you default, the guarantee fund compensates the lender, which is why banks can lend without security. A guarantee fee applies; some banks pass it to the borrower (Indian Bank states this for Tarun Plus), so ask whether it is included in your cost.
Separately, RBI’s MSME lending rules, as amended in February 2026, bar banks from taking collateral on loans to micro and small enterprises up to ₹20 lakh, for loans sanctioned or renewed from 1 April 2026.
Who lends
MUDRA Ltd does not lend to you directly; it refinances lenders (Member Lending Institutions):
- Public and private sector banks
- Regional Rural Banks
- Small Finance Banks
- Cooperative banks
- NBFCs and Microfinance Institutions (MFIs)
Interest, fees and repayment
There is no single Mudra interest rate. Each lender sets its own within RBI rules, and banks that take MUDRA refinance are expected to keep rates reasonable. What drives your rate:
- Benchmark: most banks link MSME loans to an external benchmark, usually the RBI repo rate, plus a spread. When the repo rate changes, your rate moves too.
- Type of lender: NBFCs and MFIs borrow at higher cost and take on riskier borrowers, so their rates are often higher than banks’.
- Your credit score and history, the business’s cash flows and the loan size.
Fees: processing fees are at the lender’s discretion. SBI, for example, charges nil for Shishu and Kishor and 0.50% plus tax for Tarun. Most banks waive fees on Shishu loans.
Your contribution (margin): usually nil for loans up to ₹50,000 and around 20% of the asset or working capital cost above that (SBI and Indian Bank both use 20%).
Repayment: based on your cash flow and the asset’s life. SBI allows up to 5 years (with up to 6 months’ moratorium) for loans below ₹5 lakh and up to 7 years (up to 12 months’ moratorium) for ₹5 lakh to ₹10 lakh. Indian Bank sets a 60-month maximum for Tarun Plus term loans. Working capital limits are reviewed and renewed yearly.
Documents you will typically need
Lists vary by lender, and branches can ask for more. A typical checklist (based on Punjab & Sind Bank’s PMMY form):
- Identity proof: Aadhaar, PAN, Voter ID, driving licence or passport
- Address proof: recent electricity, telephone or property tax bill (not older than 2 months), or Aadhaar, Voter ID or passport
- Business proof: registration or licence, such as Udyam registration, GST certificate, shop and establishment licence or trade licence
- Bank statement for the last six months
- Quotations for machinery or items you plan to buy
- Category certificate if you are SC, ST, OBC or minority
- For loans of ₹2 lakh and above: last two years’ balance sheets and income tax or GST returns, plus projected balance sheets
- Project report showing the plan is viable (simpler for Shishu)
- Partnership deed if applicable
Register on Udyam (free) before you apply. JanSamarth pulls Udyam, GST, PAN, Aadhaar and credit bureau data digitally, so having these in order speeds things up.
How to apply, step by step
- Decide your amount. Know what you need it for and how you will repay it monthly from business income.
- Check your credit report (CIBIL or another bureau) and clear any overdue loans or credit card dues first.
- Get your Udyam registration and gather the documents above, plus quotations.
- Apply online on JanSamarth (jansamarth.in). Choose the business activity loan, enter your details, and the portal checks eligibility and lets you pick a lender. JanSamarth is the government’s current national portal for credit-linked schemes, including PMMY, and is what banks such as SBI now point applicants to. The older Udyami Mitra portal (udyamimitra.in, run by SIDBI) still exists, but JanSamarth is the main route.
- Or apply at a branch. Walk into your bank, RRB, small finance bank or a registered NBFC or MFI and fill in the Mudra application form. Bank business correspondents can also help you apply on JanSamarth.
- Keep your acknowledgement. Under RBI rules, banks must issue an acknowledgement with a unique number for every MSME loan application, physical or online.
- Appraisal, sanction and disbursement. The lender may visit your business. Once sanctioned, you sign the loan papers; for equipment, money often goes directly to the supplier.
Timelines: RBI’s MSME lending rules (updated February 2026) require banks to decide on micro and small enterprise loans up to ₹25 lakh within 14 working days of a complete application. If rejected, the bank must give you the main reasons in writing. NBFCs and MFIs follow their own timelines.
Why Mudra applications get rejected
- Poor credit record or an existing default, including old unpaid credit cards or a loan you guaranteed for someone else.
- Wrong purpose: asking for money that is really for personal use, or for a farm activity that is not allied to agriculture.
- Weak or vague plan: no clear figures for costs, sales and how you will repay.
- Incomplete documents: missing business proof, outdated address proof, no quotations.
- No track record for the amount asked: applying for Tarun or Tarun Plus without a history that supports it. Start smaller if you are new.
- Too much existing debt compared with your income.
If rejected, use the written reason to fix the gap, then reapply or try another lender.
Tips for women and small founders
- There is no scheme-wide women concession. PMMY’s limits, collateral rules and guarantee are the same for everyone. Some banks run women-specific products or rate offers; ask your bank and compare, but don’t assume a discount.
- Keep a separate business account. Six months of clean transactions is your best evidence.
- Borrow what you can repay. A repaid smaller loan builds the history you need for Tarun and Tarun Plus.
- Be the applicant in your own name. If a family member does the paperwork, make sure the loan, account and Udyam registration are yours.
- Don’t pay agents who promise a sanctioned Mudra loan for a fee.
Related options to compare
- Stand-Up India: bank loans of ₹10 lakh to ₹1 crore for women and SC/ST entrepreneurs setting up a new (greenfield) unit. The Finance Ministry page lists it as running up to 31 March 2025; confirm its current status with your bank. Budget 2025-26 announced a new scheme of term loans up to ₹2 crore for 5 lakh first-time women, SC and ST entrepreneurs, still being finalised. standupmitra.in
- CGTMSE: a credit guarantee for collateral-free MSE loans above Mudra size, now up to ₹10 crore per borrower. cgtmse.in
FAQ
Q: Is a Mudra loan only for women?
A: No. It is open to all eligible micro businesses, but women hold about 60% of Mudra loan accounts.
Q: Can I get ₹20 lakh as my first Mudra loan?
A: No. Tarun Plus (₹10 lakh to ₹20 lakh) is only for borrowers who have taken and fully repaid a Tarun loan.
Q: Do I need collateral or a guarantor?
A: No collateral is needed up to ₹20 lakh. The loan is covered by the CGFMU guarantee, and the lender takes a charge on the assets you buy with it.
Q: Is Mudra a subsidy?
A: No. It is a loan you repay with interest; PMMY has no subsidy component.
Q: What is the Mudra interest rate?
A: It varies by lender and is usually linked to the repo rate plus a spread. Compare at least two or three lenders.
Q: How long does it take?
A: Banks must decide on loans up to ₹25 lakh within 14 working days of a complete application, under RBI rules.
Official links
- MUDRA: https://www.mudra.org.in
- JanSamarth (apply online): https://www.jansamarth.in
- Udyam Registration: https://udyamregistration.gov.in
- NCGTC (CGFMU guarantee): https://www.ncgtc.in
- Stand-Up India: https://www.standupmitra.in
- CGTMSE: https://www.cgtmse.in
- RBI Master Direction, Lending to MSME Sector: https://rbi.org.in/scripts/BS_ViewMasDirections.aspx?id=11060
Last checked: October 2026. Rules, limits and fees change; confirm with the official source before you apply. This guide is general information, not legal, tax or financial advice.
Sources: PIB backgrounder on PMMY (April 2026); RBI Master Direction, Lending to MSME Sector, as amended (February 2026); SBI PMMY page (December 2025); Indian Bank PMMY Tarun Plus page (October 2026); Punjab & Sind Bank PMMY application form (October 2026); Department of Financial Services, JanSamarth and Stand-Up India pages (October 2026); SIDBI digital initiatives page (October 2026); CGTMSE website (October 2026); MUDRA salient features, Nagaland EoDB (November 2024)
