Pradhan Mantri Mudra Yojana (PMMY): Eligibility, Loan Types & Interest Rate

Many small business owners in India struggle to secure credit to start or expand their businesses. As a result, they often rely on informal moneylenders who charge high interest rates, creating long-term financial pressure. To address this issue, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY) on April 8, 2015, to provide easier access to institutional credit for micro and small enterprises.

Under PMMY, eligible borrowers can obtain collateral-free loans of up to ₹20 lakh for non-corporate, non-farm micro and small enterprises. These loans support businesses in manufacturing, trading, and service sectors, including activities allied to agriculture. Loans are provided through Member Lending Institutions (MLIs) such as banks, NBFCs, MFIs, Regional Rural Banks (RRBs), and Small Finance Banks. Borrowers may also receive a MUDRA Card, which allows them to withdraw funds as needed for business expenses.

As of August 2025, PMMY has sanctioned over 53.85 crore loans worth more than ₹35.13 lakh crore. The scheme has significantly improved financial inclusion, with over 68% of loans benefiting women entrepreneurs and nearly half reaching SC, ST, and OBC communities.

This guide explains Pradhan Mantri Mudra Yojana (PMMY) in detail, including Mudra loan eligibility, loan categories, benefits, and the application process for small business owners.

What is Pradhan Mantri Mudra Yojana (PMMY)?

Pradhan Mantri Mudra Yojana (PMMY) is a government-backed loan scheme that provides collateral-free credit to micro and small businesses (MSMEs) in India. The scheme supports non-corporate and non-farm businesses operating in manufacturing, trading, and service sectors.

Under PMMY, banks and other lending institutions provide loans of up to ₹20 lakh to eligible borrowers. These loans help entrepreneurs start new businesses, expand existing operations, and improve working capital without relying on high-interest informal lenders.

What are the Objectives of the Mudra Loan Scheme?

The government designed the scheme with four clear goals in mind: 

• Provide formal credit to micro businesses that previously had no access to banks.
• Promote entrepreneurship and self-employment at the grassroots level.
• Drive financial inclusion for women, SC, ST, and OBC communities.
• Reduce dependence on informal lenders and moneylenders who charge exploitative interest rates.

Key Highlights of Pradhan Mantri Mudra Yojana

Before diving into the details, here is a quick reference table covering the most important facts about the Pradhan Mantri Mudra Yojana scheme:

Feature	Details
Launch Date	April 8, 2015
Maximum Loan Amount	₹20 lakh (under Tarun Plus)
Collateral Required	No
Loan Categories	Shishu, Kishor, Tarun, Tarun Plus
Loan Providers	Banks, RRBs, SFBs, NBFCs, MFIs
Ministry	Ministry of Finance, Govt. of India
Managed By	MUDRA Ltd. (mudra.org.in)
Online Application Portal	www.udyamimitra.in
Credit Guarantee	CGFMU (Credit Guarantee Fund for Micro Units)

PMMY falls under the Ministry of Finance, Government of India. MUDRA Ltd., Micro Units Development and Refinance Agency, manages the scheme. MUDRA does not lend directly to borrowers. Instead, it refinances the Member Lending Institutions (MLIs) that actually disburse the loans. 

All loans up to ₹20 lakh are backed by the Credit Guarantee Fund for Micro Units (CGFMU), which means the bank’s risk is covered even without collateral from the borrower.

Types of Loans Under Pradhan Mantri Mudra Yojana

PMMY structures loans into four categories based on the business stage and funding requirement:

Category	Loan Amount	Suitable For	Stage
Shishu	Up to ₹50,000	New startups, first-time borrowers	Starting
Kishor	₹50,001 to ₹5 lakh	Growing businesses	Growing
Tarun	₹5 lakh to ₹10 lakh	Established businesses expanding	Scaling
Tarun Plus	₹10 lakh to ₹20 lakh	Tarun borrowers with clean repayment	Expanding

1. Shishu: For Startups and First-Time Borrowers

Loan Amount: Up to ₹50,000.

This category targets businesses that are just starting or individuals who want to begin a micro-enterprise. It is the entry-level product under the PMMY program. Most Shishu loans do not attract a processing fee, and the repayment period can extend up to five years. This category records the highest volume of loans sanctioned each year.

2. Kishor: For Growing Businesses

Loan Amount: ₹50,001 to ₹5 lakh.

Kishor loans suit businesses that have started operations and need additional capital to grow. A business owner who has successfully repaid a Shishu loan can apply for a Kishor loan for business expansion. The borrower needs to show basic financial records and a business plan.

3. Tarun: For Established Businesses Scaling Up

Loan Amount: ₹5 lakh to ₹10 lakh.

Tarun loans target businesses with a proven track record, stable cash flow, and clear plans for expansion. Dairy farmers expanding their herd, small manufacturers adding capacity, or service businesses opening new locations all qualify for this category.

4. Tarun Plus: The New Category for Repeat Borrowers

Loan Amount: ₹10 lakh to ₹20 lakh.

Budget 2024–25, announced on July 23, 2024, added the Tarun Plus category and raised the maximum loan limit from ₹10 lakh to ₹20 lakh, effective from October 24, 2024. Only borrowers who previously availed a Tarun loan and successfully repaid it can apply. This category targets experienced micro-entrepreneurs seeking larger capital for expansion.  

Businesses may purchase machinery, set up manufacturing units, or enter new markets. The CGFMU provides guarantee coverage for Tarun Plus loans as well.

Who is Eligible for Pradhan Mantri Mudra Yojana (PMMY)?

The scheme targets a wide range of micro-entrepreneurs. The following applicants are eligible:

• Indian citizens running or planning to start a micro or small business.
• Self-employed individuals, sole proprietors, and partnership firms.
• Small manufacturers, traders, and service providers.
• Startups and first-time entrepreneurs with a viable business idea.
• Women entrepreneurs, SC, ST, and OBC business owners.
• Businesses in manufacturing, trading, services, and activities allied to agriculture.

Who is Not Eligible for Pradhan Mantri Mudra Yojana (PMMY)?

The scheme explicitly excludes certain categories of applicants:

• Large industrial units and corporate businesses.
• Loan defaulters with outstanding overdue amounts at any bank or financial institution.
• Purely agricultural activities are covered under farm credit schemes.
• Businesses falling outside the non-corporate, non-farm micro enterprise definition.

Which Business Sectors are Eligible for Mudra Loans?

PMMY covers a broad range of income-generating activities. The following sectors actively benefit from Mudra loans:

• Retail shops and small traders
• Food processing units, bakeries, and tiffin services
• Beauty parlours, salons, and grooming businesses
• Repair shops for electronics, vehicles, and machinery
• Small manufacturing units producing textiles, furniture, or handicrafts
• Transport businesses, including auto-rickshaws and small trucks
• Dairy farming and poultry (allied agricultural activities)
• Mobile repair and IT accessory shops

Note: The scheme does not fund purely agricultural activities like crop cultivation. However, it does cover activities allied to agriculture, such as dairy, poultry, and agro-processing.

Documents Required for Pradhan Mantri Mudra Yojana

Document requirements vary slightly by lender and loan category. However, the standard documents most MLIs require are:

• Identity proof: Aadhaar Card, PAN Card, Voter ID, or Passport.
• Address proof: Utility bill, Aadhaar, or any government-issued address document.
• Business proof: Udyam Registration Certificate, trade licence, or any document establishing the business.
• Bank statements: Last 6 months of account statements from your primary bank account.
• Photographs: Recent passport-size photographs of the applicant.
• Loan application form: Obtained from the lending institution or downloaded from the Udyami Mitra portal. 

For Kishor, Tarun, and Tarun Plus loans, lenders may request additional documents. These may include a business plan or project report, Income Tax returns for the last one to two years, and GST registration (if applicable). 

Note that the banks have the right to request additional documents based on their internal credit assessment process.

How to Apply for Pradhan Mantri Mudra Yojana in 2026?

Entrepreneurs can apply for a Mudra loan through the official online portal or by visiting a participating bank branch. Follow the steps below to complete the application process:

a. Online Application Process

The government allows applicants to submit the Pradhan Mantri Mudra Yojana application form online through the official MUDRA portal:

1. Visit the official login portal (pmmydata.mudra.org.in)
2. Register as a New Entrepreneur, Existing Entrepreneur, or Self-Employed Professional.
3. Select your loan category: Shishu, Kishor, Tarun, or Tarun Plus.
4. Fill out the Pradhan Mantri Mudra Yojana application form with accurate personal, business, and financial details.
5. Upload the required documents in the prescribed format.
6. Submit the application. The portal forwards it to your selected lender for review.
7. The bank will contact you for verification, assessment, and approval.

Applicants can also visit mudra.org.in and access the login page to proceed with the application process.

MUDRA does not lend directly to borrowers. Always apply through an official lending institution or the government portal. Avoid any middlemen or fake agents claiming to fast-track your application.

B. Offline Application Process

You can also apply by walking into any participating bank branch, Regional Rural Bank (RRB), or MicroFinance Institution (MFI) near you. Carry all required documents mentioned in the “Documents Required for Pradhan Mantri Mudra Yojana” section above. Ask for the Pradhan Mantri Mudra Yojana application form for your relevant category. 

Below is a reference example of the Mudra loan application form used by the State Bank of India:

Then, submit the form along with documents to the branch officer. 

Mudra Loan Processing Time

Banks usually process Mudra loan applications within 7 to 10 working days after receiving complete documents. The exact processing time depends on document verification, credit assessment, and the borrower’s business details. 

Applicants who submit accurate documents and respond quickly to bank queries often receive faster approval decisions.

What is the Mudra Loan Interest Rate in 2026?

PMMY does not fix a single interest rate. Each Member Lending Institution sets its own rate based on the borrower’s credit profile, loan category, and prevailing benchmark rates. For FY 2025-26, Mudra loan interest rates across lending institutions generally start from 8.5 to 9% per annum for low-risk borrowers.

Banks usually offer lower rates, while NBFCs and MFIs may charge higher rates depending on borrower risk.

Key points to understand about Mudra loan interest rates:

• Rates are linked to the bank’s MCLR (Marginal Cost of Funds-based Lending Rate) or an external benchmark such as the RBI Repo Rate.
• Women entrepreneurs may get a slight concession on interest rates depending on the lender.
• Most banks waive processing fees for Shishu loans. Kishor, Tarun, and Tarun Plus loans may attract nominal processing charges of 0.5 to 2% of the loan amount.
• Repayment tenure ranges from 3 months to 7 years, depending on the lender and category.

Always compare rates across at least 2 or 3 lenders before finalizing your application.

What is a MUDRA Card?

A MUDRA Card is a RuPay debit card issued to MUDRA loan borrowers. It works as a working capital credit facility linked to your loan account. You can use this card to make withdrawals and payments for business expenses as needed, rather than taking the entire loan amount at once.

This card helps small business owners manage their cash flow more efficiently. For example, a retail shop owner can withdraw funds to purchase stock, repay a portion, and withdraw again as needed, all within the sanctioned credit limit. The MUDRA Card is accepted at ATMs and point-of-sale terminals, and transactions are digital and traceable.

Common Reasons for Mudra Loan Rejection

The following issues commonly lead to rejection:

• Poor credit score: Banks review the applicant’s credit history before approving any Mudra loan request. A CIBIL score below 650 signals repayment risk and reduces approval chances. 

You should clear outstanding dues and maintain regular repayments before applying.

• Incomplete documents: Missing or mismatched documents delay verification and often lead to rejection during the bank’s review process. 

Applicants should submit accurate identity proof, address proof, bank statements, and business documents.

• No business proof: Banks require valid evidence that the business exists and operates legally. 

You should obtain Udyam registration, a trade license, or similar records to verify business activity.

Loan default history: Existing defaults with banks or NBFCs usually result in automatic rejection. Applicants should settle dues before submitting a new loan application.

Mudra Loan vs MSME Loan: Key Differences

Many borrowers confuse Pradhan Mantri Mudra Yojana with MSME loans. Both serve small businesses but differ significantly in their scope and structure. Understanding these differences will help you choose the right financing option for your business needs: 

Feature	Mudra Loan (PMMY)	MSME Loan
Target Borrower	Micro enterprises	Small and medium enterprises
Collateral	Not required	May be required for larger amounts
Maximum Loan	₹20 lakh	Higher limits available
Credit Guarantee	CGFMU (up to ₹20 lakh)	CGTMSE (varies)
Government Support	Yes, central scheme	Depends on the scheme

In summary,

• If your business is a micro-enterprise with a credit requirement up to ₹20 lakh, Mudra is the right scheme. 
• If you run a medium-sized business with larger credit needs, explore dedicated MSME schemes offered by banks and SIDBI.

Proper business registration and MSME registration strengthen your Mudra loan application and help lenders verify business legitimacy and improve approval chances. RegisterKaro helps you complete MSME registration and organize essential documents. Contact us today to register your MSME and support your loan application process. 

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