The Government of India has launched several visionary initiatives to empower citizens and boost entrepreneurship. One such impactful step is the Pradhan Mantri MUDRA Yojana (PMMY), a flagship financial inclusion program aimed at supporting small and micro-businesses. Since its launch in 2015, the scheme has become a catalyst for grassroots entrepreneurship by offering loans without the need for collateral.

Over the past few years, MUDRA loans have enabled over 29 crore borrowers with a total disbursal of more than INR 15.52 lakh crore. This blog covers everything you need to know about the MUDRA Loan—from what it is, its types, benefits, eligibility criteria, documents required, to the application process.

 

What is a MUDRA Loan?

MUDRA stands for Micro Units Development and Refinance Agency. The MUDRA Loan scheme was designed to offer financial support to non-corporate, non-farming small and micro enterprises. Under this initiative, borrowers can avail loans up to INR 10 lakh from various financial institutions, including public and private sector banks, regional rural banks, cooperative banks, NBFCs, and microfinance institutions.

These loans cater especially to individuals and businesses operating in manufacturing, trading, services, and allied agriculture sectors.

 

Types of MUDRA Loans

To suit the diverse financial requirements of businesses at various stages, MUDRA Loans are divided into three categories:

1. Shishu Loan

• Loan amount: Up to INR 50,000

• Ideal for: Startups and micro-enterprises in the early stage

• Uses: Buying small machinery, tools, raw material, or meeting other basic business needs

• Benefits: No collateral, minimal processing fee, repayment period up to 7 years

2. Kishor Loan

• Loan amount: INR 50,001 to INR 5,00,000

• Ideal for: Growing businesses needing funds for working capital, vehicle purchase, or equipment

• Uses: Expansion, purchase of heavy equipment, hiring more staff, logistics, etc.

3. Tarun Loan

• Loan amount: INR 5,00,001 to INR 10,00,000

• Ideal for: Established businesses requiring large capital investment

• Uses: Infrastructure expansion, bulk purchase of equipment, inventory stocking, etc.

Each category addresses a specific phase of a business lifecycle, from idea inception to business expansion.

 

Key Benefits of MUDRA Loan

MUDRA Loans have transformed the way small enterprises access funding. Here's how:

1. Wide Accessibility

Anyone, whether from an urban city or a rural village, can apply. The scheme is especially beneficial for those in financially underserved areas.

2. Collateral-Free Financing

Borrowers don’t need to pledge assets to get the loan. This encourages first-time entrepreneurs to take the plunge without risking personal assets.

3. Flexible Loan Size

Whether your financial need is small or substantial, MUDRA loans cater to requirements starting from just INR 10,000 up to INR 10 lakh.

4. Government Credit Guarantee

The Credit Guarantee Fund for Micro Units (CGFMU) backs these loans, offering banks a safety net and encouraging them to lend more freely.

5. Affordable Interest Rates

Interest rates are generally lower than regular unsecured loans, making repayments easier for small business owners.

6. Extended Repayment Tenure

Borrowers enjoy flexible repayment periods, extending up to 7 years depending on the loan type and usage.

7. Support for Startups and New Ventures

Those planning to start a new business or side hustle can avail funding under Shishu or Kishor categories without prior business records.

 

Eligibility Criteria for MUDRA Loan

To qualify for a MUDRA loan, applicants must meet the following criteria:

• Must be an Indian citizen

• Age: Minimum 18 years; Maximum 65 years at the time of loan maturity

• Should be running or planning to start a non-agricultural business in manufacturing, trading, or services

• Loan requirement should be less than INR 10 lakh

• Should not have a record of loan default with any financial institution

 

Documents Required for MUDRA Loan Application

Before applying for a MUDRA Loan, make sure to keep these documents ready:

1. Completed Application Form

• Available online or at any bank branch

2. Proof of Identity (any one)

• Aadhaar card

• PAN card

• Voter ID

• Passport

• Driving license

3. Proof of Address

• Recent utility bills

• Voter ID

• Aadhaar card

4. Photographs

• Passport-size photos of all applicants (in case of joint loans)

5. Business Proof

• Registration certificates

• Trade license

• GST certificate

• Udyam registration (if available)

6. Bank Statements

• Last 6 months’ bank statements

7. Quotations or Invoices

• To justify the loan amount (e.g., equipment purchase, vendor quotations, etc.)

 

How to Apply for a MUDRA Loan

Applying for a MUDRA loan is simple and can be done both online and offline:

Offline Application Process

1. Visit the nearest branch of any eligible bank or NBFC.

2. Collect and fill out the MUDRA Loan application form.

3. Submit the form along with the required documents.

4. The bank will verify the details and assess creditworthiness.

5. Once approved, the amount is credited to your account and a MUDRA Debit Card is issued.

Online Application Process

1. Visit the official website of your preferred bank.

2. Navigate to the MUDRA Loan section.

3. Fill in the online form with details like business plan, loan requirement, and personal details.

4. Upload necessary documents.

5. Submit the form and wait for the bank to verify and approve your application.

 

Sectors Eligible for MUDRA Loan

MUDRA Loans support a wide array of small business types, including:

• Manufacturing units (handicrafts, small industries)

• Trading businesses (grocery stores, general retail)

• Service providers (salons, repair shops, tailors, etc.)

• Transport businesses (auto rickshaws, taxis, logistics)

• Allied agricultural activities (dairy, poultry, fisheries)

 

The Pradhan Mantri MUDRA Yojana is more than just a loan scheme—it's a tool for financial inclusion and economic empowerment. By enabling aspiring entrepreneurs and small business owners to access credit without the burden of collateral, it bridges the gap between potential and performance.

Whether you're starting a new venture or scaling up an existing one, a MUDRA loan could be the financial support you need. With flexible terms, minimal paperwork, and government backing, it is a strong stepping stone toward a self-reliant India.

For more information or to apply, visit your nearest bank or explore the PMMY official website.