For many small shopkeepers, self-employed individuals, and budding entrepreneurs, arranging funds to start or expand a business can be challenging. To support them, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY) in 2015. Through this scheme, banks and financial institutions provide loans of up to ₹10 lakh without the need for collateral. These loans are popularly known as Mudra Loans.
If you are planning to set up a new business or need financial help to grow your existing venture, here’s everything you need to know about Mudra Loans.
What is a Mudra Loan?
Mudra Loan is a financial support scheme for micro and small enterprises. It is designed for individuals and businesses that do not have access to large-scale funding. The loans are given through banks, NBFCs, and other financial institutions under PMMY.
The best part? Mudra loans are collateral-free, which means you don’t need to pledge your property or assets.
Types of Mudra Loans
To make it suitable for different business needs, Mudra Loans are divided into three categories:
- Shishu Loan – Up to ₹50,000
Ideal for startups, street vendors, or very small businesses just beginning operations.
- Kishore Loan – From ₹50,001 to ₹5,00,000
Suitable for small enterprises looking to expand or purchase equipment.
- Tarun Loan – From ₹5,00,001 to ₹10,00,000
Best for well-established businesses that want to scale up further.
Features of Mudra Loan
Loan Amount: ₹50,000 to ₹10 lakh
Collateral: Not required
Interest Rate: Generally between 8% to 12% (varies by lender)
Repayment Tenure: Up to 5 years
Processing Fee: Nil for Shishu; minimal for Kishore & Tarun
Target Group: Small shopkeepers, traders, manufacturers, service providers, artisans, transport owners, and agri-allied activities
Eligibility for Mudra Loan
Mudra Loan is available for:
Small shop owners (grocery, garment, stationery, etc.)
Self-employed individuals (photographers, freelancers, beauty salons, tailoring shops, etc.)
Service providers (repair shops, coaching centers, e-commerce sellers, etc.)
Food processing units and micro-manufacturers
Transport vehicle owners (auto-rickshaw, taxi, small goods carrier)
Agri-allied activities like dairy, poultry, and fisheries (not core farming)
Documents Required
To apply for a Mudra Loan, you need to submit:
Identity Proof: Aadhaar card, PAN card, Voter ID, or Driving License
Address Proof: Aadhaar card, electricity bill, rental agreement, or passport
Business Proof: GST certificate, trade license, or simple business plan
Bank Statement: Last 6 months
Photographs: Passport-size photos
Financial Records (if applicable): Income tax return or balance sheet for larger loans
How to Apply for Mudra Loan
You can apply for a Mudra Loan through banks, NBFCs, and regional rural banks. Here’s the step-by-step process:
- Assess Your Requirement – Decide the loan amount (Shishu, Kishore, or Tarun).
- Choose the Lender – Approach your nearest public or private bank, cooperative bank, or NBFC.
- Prepare Your Application – Fill out the Mudra loan application form. For larger loans, prepare a simple project plan showing how the money will be used.
- Attach Documents – Submit KYC, business proof, and financial records.
- Verification & Approval – The bank will check your details and approve the loan if eligible.
- Loan Disbursement – The sanctioned amount will be credited directly to your account.
Where to Get a Mudra Loan
You can apply at:
Public Sector Banks (SBI, Bank of Baroda, PNB, Canara Bank, etc.)
Private Banks (HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra, etc.)
Regional Rural Banks (RRBs)
NBFCs and Microfinance Institutions
Benefits of Mudra Loan
No need for collateral or guarantor
Affordable interest rates compared to private money lenders
Encourages self-employment and small businesses
Women entrepreneurs receive special encouragement
Simple documentation and fast approval process
Conclusion
Mudra Loan is a practical financial solution for individuals and small businesses who want to grow but lack the funds. Whether you are a street vendor, a shop owner, or running a small service unit, Mudra Loan can help you take the next step toward business expansion.
If you are serious about starting or expanding your business, visit your nearest bank branch and apply under Pradhan Mantri Mudra Yojana (PMMY) today. With the right plan, this loan can become the stepping stone to your entrepreneurial success.
