Quick take
Mudra loans are collateral-free government-backed loans up to ₹10 lakh for micro and small businesses. No security deposit, no guarantor. Three tiers: Shishu (up to ₹50K), Kishore (up to ₹5L), Tarun (up to ₹10L). Available at virtually every bank branch. If you have a business idea and an Aadhaar card, you can apply today.
The Pradhan Mantri Mudra Yojana (PMMY) is one of the most accessible funding schemes for small businesses in India. Since 2015, over 47 crore loans have been sanctioned. Yet most small business owners either don’t know it exists, apply incorrectly, or get discouraged by their first bank visit.
The three Mudra loan categories
Shishu
Up to ₹50,000
New businesses, street vendors, small artisans. Highest approval rate, often zero processing fees.
Kishore
₹50,001 to ₹5 lakh
Working capital needs, small equipment purchases. For businesses ready to grow.
Tarun
₹5,00,001 to ₹10 lakh
Established businesses expanding operations. More documentation needed but worth the effort.
Who is eligible?
Eligibility is intentionally broad. Any Indian citizen with a non-farm business activity or plan to start one qualifies — shopkeepers, food vendors, tailors, salon owners, manufacturers, transport operators, artisans, repair services, freelancers with a business plan.
✅ No minimum turnover requirement
✅ No minimum income requirement
✅ No collateral requirement
✅ No existing bank relationship needed
❌ Only exclusion: farm-related crop cultivation (food processing, dairy, fisheries ARE eligible)
Documents you need
📝 Application form (available at the bank)
📸 2 passport-sized photographs
🆔 Identity proof: Aadhaar, voter ID, PAN, or driving licence
🏠 Address proof: Aadhaar, utility bill, or rent agreement
🏢 Business proof: Udyam certificate, GST certificate, shop licence
💰 Quotation for machinery (Kishore/Tarun)
📊 Business plan or project report (Kishore/Tarun)
🏦 Bank statements for last 6 months (if existing account)
For Shishu loans, just Aadhaar + basic business description is often enough.
How to apply
Option 1 — Walk into any bank branch (fastest)
Every public sector bank, most private banks, RRBs, and many NBFCs/MFIs are authorised. Ask for the Mudra loan desk or MSME lending officer. Most common and effective method.
Option 2 — Apply online via Udyamimitra
Visit udyamimitra.in, create account, fill details. The portal matches you with nearby lenders. Useful but slower than walking in.
Option 3 — Through a microfinance institution
In rural or semi-urban areas without easy bank access, MFIs like Bandhan Bank and Ujjivan process Mudra loans as lending partners.
Improve your approval chances
✅ Check CIBIL score — above 650 helps significantly
✅ Prepare a one-page business plan — most applicants don’t, so you’ll stand out
✅ Get MSME registration and GST registration first — both free
✅ Apply at a bank where you already have an account
✅ Start with Shishu — repay on time, and Kishore/Tarun becomes much easier
Interest rates and repayment
Each bank sets its own rate, typically 8-12% per annum. Repayment tenure is usually 3-5 years with EMIs starting after a moratorium period (often 6-12 months for Tarun). Shishu loans may have shorter 1-3 year tenures. There is no prepayment penalty — you can repay early without extra charges.
Mudra loan vs other funding options
| Feature | Mudra | CGTMSE | PMEGP |
|---|---|---|---|
| Max amount | ₹10 lakh | ₹5 crore | ₹50L / ₹20L |
| Collateral | Not needed | Not needed | May need |
| Subsidy | No | No (guarantee) | 15-35% |
| Best for | First-time borrowers | Growing SMEs | New enterprises |
For a complete overview of all available schemes, read our guide to 10 government schemes every small business should know.
Frequently asked questions
Is it only for new businesses?
No. Both new and existing businesses can apply. Shishu is for startups; Kishore and Tarun are for established businesses.
Can women get priority?
Yes. PMMY has special focus on women borrowers. Many banks have dedicated schemes and faster processing for women-owned businesses.
How long does approval take?
Shishu: 7-14 days. Kishore/Tarun: 2-4 weeks depending on documentation and the bank.
What if the bank rejects my application?
Banks must give a valid reason in writing. Fix the issue and reapply — at the same bank or a different one. You can also escalate to the bank’s grievance cell or the PMMY portal.
Need help applying for a Mudra loan?
OpenBiz helps small business owners navigate the loan application process end to end. From getting your registrations sorted to preparing the right documentation, our AI-powered platform paired with real CAs and business consultants makes the process faster and less frustrating.
Last updated: March 2026. Based on the latest PMMY guidelines and common bank practices across India.
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