What Is a Mudra Loan?
A Mudra Loan is a government-backed financial product under the Pradhan Mantri Mudra Yojana (PMMY) designed to support micro, small, and non-corporate small businesses. These loans provide working capital, expansion funding, or startup support at affordable interest rates without collateral for small amounts.
Key Features of Mudra Loans
- Loans for startups, micro businesses, and small enterprises
- No collateral required for loans up to ₹10 lakh
- Flexible repayment tenure: 12–60 months
- Available through banks, NBFCs, and MFIs
- Government guarantee reduces risk for lenders
Types of Mudra Loans
| Loan Type |
Purpose |
Loan Amount |
Interest Rate (p.a.) |
| Shishu |
Startup / very small businesses |
Up to ₹50,000 |
7% – 10% |
| Kishore |
Growing micro businesses |
₹50,001 – ₹5 lakh |
8% – 12% |
| Tarun |
Established small enterprises |
₹5,00,001 – ₹10 lakh |
9% – 12% |
Eligibility Criteria
- Indian citizen with a registered business or self-employed activity
- Business should be non-corporate micro or small scale
- Age: 18–65 years
- Business operational for at least 6 months (Shishu may not require)
- Good repayment capability and KYC documents
Documents Required
- Identity proof (Aadhaar, PAN, Passport)
- Address proof (Utility bills, Voter ID)
- Business registration or certificate of micro business
- Income proof or bank statements
- Loan application form under PMMY
Mudra Loan Example
If a micro business takes a ₹2 lakh Mudra loan at 9% interest for 36 months:
- Monthly EMI: ₹6,350 approx.
- Total interest payable: ₹28,600 approx.
- Total repayment amount: ₹2,28,600 approx.
Advantages and Disadvantages
Advantages
- Easy access to finance for small entrepreneurs
- No collateral for loans up to ₹10 lakh
- Government guarantee ensures credibility
- Supports business growth and job creation
Disadvantages
- High interest for larger loans (Tarun category)
- Limited to micro and small businesses
- Approval process may require documentation and business plan
Frequently Asked Questions (FAQs)
Who can apply for Mudra loans?
Micro and small business owners, startups, and self-employed individuals.
Is collateral required?
No collateral is required for loans up to ₹10 lakh. Larger loans may require security.
How to apply?
Apply through banks, NBFCs, or MFIs under PMMY with required documents.
Can the loan be used for working capital?
Yes, Mudra loans can be used for working capital, business expansion, and equipment purchase.
Author: All Finance Store Mudra Loan Team
Expertise: Small Business & Government Loan Advisory
Last Updated: January 2026
Disclaimer: This page is for informational purposes only. Mudra loan terms, interest rates, and eligibility vary by bank and government scheme. Always verify details from official PMMY or authorized banks before applying.