India’s economy is deeply rooted in its vast network of micro and small businesses. From local shopkeepers and artisans to rural service providers and budding entrepreneurs, these small enterprises are the backbone of job creation and grassroots development. Yet, access to affordable and timely credit has often been a hurdle for these businesses to grow and succeed.
What Is the MUDRA Loan Scheme?
Launched in April 2015, the Pradhan Mantri MUDRA Yojana (PMMY) provides funding support to micro and small business units that are often left out of the formal credit ecosystem. MUDRA loans are collateral-free and offered through banks, NBFCs, and Micro Finance Institutions (MFIs).
Core Objective:
To facilitate income generation and employment by empowering small entrepreneurs with easy access to finance.
Target Beneficiaries:
. Small manufacturing units
. Traders
. Vendors and hawkers
. Artisans and handloom weavers
. Small service providers
. Rural and urban small-scale enterprises
Categories of MUDRA Loans
MUDRA Loans are divided into three categories based on the stage of business development:
1. Shishu (Up to ₹50,000)
For start-ups or very small businesses in their nascent stage.
Ideal for setting up a new shop or small enterprise.
2. Kishor (₹50,001 to ₹5,00,000)
For businesses that are already established but require additional funding to grow.
Helps in buying machinery, increasing inventory, or renovating infrastructure.
3. Tarun (₹5,00,001 to ₹10,00,000)
For expanding well-established businesses.
Assists in scaling operations, hiring labor, and expanding into new markets.
Features and Benefits of MUDRA Loan
Collateral-Free Loans
No requirement of security or third-party guarantee.
Backed by the Credit Guarantee Fund for Micro Units (CGFMU).
Low Interest Rates
Depends on the applicant’s profile and the lending institution.
Generally lower than personal loans or informal sector borrowing.
Flexible Repayment Tenure
Repayment periods range from 12 months to 5 years.
EMI-based repayment plans.
No Processing Fees (for Shishu Loans)
Encourages first-time borrowers to apply without upfront charges.
Financial Inclusion
Promotes formal banking and reduces dependence on moneylenders.
Eligibility Criteria for MUDRA Loan
Anyone involved in non-corporate, non-farm income-generating activities can apply:
Individual or Proprietorship
Partnership firms
Small Manufacturing or Trading Units
Service Sector Enterprises
Self-Help Groups (SHGs)
Rural & Urban entrepreneurs
Note: The business must be engaged in income-generating activities (e.g., tailoring, grocery shops, dairy farming, repair services).
Documents Required for MUDRA Loan Application
Here are the common documents needed for applying:
1. Identity & Address Proof
Aadhaar Card
Voter ID
PAN Card
Passport
Driving License
2. Business Proof
Registration certificate
Trade license
Sales tax returns
Business plan or quotation (if applicable)
3. Financial Documents
Bank account statements
Income tax returns (for Kishor and Tarun)
4. Photographs
Recent passport-sized photographs of the applicant(s)
Step-by-Step Process to Apply for MUDRA Loan
Step 1: Choose the Loan Type
Determine whether your business needs Shishu, Kishor, or Tarun category assistance.
Step 2: Visit a Lending Institution
Visit your nearest:
. Public sector or private sector bank
. Regional rural bank
. NBFC or MFIs
Step 3: Fill in the Application Form
. Collect or download the MUDRA loan application form
. Fill out business and personal details accurately
Step 4: Submit Documents
. Attach identity proof, business proof, and other required documents
. Include quotations/invoices if applying for asset purchase
Step 5: Interview or Personal Discussion
. The lender may conduct a brief interview or verification call
. Some field verification may also happen
Step 6: Loan Disbursement
. Upon successful processing, loan amount is credited to your bank account
. You will receive a MUDRA card (like a debit card) for withdrawal
Top Banks Offering MUDRA Loans in India
Here are some major banks and financial institutions offering MUDRA Loans:
State Bank of India (SBI)
Punjab National Bank (PNB)
Bank of Baroda
Canara Bank
ICICI Bank
HDFC Bank
IDBI Bank
Small Finance Banks and NBFCs
Online Application for MUDRA Loan
Many banks now allow online MUDRA loan applications via their official websites.
How to Apply Online:
Visit your bank’s official website
Navigate to “MUDRA Loan” or “PMMY” section
Fill the online form
Upload scanned documents
Submit and track your application
Popular Portals:
Check Online Government Website Portal
Bank-specific online portals
Role of MUDRA Card
. It is a RuPay debit card issued against the MUDRA loan account.
. Helps entrepreneurs access working capital as needed.
. Can be used to withdraw funds from ATMs or make business-related purchases.
Sectors Covered under MUDRA Loan
. Food processing units
. Textile industry
. Repair & maintenance services
. Transport & logistics
. Beauty parlors & salons
. Mobile repair shops
. Dairy & poultry farming
. Retail shops
. Impact of MUDRA Yojana in India
Key Achievements (Till 2025):
Over ₹20 lakh crore sanctioned to over 40 crore beneficiaries
60%+ beneficiaries are women
Massive boost to rural and semi-urban entrepreneurship
Socio-Economic Impact
. Encouraged job creation
. Reduced dependency on informal credit
. Empowered women and minority communities
. Strengthened grassroots economies
Challenges and Limitations
While MUDRA loans have helped millions, challenges still exist:
Some applicants face rejections due to poor documentation
Awareness is low in remote areas
Field-level verification delays
Non-performing assets (NPAs) impact future disbursements
Conclusion
The MUDRA loan scheme is more than just a financial program — it’s a movement to unlock the potential of India’s smallest entrepreneurs. By offering easy, collateral-free credit and encouraging self-employment, the scheme strengthens India’s economic foundation at the grassroots level. If you have a business dream, MUDRA can help you turn it into a reality.