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Updated August 2026

PM Mudra Loan up to Rs 20 Lakh - Collateral-Free for Micro-Entrepreneurs

Government of India-backed loan for small manufacturers, traders, shopkeepers, and service providers. Three tiers - Shishu, Kishore, Tarun - covering every micro-enterprise need. No collateral. Zero processing fee for Shishu.

Rs 20 LMax Amount
8.15%+Interest
NilCollateral
3 TierShishu/Kishore/Tarun
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What is Mudra Loan

Pradhan Mantri Mudra Yojana Explained

The Pradhan Mantri Mudra Yojana (PMMY) is a flagship credit-inclusion scheme launched by the Government of India in April 2015. Its purpose: to provide affordable, collateral-free institutional credit to non-corporate, non-farm micro and small enterprises across India - the segment that had historically depended on moneylenders and informal credit at exploitative rates.

Mudra loans are disbursed through a wide network - all Public Sector Banks, most Private Banks, Regional Rural Banks, Cooperative Banks, Micro-Finance Institutions and NBFCs empanelled by SIDBI. The government provides credit guarantee via CGFMU (Credit Guarantee Fund for Micro Units), which is why the loans require no personal or business collateral from the borrower.

As of 2024, the upper limit of Mudra was revised upward to Rs 20 lakh (from the earlier Rs 10 lakh), reflecting inflation and the growing capital needs of India’s micro-enterprise segment. The scheme has cumulatively disbursed over Rs 25 lakh crore to 40+ crore beneficiaries - making it one of the largest microcredit programmes globally. Nearly 68% of Mudra beneficiaries are women, and over 50% belong to SC, ST or OBC categories - showing its inclusive design.

3 Tiers

Three Mudra Tiers - Which One Fits You?

Mudra loans come in three progressive tiers based on your business size and capital need. Start with Shishu, graduate to Kishore, expand with Tarun.

Shishu (Rs 50,000)

For: First-time micro-entrepreneurs. Street vendors, small vegetable sellers, tailors, small artisans. Vintage: Not required. Docs: Minimal KYC. Rate: 8.15%-12% (lowest).

Kishore (Rs 50k-5L)

For: Established micro-enterprises needing to expand. Shopkeepers, small manufacturers, service providers. Vintage: 12+ months preferred. Rate: 8.75%-13%.

Tarun (Rs 5-20L)

For: Scaling micro-enterprises - buying machinery, opening additional locations, adding staff. Vintage: 2+ years. Rate: 9%-14%. Mudra Card option.

Key Features

Why Choose a Mudra Loan

100% Collateral-Free

No property, gold, FD or personal asset needed. Government (CGFMU) guarantees the lender.

Nil Processing Fee (Shishu)

Shishu tier has zero processing fee. Kishore/Tarun: 0.5%-1% only.

Women-Preferred

0.25%-0.5% rate concession for women. Over 68% of Mudra loans have gone to women beneficiaries.

Priority Sector

Mudra qualifies under RBI priority sector - banks actively seek borrowers to meet PSL targets.

Mudra Card (RuPay)

Kishore/Tarun eligible for Mudra Card - draw incrementally like a working capital limit.

No Prepayment Penalty

Foreclose the Mudra loan any time without charges. Full flexibility.

Rural-Urban Coverage

Available across metros, Tier-2/3 cities, and rural areas via cooperative + RRB network.

Fast Processing

Shishu: 2-7 days. Kishore: 7-15 days. Tarun: 15-30 days. Digital NBFC Mudra faster still.

Eligibility

Mudra Loan Eligibility

Indian Citizen

Any Indian citizen aged 18+ operating or planning to operate a legitimate non-farm, non-corporate business activity.

Business Type

Manufacturing, trading, services, allied agriculture (poultry, dairy, fishery). Small commercial vehicle transport included.

Business Vintage

Shishu: none required. Kishore: 12+ months preferred. Tarun: 2+ years typical.

Credit Behaviour

No active default or NPA classification. First-time borrowers welcome. CIBIL not strictly gated but 600+ helps.

Documented Activity

Evidence of income-generating activity - GST invoice, sales register, or business location proof.

Exclusions

Corporates, large companies, direct agricultural crop cultivation, salaried employees for personal use, prohibited sectors.

Documents

Documents Required

Shishu Loan (up to Rs 50,000)
PAN + Aadhaar. 2 recent passport-size photographs. Business activity proof (invoice, sales register, or trade licence). Quotation for the item being purchased (if applicable). Voter ID or driving licence as address proof.
Kishore Loan (Rs 50k - 5 Lakh)
All Shishu documents. 6 months bank statement (current or savings account). ITR of last year if filed. Shop & Establishment Act licence or Udyam registration. Property lease or ownership proof of business location.
Tarun Loan (Rs 5 - 20 Lakh)
All Kishore documents. 2 years ITR. 12 months bank statements. Business plan or project report (simple 1-page acceptable). Machinery/equipment quotation for capex Tarun loans. Udyam registration mandatory. Written business background.
For Women Applicants (any tier)
Same as above tier, plus women-specific priority: Stree Shakti membership (SBI branches), self-help group linkage (rural), or DAY-NRLM affiliation for enhanced rate concession. Statutory declaration of women ownership if enterprise is women-led.
For SC/ST/OBC Applicants
Standard tier documents. Caste certificate to unlock additional rate concession or preferential treatment where applicable. Stand-Up India route can be combined with Tarun for SC/ST greenfield entrepreneurs.
Top Lenders

Best Lenders for Mudra Loans

State Bank of India
India’s largest Mudra lender by volume. Dedicated Mudra desks in all branches. YONO app enables digital Shishu application in some cases.
Rate8.15% - 12.00%
MaxRs 20 Lakh
Punjab National Bank
Strong PSU Mudra product. Best for North India rural and semi-urban Mudra borrowers. Fast Shishu processing.
Rate8.50% - 12.50%
MaxRs 20 Lakh
Bank of Baroda
Well-established Mudra + Baroda Vyapar (linked SME product). Strong presence in Gujarat, Maharashtra, MP.
Rate8.75% - 13.00%
MaxRs 20 Lakh
HDFC Bank
Fastest private-bank Mudra processing. Digital-first for Kishore and Tarun. Preferred for GST-registered small businesses.
Rate10.00% - 14.00%
MaxRs 20 Lakh
Bajaj Finance
NBFC Mudra for tech-forward micro-enterprises. GST-based digital approval. Fast disbursal but higher rates.
Rate12.00% - 16.00%
MaxRs 20 Lakh
Regional Rural Banks
Deep rural coverage. Best for agri-allied, rural artisans, and self-help group linked borrowers. Preferential terms.
Rate8.15% - 12.50%
MaxRs 20 Lakh
Interest Rates

Mudra Loan Interest Rates by Tier (August 2026)

Tier + LenderInterest Rate (p.a.)Processing FeeMax Amount
Shishu (PSU Bank)8.15% - 10.00%NilRs 50,000
Shishu (Private Bank)9.00% - 12.00%NilRs 50,000
Kishore (PSU Bank)8.75% - 12.00%0.25% - 0.5%Rs 5 Lakh
Kishore (Private Bank / NBFC)10.00% - 14.00%0.5% - 1%Rs 5 Lakh
Tarun (PSU Bank)9.00% - 13.00%0.5% - 1%Rs 20 Lakh
Tarun (Private Bank / NBFC)10.00% - 16.00%0.5% - 1%Rs 20 Lakh
Women / SC-ST concessionAdditional 0.25% - 0.5% reductionOften waivedSame tier caps
Application Process

How to Apply for a Mudra Loan

1

Choose Tier

Shishu / Kishore / Tarun based on your funding need.

2

Prepare Docs

Minimal KYC for Shishu; bank statements for Kishore/Tarun.

3

Route Choice

UdyamiMitra.in / bank branch / MahadevX (best-fit routing).

4

Application Submission

Fill form + upload docs. Track via UdyamiMitra reference number.

5

Sanction

Bank verifies eligibility + issues sanction letter.

6

Disbursal

Amount credited to your business bank account. Mudra Card issued if Kishore/Tarun.

Pros & Cons

Is a Mudra Loan Right for You?

Advantages

  • 100% collateral-free (CGFMU guarantee)
  • Lowest rates in micro-lending (8.15%+)
  • Nil processing fee for Shishu
  • No prepayment penalty
  • Women get preferential rates
  • Fast processing (Shishu 2-7 days)
  • Mudra Card for revolving credit
  • Priority sector - banks actively want you

Trade-offs

  • Amount capped at Rs 20 lakh (not scalable beyond)
  • Excluded sectors (agri, corporate)
  • PSU bank Mudra can be slower than NBFC
  • Documentation complexity increases for Tarun
  • NBFC Mudra rates significantly higher (up to 16%)
  • Default hurts CIBIL + future Mudra eligibility
Comparison

Mudra vs Stand-Up India vs CGTMSE

FeatureMudra LoanStand-Up IndiaCGTMSE Loan
Max AmountRs 20 LakhRs 1 CroreRs 5 Crore
Collateral-FreeYes (CGFMU)Yes (CGTMSE-covered)Yes (CGTMSE guarantee)
Target SegmentAll micro-enterprisesSC/ST/Women (greenfield)All MSMEs
Interest Rate8.15% - 22%9.15% - 14%8.15% - 13.5%
Processing FeeNil-1%0.25%-1%0.5%-1%
Vintage RequiredNil (Shishu)Nil (greenfield only)Standard MSME vintage
TenureUp to 7 yearsUp to 7 yearsUp to 7 years
Best ForSmall micro-enterprisesFirst-time SC/ST/women entrepreneursLarger MSME needs
20 Questions

Mudra Loan - Frequently Asked Questions

What is the PM Mudra Loan Yojana?
Pradhan Mantri Mudra Yojana (PMMY) is a Government of India scheme launched in 2015 to provide collateral-free credit up to Rs 20 lakh (revised from Rs 10 lakh in 2024) to non-corporate, non-farm micro and small enterprises. Loans are disbursed through PSU banks, private banks, RRBs, cooperative banks, MFIs and NBFCs. Mudra stands for Micro Units Development and Refinance Agency Ltd.
What are the three categories of Mudra Loans?
Shishu: up to Rs 50,000 (for micro-enterprises just starting - no vintage required). Kishore: Rs 50,001 to Rs 5 lakh (for established micro-enterprises needing to expand). Tarun: Rs 5 lakh to Rs 20 lakh (for enterprises ready to scale further - the largest Mudra tier).
Who is eligible for a Mudra Loan?
Any Indian citizen operating a non-farm, non-corporate income-generating activity in manufacturing, trading, services, or allied agriculture activities. Includes small manufacturers, shopkeepers, food-service units, artisans, small traders, transport operators, self-help groups, and startup micro-entrepreneurs. Both new and existing businesses qualify.
What activities are NOT covered under Mudra?
Agricultural activities directly (crop cultivation, allied agriculture services via other schemes), corporates and large companies, government-sector employees for personal use, real estate speculation, and prohibited-sector businesses. Note: allied agri like poultry, dairy, fisheries, beekeeping IS covered.
Do I need collateral for a Mudra Loan?
No - Mudra loans are 100% collateral-free by design. The government (via CGFMU - Credit Guarantee Fund for Micro Units) provides guarantee to the lender. This is the biggest strength of Mudra - no personal or business asset is at risk from the lender action.
What is the interest rate on a Mudra Loan?
Rates vary by lender - RBI has not fixed a Mudra ceiling. Typical range: PSU banks 8.15%-12%; private banks 9%-13%; NBFCs 10%-16%; MFIs 14%-22%. Shishu tier gets the lowest rates. There is no processing fee for Shishu, and 0.5%-1% for Kishore/Tarun.
How do I apply for a Mudra Loan?
Three routes: (1) Any participating bank/NBFC branch - fill physical form + submit documents. (2) UdyamiMitra.in portal - central Mudra application portal, submit online + track. (3) Via loan DSA like MahadevX - we identify best-fit Mudra lender and coordinate. Also available at Common Service Centres (CSCs) in rural areas.
What documents are required for a Mudra Loan?
Shishu (up to Rs 50k): KYC (PAN + Aadhaar), 2 recent photos, business activity proof, quotation of item to be purchased. Kishore/Tarun: adds 6 months bank statements, ITR (if applicable), business address proof, machinery quotation, and business plan for larger amounts.
What is the Mudra Card?
Mudra Card is a RuPay debit card linked to the sanctioned Mudra loan account. Enables the borrower to draw the loan amount incrementally (like a working capital limit) as needed - useful for shopkeepers and traders needing working capital rotation. Available on Kishore and Tarun loans.
How long does Mudra Loan approval take?
Shishu: 2-7 working days at most PSU banks. Kishore: 7-15 working days (includes basic banking behaviour check). Tarun: 15-30 working days (includes business plan review and CIBIL check). NBFC digital-Mudra loans can be faster - 3-5 days for Shishu.
What is the tenure for a Mudra Loan?
Working capital Mudra loans: 12 months, renewable annually. Term Mudra loans (for equipment, machinery, expansion): 3-7 years (36-84 months). No prepayment penalty as per Mudra guidelines.
Can women get preferential Mudra Loan terms?
Yes - women entrepreneurs get: (1) 0.25%-0.5% interest rate concession at most PSU banks; (2) higher loan sanction rates (women get faster approval); (3) dedicated Women-only Mudra desks at select PSU bank branches; (4) integration with Stree Shakti Yojana. Nearly 68% of Mudra loans have gone to women beneficiaries.
What is the difference between Mudra Loan and MSME Loan?
Mudra is a specific scheme with defined amount tiers (up to Rs 20 lakh) targeting micro-enterprises with collateral-free credit. MSME Loan is a broader category covering all business loans to registered MSMEs - can go up to Rs 500 crore, requires Udyam registration, and may need collateral for larger amounts. Mudra is a subset of MSME lending.
Can I get more than Rs 20 lakh through Mudra?
No - Rs 20 lakh is the upper cap for the Tarun tier as of 2024. For amounts above Rs 20 lakh, you need to graduate to standard MSME loans (SBI MSME Sahaj, Bajaj Business Loan, etc.) or CGTMSE-covered term loans (up to Rs 5 crore collateral-free).
Which banks give the fastest Mudra Loans?
For fastest processing: SBI (dedicated Mudra desks in all branches), HDFC Bank, ICICI Bank, Bank of Baroda, and Punjab National Bank. Cooperative banks and Regional Rural Banks are faster in rural areas. Digital NBFC Mudra loans (small ticket Shishu) can approve in under 48 hours.
What is CGFMU and how does it protect the lender?
Credit Guarantee Fund for Micro Units - operated by NCGTC (National Credit Guarantee Trustee Company) - provides a guarantee to Mudra lenders covering 75%-85% of the loan amount. This is what makes Mudra collateral-free - the government absorbs the default risk, giving lenders confidence to lend without collateral.
What happens if I default on a Mudra Loan?
The lender initiates standard collection process. Since there is no collateral, they cannot attach your assets - but they can proceed with legal recovery, damage your CIBIL, and blacklist you from future Mudra loans. The CGFMU guarantee kicks in for the lender - your personal liability continues. Always prefer restructuring over default - talk to your MahadevX RM early.
Are Mudra Loan interest payments tax-deductible?
Yes - interest paid on Mudra loans is fully deductible as a business expense under Section 37(1). Principal repayment is NOT deductible. Startup Mudra borrowers with DPIIT recognition can additionally benefit from Section 80-IAC tax holiday. Always consult a CA for your specific case.
Can I get a Mudra Loan for buying a used commercial vehicle?
Yes - Mudra covers used commercial vehicles for last-mile transport, auto-rickshaws, e-rickshaws, taxis, small trucks, and utility vehicles used for business. Vehicle should not be older than 5-7 years typically. Amount depends on vehicle valuation and your income capacity.
How can MahadevX help with a Mudra Loan?
MahadevX identifies your best-fit Mudra tier (Shishu/Kishore/Tarun), matches you to the right lender (PSU bank vs NBFC vs MFI based on your profile and location), assists with UdyamiMitra portal application or bank branch submission, and coordinates till disbursal. Service is free - lenders pay us on disbursal. We handle applications across all Mudra-participating institutions.
Related

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