The Pradhan Mantri Mudra Yojana (PMMY), better known as the Mudra loan, is a government scheme that helps small and micro businesses in India get funding without pledging collateral. It is aimed at the non-corporate, non-farm sector — small manufacturers, traders, shopkeepers, service providers and the self-employed — who often struggle to access formal credit.
This guide explains the Mudra loan categories, who is eligible, the indicative interest rate picture, the documents you need, and how to apply through official channels. Treat the figures as general, variable information and confirm current terms with your bank or an RBI-registered NBFC before borrowing.
Business Finance · India · 2026
Mudra Loan in India — collateral-free funding for small businesses
Collateral-freeUp to ₹20 lakhFor micro-businessBanks & NBFCs
Where: India
Shishu, Kishor, Tarun and Tarun Plus: how the Mudra scheme works and how to apply the right way.
Loan amount
Up to ₹20 lakh (Tarun Plus)
For
Non-farm micro/small business
Apply via
Bank / NBFC / udyamimitra
✓Shishu / Kishor / Tarun✓Collateral-free✓For small business✓Indicative variable rate✓CIBIL & plan matter✓Official channels only
What it is and who it’s for
A Mudra loan is a collateral-free business loan of up to ₹20 lakh offered through banks, RBI-registered NBFCs and microfinance institutions under PMMY, with the loan guaranteed under the scheme rather than secured against your assets. It can fund working capital, equipment, a shop or any legitimate income-generating non-farm activity. Because it is designed for small enterprises, the process is simpler than for a large commercial loan, but you still need a viable business purpose and a clean repayment record.
Features and eligibility
You are usually eligible if you have:
- ✓An Indian citizen running or starting a non-farm micro or small business (manufacturing, trading or services).
- ✓A viable business plan or purpose and, for existing businesses, basic records of activity.
- ✓A reasonable credit history — a good CIBIL score helps, though first-time borrowers can qualify for smaller amounts.
- ✓No default on previous loans, and for Tarun Plus, successful repayment of an earlier Tarun loan.
Key features
Mudra loans come in four categories by amount: Shishu (up to ₹50,000) for new and very small businesses; Kishor (₹50,000 to ₹5 lakh) for growing ones; Tarun (₹5 lakh to ₹10 lakh) for established micro-enterprises; and Tarun Plus (₹10 lakh to ₹20 lakh) for entrepreneurs who have already repaid a Tarun loan. The loans are collateral-free, can be term loans or working-capital facilities, and interest rates are set by each lender within RBI norms rather than being fixed by the scheme.
Interest rate, EMI and charges
Indicative Mudra loan snapshot
Terms vary by lender, category, business profile and credit history. As a general guide:
| Shishu |
Up to ₹50,000 |
| Kishor / Tarun |
₹50,000 – ₹10 lakh |
| Tarun Plus |
₹10 lakh – ₹20 lakh |
| Interest rate |
Indicative ~8% – 14%+ (lender-set, variable) |
| Collateral |
Not required |
Note: Interest rates, fees and limits shown are indicative ranges only and change often — they vary by lender, your credit score, income and loan amount. Always check the current, exact terms with the bank or RBI-registered NBFC before you borrow. This is general information, not financial advice.
Your EMI depends on the amount, the lender’s interest rate and the tenure, which is typically a few years for a term loan. A stronger credit score, clear business records and a sound purpose can help you secure a better rate and limit. Remember that the rate is set by the lender within RBI guidelines, not fixed by the scheme, so it pays to compare two or three banks or NBFCs and to borrow only what your cash flow can comfortably repay.
Documents required
Keep these ready:
- ✓Identity and address proof — Aadhaar and PAN.
- ✓Business proof — registration, licence or basic documents showing the activity and its address.
- ✓Recent bank statements and, for existing businesses, financials or turnover records.
- ✓A simple business plan or quotation for the amount you need, plus passport photos.
How to apply
1
Decide category and amount
Work out whether you need Shishu, Kishor, Tarun or Tarun Plus based on your business stage and requirement.
2
Prepare documents and plan
Get your KYC, business proof and a clear purpose or quotation ready.
3
Apply officially
Apply at a bank or RBI-registered NBFC branch, or through the Udyamimitra portal (udyamimitra.in); compare offers.
4
Sanction and repay
Review the sanction terms and schedule of charges, accept if suitable, and repay EMIs on time to build credit.
Apply directly with a bank or an RBI-registered NBFC, or through their official app or website. Compare at least two or three offers, check the total cost (interest plus fees), and read the sanction letter carefully before signing.
⚠ Avoid these loan scams
No genuine Mudra lender asks for an advance ‘processing fee’ paid into a personal account, or an OTP to ‘release’ your loan — those are classic frauds. The scheme does not charge agents’ fees for guaranteed approval; apply directly with a bank or RBI-registered NBFC, or via the official Udyamimitra portal. Never share your bank OTP or UPI PIN, be wary of anyone promising a guaranteed Mudra loan for a fee, and report fraud on cybercrime.gov.in or helpline 1930.
Frequently asked questions
What is a Mudra loan?
It is a collateral-free business loan of up to ₹20 lakh under the Pradhan Mantri Mudra Yojana, offered through banks, NBFCs and microfinance institutions to non-farm micro and small enterprises for working capital, equipment or business setup.
What are the Mudra loan categories?
Shishu (up to ₹50,000), Kishor (₹50,000–₹5 lakh), Tarun (₹5–10 lakh) and Tarun Plus (₹10–20 lakh, for those who have repaid a Tarun loan). You choose the category that matches your business stage and need.
What is the Mudra loan interest rate?
There is no single fixed rate — each lender sets it within RBI norms based on your category, business profile and credit history, so rates are indicative and variable. Compare offers from two or three lenders before borrowing.
Is collateral needed for a Mudra loan?
No. Mudra loans are collateral-free; the loan is covered under the scheme rather than secured against your assets. You still need a viable business purpose and a reasonable credit record.
How do I apply for a Mudra loan safely?
Apply directly at a bank or RBI-registered NBFC, or through the official Udyamimitra portal (udyamimitra.in). Never pay an advance fee to an ‘agent’ or share your OTP — genuine lenders don’t ask for that.
Final word
The Mudra loan is a valuable, collateral-free route for India’s small and micro entrepreneurs to access formal credit, from a ₹50,000 Shishu loan up to ₹20 lakh under Tarun Plus. Choose the right category, prepare a clear business purpose and your documents, and apply directly through a bank, NBFC or the official Udyamimitra portal. Compare rates, borrow only what you can repay, never pay an advance fee or share an OTP, and repay on time to build the credit record that unlocks larger funding later.
Disclaimer: This article is general information about loans in India and is not financial advice or a loan offer. Interest rates, fees, eligibility and limits are indicative, change frequently, and vary by lender, credit profile and amount. Always compare offers, read the full terms and the schedule of charges, and confirm current details with the bank or RBI-registered NBFC before borrowing. Borrow only what you can repay. No genuine lender asks for an advance ‘processing fee’ paid to a personal account or an OTP to release a loan — never pay such demands, and report fraud on cybercrime.gov.in or helpline 1930.
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