The Pradhan Mantri Mudra Yojana (PMMY) is one of the most popular government loan schemes in India, designed to provide “funding the unfunded.” Launched by the Government of India, MUDRA (Micro Units Development & Refinance Agency Ltd.) helps small business owners and entrepreneurs get collateral-free loans up to ₹10 Lakh.
What is a Mudra Loan?
A Mudra loan is a credit facility offered to non-corporate, non-farm small/micro-enterprises. These loans are provided by Commercial Banks, RRBs, Small Finance Banks, MFIs, and NBFCs.
Three Categories of Mudra Loans
Mudra loans are divided into three categories based on the stage of growth and funding needs of the beneficiary micro-unit:
- Shishu: Covering loans up to ₹50,000 (For startups and new businesses).
- Kishore: Covering loans above ₹50,000 and up to ₹5 Lakh (For businesses that are already established).
- Tarun: Covering loans above ₹5 Lakh and up to ₹10 Lakh (For larger micro-units requiring expansion).
Eligibility for PMMY
Any Indian citizen who has a business plan for a non-farm sector income-generating activity such as manufacturing, processing, trading, or service sector and whose total loan requirement is up to ₹10 Lakh can apply for a Mudra loan.
- Proprietorship / Partnership firms
- Small manufacturing units
- Service sector units
- Shopkeepers
- Fruits / Vegetable vendors
- Truck operators
- Food-service units
- Repair shops
- Machine operators
- Small industries
- Artisans
Interest Rates and Terms
Interest rates are NOT fixed by the government. Instead, MUDRA provides refinance support to banks, and the individual banks set the interest rates based on RBI guidelines and the credit profile of the borrower. Generally, rates range from 8.60% to 12% per annum.
Repayment Period: Usually 3 to 5 years, depending on the bank’s terms.
Collateral and Processing Fees
- No Collateral: Mudra loans are collateral-free as per RBI directives.
- Processing Fees: Nil for Shishu loans. For Kishore and Tarun, banks may charge a nominal fee (usually ~0.50%).
How to Apply for a Mudra Loan
- Prepare a Business Plan: Outline what your business does, how much money you need, and how you will repay it.
- Approach a Lender: Visit any commercial bank, private bank, RRB, or NBFC near you.
- Submit Documents: You will need ID proof, Address proof, Business address proof, and the MUDRA application form.
- Online Application: You can also apply online through the Udyamimitra portal (udyamimitra.in) or JanSamarth portal (jansamarth.in).
Pro Tip: Ensure your business is registered (Udyam Registration) before applying. This significantly increases your chances of approval and simplifies the documentation process.