What is MUDRA?
Micro Units Development & Refinance Agency Ltd. (MUDRA) is a financial institution established by the Government of India to provide financing to micro-enterprises and small businesses. The Pradhan Mantri MUDRA Yojana (PMMY) was launched on April 8, 2015, by the Hon'ble Prime Minister.
MUDRA provides refinance support to Banks, Micro Finance Institutions (MFIs), and Non-Banking Financial Companies (NBFCs) for lending to micro enterprises engaged in manufacturing, trading, and services activities. Since its inception, PMMY has disbursed over 46 crore loans totaling more than ₹25 lakh crore, making it one of the largest micro-finance schemes globally.
Key Features of PMMY
- • Loans up to ₹10 lakh without collateral
- • Covers non-farm income generating activities
- • For manufacturing, processing, trading, and services
- • Available through wide network of lenders
- • No processing fees for loans up to ₹50,000
- • Special focus on SC/ST, women, and minorities
Vision and Mission
Vision
To create an inclusive and sustainable entrepreneurial ecosystem in India by providing affordable credit to micro-enterprises and small businesses.
Mission
To support "fund the unfunded" by providing access to formal credit for millions of small entrepreneurs who were previously dependent on informal sources.
MUDRA Loan Categories
MUDRA loans are classified into three categories based on the stage of business development and funding requirements:
Shishu
Up to ₹50,000For entrepreneurs who are just starting their business journey or need very small amounts for working capital or equipment.
Covers:
- • Starting a new micro enterprise
- • Purchase of basic equipment and tools
- • Initial working capital requirements
- • Setting up small trading businesses
- • Small service enterprises
Kishor
₹50,001 - ₹5,00,000For entrepreneurs who have established their business and need larger funds for growth, expansion, or working capital.
Covers:
- • Expansion of existing business
- • Purchase of additional machinery
- • Additional working capital
- • Business modernization
- • Adding new products/services
Tarun
₹5,00,001 - ₹10,00,000For well-established businesses looking for significant expansion, modernization, or entering new markets.
Covers:
- • Significant business expansion
- • Setting up additional units
- • Large equipment purchase
- • Technology upgradation
- • Market expansion activities
Category Comparison
| Aspect | Shishu | Kishor | Tarun |
|---|---|---|---|
| Loan Amount | Up to ₹50,000 | ₹50,001 - ₹5,00,000 | ₹5,00,001 - ₹10,00,000 |
| Processing Fee | Nil | As per lender policy | As per lender policy |
| Documentation | Minimal | Moderate | Detailed |
| Ideal For | New businesses | Growing businesses | Established businesses |
Eligibility Criteria
MUDRA loans are designed to be inclusive and accessible. The eligibility criteria are straightforward:
Who Can Apply?
Individual Entrepreneurs
- • Small business owners
- • Shopkeepers and traders
- • Artisans and craftsmen
- • Food processors
- • Service providers
Business Entities
- • Proprietorship firms
- • Partnership firms
- • Self-help groups (SHGs)
- • Joint liability groups (JLGs)
Eligible Activities
Manufacturing
- • Food processing
- • Textile production
- • Handicrafts
- • Small machinery
Trading
- • Retail shops
- • Wholesale trading
- • Kirana stores
- • Online sellers
Services
- • Transport operators
- • Repair services
- • Professional services
- • Beauty parlors
Exclusions
MUDRA loans do not cover:
- • Agricultural activities (farm operations)
- • Corporate entities (Pvt Ltd, Ltd companies)
- • Educational institutions
- • Real estate/construction activities
- • Speculative activities
Application Process
Applying for a MUDRA loan is a straightforward process:
Step 1: Identify Your Category
Determine whether you need Shishu, Kishor, or Tarun loan based on your funding requirements and business stage.
Step 2: Prepare Documents
Gather identity proof, address proof, business-related documents, and photographs.
Step 3: Prepare Business Plan
For Shishu: Simple outline. For Kishor/Tarun: Detailed project report with financial projections.
Step 4: Approach Lender
Visit any bank branch, NBFC, or MFI that offers MUDRA loans. Most commercial banks participate in the scheme.
Step 5: Fill Application
Complete the MUDRA loan application form. Forms are available at lender branches or online.
Step 6: Processing and Disbursement
Lender processes your application and disburses the loan directly to your bank account.
Interest Rates and Terms
MUDRA loan interest rates and terms vary by lender:
Interest Rate Range
| Lender Type | Interest Rate Range |
|---|---|
| Public Sector Banks | Base rate + 1-3% (typically 9-12%) |
| Private Sector Banks | Base rate + 2-4% (typically 11-14%) |
| NBFCs | 14-18% per annum |
| MFIs | 16-22% per annum |
Repayment Terms
- • Loan Tenure: 3 months to 5 years depending on category and activity
- • Repayment Mode: Monthly, quarterly, or as per cash flow
- • Moratorium: Available for term loans (typically 3-6 months)
- • Prepayment: Usually allowed without penalty
Government Interest Subvention
The government provides interest subvention to specific categories:
- • 2% interest subvention for GST-registered units
- • Additional 3% for timely repayment (in some schemes)
- • Special rates for women entrepreneurs in certain categories
Lending Institutions
MUDRA loans are available through a wide network of financial institutions:
Types of Lenders
Scheduled Commercial Banks
- • Public Sector Banks (SBI, PNB, etc.)
- • Private Sector Banks (HDFC, ICICI, Axis)
- • Regional Rural Banks
- • Foreign Banks with Indian operations
Other Financial Institutions
- • Non-Banking Financial Companies (NBFCs)
- • Micro Finance Institutions (MFIs)
- • Small Finance Banks
- • Cooperative Banks
Where to Apply
- • Nearest Bank Branch: Visit any branch of participating banks
- • MUDRA Portal: www.mudra.org.in
- • CSC Centers: Common Service Centers in rural areas
- • Bank Mitras: Banking correspondents in villages