What the Mudra scheme is
PM MUDRA Yojana (PMMY) is a Government of India scheme to provide affordable credit to micro enterprises engaged in trading, manufacturing and service sectors, including agricultural activities.
Micro Units Development and Refinance Agency (MUDRA) is an NBFC which provides refinance support to regional rural banks, commercial banks, microfinance institutions, small finance banks and other NBFCs for lending onward to micro enterprises. Borrowers can avail MUDRA loans of up to ₹10 lakh from a nearby branch of a bank or NBFC. MUDRA also offers the MUDRA Card for working capital, cash withdrawals from any ATM and purchases through POS machines.
Key highlights
- Loan Facility
- Cash credit, overdraft and term loan
- Interest Rates
- Set by each bank’s own policy decisions
- Loan Amount
- Up to ₹10 lakh (up to ₹20 lakh proposed in Budget 2024)
- Tenure
- Set by each bank’s own policy decisions
- Processing Fees
- No processing fee for the SHISHU category (loans up to ₹50,000). For Kishore and Tarun, this depends on the financial institution.
- Collateral
- Not required — covered under the Credit Guarantee Fund for Micro Units (CGFMU)
Where we come in. MUDRA does not lend directly and does not set the interest rate — each bank does. That means the same application can be priced very differently at two branches on the same road. We know which lenders are actively booking Mudra cases and on what terms.
The three categories
MUDRA loans are categorised as Shishu, Kishore and Tarun, reflecting the development stage and funding needs of the applicant:
| Category | Loan amount | Processing fee |
|---|---|---|
| SHISHU | Up to ₹50,000 | Nil |
| KISHORE | Above ₹50,000 to ₹5 lakh | As per the lender |
| TARUN | Above ₹5 lakh to ₹10 lakh | As per the lender |
Budget 2024 proposal. The Mudra loan limit is proposed to increase to ₹20 lakh for entrepreneurs who have already repaid a previous loan under the TARUN category.
Features of the scheme
Interest rates
MUDRA does not set the interest rates of PMMY loans. The agency gives lending institutions freedom over pricing, so prospective borrowers should approach the concerned bank, NBFC or MFI for their current Mudra rate.
Collateral
The loans are collateral free and covered under the Credit Guarantee Fund for Micro Units (CGFMU), operated by National Credit Guarantee Trustee Company Limited (NCGTC).
Repayment tenure
MUDRA has not specified a repayment tenure for loans refinanced under PMMY. Lending institutions set their own tenures within their internal rules and RBI regulations.
Types of facility
Loans under the PMMY scheme are offered as a term loan, an overdraft or a cash credit (CC) limit — so the scheme covers both asset purchase and running working capital.
Fees and charges
Lending institutions may charge an upfront fee as per their internal guidelines. In practice most lenders waive the upfront fee or processing charge for loans under the SHISHU category.
Eligibility criteria
MUDRA loans are offered to the micro enterprise sector in manufacturing, service, processing or trading, including activities allied to agriculture. The prospective borrower must not be a defaulter with any bank or financial institution and should have a satisfactory credit track record.
Educational qualification may be assessed depending on the nature of the proposed activity. Applicants may also need relevant experience, skills or knowledge to carry out the activity.
Who can borrow
- Individuals
- Proprietary concern
- Partnership firm
- Private Limited Company
- Public Company
- Any other legal form
Activities covered
Transport vehicles
Purchase of transport vehicles for goods and passengers — auto rickshaws, small goods transport vehicles, three-wheelers, e-rickshaws and taxis. Tractors, power tillers, tractor trolleys and two-wheelers are covered where used only for commercial purposes.
Community, social and personal services
Salons, gymnasiums, boutiques, DTP and photocopying facilities, tailoring shops, dry cleaning, medicine shops, beauty parlours, cycle and motorcycle repair shops and courier agents.
Food products sector
Papad making, biscuit, bread and bun making, jam and jelly making, ice cream units, agricultural produce preservation at rural level, achaar making, cold storages, small food stalls, day-to-day catering and canteen services, cold chain vehicles, ice making units and sweet shops.
Textile products
Handloom, chikan work, traditional and computerised embroidery, traditional dyeing and printing, zari and zardozi work, powerloom, khadi activity, apparel design, knitting, cotton ginning, stitching, and non-garment textile products such as vehicle accessories, bags and furnishing accessories.
Traders and shopkeepers
Loans to individuals for running their shops, trading and business or service enterprises, and non-farm income generating activities.
Equipment finance for micro units
For individuals setting up micro enterprises by purchasing the machinery or equipment required.
Activities allied to agriculture
Pisciculture, poultry, livestock rearing, bee keeping, agro industries aggregation, food and agro-processing, dairy, fishery, grading, sorting, agri-clinics and agribusiness centres, plus services supporting these activities.
Excluded. Crop loans, and land improvement such as irrigation, canals and wells, are not covered under activities allied to agriculture.
The MUDRA Card
The MUDRA Card is a RuPay debit card offering a working capital loan in the form of an overdraft facility. It allows multiple withdrawals and credits, digitalising transactions and building a credit history for the borrower.
The card is issued against a MUDRA loan account and can be used across the country for cash withdrawals from an ATM or micro ATM, or for purchases through any Point of Sale machine. The borrower can repay at any time, depending on the availability of surplus cash — which keeps the interest cost down.
Documents required
For the SHISHU category
- Identity proof — self-attested copy of driving licence, PAN card, Voter’s ID card, Aadhaar card, government-issued photo ID or passport.
- Residence proof — latest telephone bill, property tax receipt not older than 2 months, Voter’s ID card, electricity bill, Aadhaar card, domicile certificate, bank passbook or latest bank statement attested by bank officials, or passport.
- Two recent photographs of the applicant, not older than 6 months.
- Quotation for the machinery or other items to be purchased.
- Name of the supplier, with price and details of the machinery or items.
- Proof of identity and address of the business — registration certificates, relevant licences or other documents establishing ownership, address and identity of the business unit.
- Proof of category — SC, ST, OBC, minority.
For the KISHORE and TARUN categories
- Identity proof — self-certified copy of Voter’s ID, PAN, Aadhaar, driving licence or passport.
- Residence proof — latest telephone bill, property tax receipt not older than 2 months, Voter’s ID, electricity bill, Aadhaar and passport of the proprietor, partners or directors.
- Proof of SC, ST, OBC or minority status.
- Identity and address proof of the business enterprise.
- Account statement of the last 6 months from the existing banker, if any.
- Balance sheets of the last 2 years with income tax or sales tax returns — for all cases of ₹2 lakh and above.
- Projected balance sheets — one year for working capital limits, and for the loan duration in the case of a term loan — for all cases of ₹2 lakh and above.
- Sales achieved during the current financial year up to the date of application.
- Project report for the proposed project, with details of economic and technical viability.
- Memorandum and Articles of Association of the company, or the partnership deed.
- In the absence of a third-party guarantee, an asset and liability statement from the applicant including directors and partners, to establish net worth.