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Mudra Loan: The Complete Guide for 2026

The Pradhan Mantri Mudra Yojana (PMMY) offers loans from ₹50,000 to ₹10 lakh for non-farm micro businesses. No collateral, no guarantor. Available at any bank, NBFC, or MFI in India.

Three Tiers — Which One Applies to You?

Shishu

Up to ₹50K

For businesses just starting out. Street vendors, home-based tailors, small repair shops. Fastest approval — often under 10 days.

Kishore

₹50K – ₹5L

For existing businesses needing working capital or equipment. Requires basic business financials and a simple business plan.

Tarun

₹5L – ₹10L

For established micro businesses expanding operations. Strongest documentation required. ITR for 2+ years helps significantly.

Who Qualifies

Mudra has no income threshold and no minimum turnover requirement. The primary filters are business type and credit history.

Business type

Any non-farm income activity — manufacturing, trading, or services. Street vendors, small shops, artisans, service providers all qualify.

Entity type

Individuals, proprietorships, partnership firms, and small companies. No specific registration required for Shishu — Udyam Registration strengthens Kishore/Tarun applications.

Age

18 to 65 years.

Credit history

No existing loan default with any bank or financial institution. CIBIL score above 650 improves your odds significantly; below 600 will likely result in rejection.

What is NOT eligible

Agriculture and allied activities (those fall under Kisan Credit Card). Businesses that are already NPA (non-performing asset) with any lender.

Documents You Need

All tiers

  • • Aadhaar card
  • • PAN card
  • • 2 passport-size photos
  • • Bank account passbook (last 6 months)
  • • Proof of business address (rent agreement, utility bill, or local body certificate)
  • • Proof of business activity (any invoice, trade licence, or registration)

Kishore & Tarun (additional)

  • • Business plan or project report (1–3 pages is fine)
  • • Last 2 years ITR or GST returns (if filed)
  • • Udyam Registration certificate (not mandatory, but helps)
  • • Quotations for machinery or equipment if purpose is capital expenditure
  • • Caste certificate if applying under SC/ST category

How to Apply — Step by Step

  1. 1

    Identify your tier

    Calculate how much you need. If it is under ₹50K, go Shishu. Up to ₹5L, go Kishore. Up to ₹10L, go Tarun. Do not apply for more than you need — over-application is a red flag.

  2. 2

    Prepare your documents

    Gather everything from the list above. For Kishore/Tarun, write a simple 1-page business plan: what you do, how much you earn, what you will use the loan for, and how you will repay it.

  3. 3

    Choose your lender

    Walk into any bank branch near your business. PSU banks (SBI, PNB, Bank of Baroda) have dedicated MSME desks. Alternatively, apply online via udyamimitra.in — it routes your application to multiple banks.

  4. 4

    Submit the Mudra application form

    The bank will give you the Mudra application form (it is free). Fill it with your lender, attach documents, and get an acknowledgement slip. Keep this slip — it is your reference number.

  5. 5

    Bank verification and site visit

    For Shishu, the bank may call you to verify. For Kishore/Tarun, a loan officer may visit your business. This is normal — do not be alarmed. Have your records ready.

  6. 6

    Sanction letter and Mudra card

    On approval, you receive a sanction letter with the amount and interest rate. The Mudra Card (a RuPay debit card) is issued for working capital drawdown. Term loan amounts are disbursed to your account.

Why Applications Get Rejected

Banks are not required to approve every Mudra application. These are the most common reasons they say no:

Low or no CIBIL score

Check your CIBIL score free at cibil.com before applying. If below 650, spend 3–6 months building it: close overdue accounts, reduce credit card utilisation.

Existing loan default

Any NPA (non-performing asset) on your name will block the application. Clear defaults first, get a no-dues certificate, then apply.

No clear business purpose

Vague applications ("for business") are rejected. State exactly what the money is for: "purchase of 1 cutting machine at ₹1.2L from XYZ Supplier, Rajkot." Attach a quotation.

Agriculture-linked business

Mudra does not cover crop farming, horticulture, or fisheries. If your business is agriculture-adjacent (food processing, dairy), clarify the non-farm nature explicitly.

Missing documents

Even one missing document stalls the file. Use the checklist above. Bring originals and two photocopies of everything.

Overdue KYC at your bank

Update your KYC at your bank before applying. An outdated address or expired Aadhaar link will cause automatic rejection.

What interest rate will you pay?

Mudra does not set a fixed interest rate — each lender sets their own within RBI guidelines. Expect 9%–12% per annum for most borrowers. Women entrepreneurs and SC/ST borrowers often get 0.25%–0.5% concession. Always ask the bank for the exact rate in writing before signing.

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Frequently Asked Questions

What is the maximum Mudra Loan amount?

The maximum Mudra Loan amount is ₹10 lakh under the Tarun tier. If you need more, look at CGTMSE-backed loans from the same bank.

Is collateral required for a Mudra Loan?

No. Mudra Loans do not require any collateral or third-party guarantee. The scheme is specifically designed for borrowers who cannot pledge property.

Which bank should I apply at for a Mudra Loan?

You can apply at any public sector bank, private bank, regional rural bank, small finance bank, MFI, or NBFC. SBI, PNB, Bank of Baroda, and Canara Bank process the highest volumes.

How long does Mudra Loan approval take?

Shishu loans (up to ₹50,000) are often approved within 7–10 working days. Kishore and Tarun loans typically take 3–6 weeks depending on the bank and your documentation.

Can I apply for a Mudra Loan online?

Yes. Most major banks have online Mudra Loan applications on their websites. You can also apply via the Udyamimitra portal (udyamimitra.in) which routes your application to multiple lenders.

Does Mudra Loan affect my CIBIL score?

Yes — like any loan, Mudra Loan repayments are reported to credit bureaus. Timely repayment builds your score; defaults damage it and will block future scheme access.

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