PM Mudra Yojana- Explained in One Minute
Pradhan Mantri Mudra Yojana (PMMY) gives collateral-free loans to small, non-farm businesses.
There are four loan tiers: Shishu (up to ₹50,000), Kishor (₹50,000 to ₹5 lakh), Tarun (₹5 lakh to ₹10 lakh), and Tarun Plus (₹10 lakh to ₹20 lakh).
Both new and existing small businesses can apply. No collateral is needed at any tier. You apply through a bank, NBFC, or the Udyamimitra portal.
What Is PMMY?
Pradhan Mantri MUDRA Yojana was launched on 8 April 2015. Its guiding idea is simple: “fund the unfunded.” MUDRA stands for Micro Units Development and Refinance Agency.
The scheme exists because millions of small business owners in India- think tailors, kirana shop owners, mechanics, food stall operators- could never get a formal bank loan.
They had no collateral, no credit history, and no way to prove their business was viable to a traditional lender.
MUDRA loans close this gap by removing the collateral requirement entirely and keeping the process simple enough for a small trader to complete it.
Since its launch, PMMY has issued over 52 crore loans, making it one of the largest micro-credit programs in the world.
Why Does It Matter
If you run a small shop, a repair business, a food cart, or any small non-farm enterprise, MUDRA is often the very first formal credit product you can access. It doesn’t require you to already own property.
It doesn’t ask for years of financial statements. It scales with your business, starting small and letting you borrow more as you build a repayment track record.
This progressive structure matters. A first-time borrower can start at the Shishu level with a modest amount, build trust with the lender by repaying on time, and move up to Kishor, then Tarun, and eventually Tarun Plus, as the business genuinely grows. It’s designed to grow with you, not to overwhelm you with debt at the start.
The Four Loan Tiers
MUDRA loans are split into four tiers, based on how much funding your business needs.
- Shishu covers loans up to ₹50,000. This tier suits a business just starting out, someone setting up a small stall, a home-based unit, or a very early-stage venture.
- Kishor covers loans above ₹50,000 and up to ₹5 lakh. This tier suits an established micro-business that wants to buy better equipment or increase its working capital.
- Tarun covers loans above ₹5 lakh and up to ₹10 lakh. This tier is for businesses with a stronger operating history, looking to expand meaningfully.
- Tarun Plus is the newest tier, covering loans above ₹10 lakh and up to ₹20 lakh. This was introduced in the Union Budget 2024-25 and became effective from October 2024. It is specifically meant for entrepreneurs who have already taken a Tarun loan and repaid it successfully. It isn’t available to a first-time borrower.
Key Details at a Glance
| Detail | Amount / Criteria |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishor | ₹50,000 to ₹5 lakh |
| Tarun | ₹5 lakh to ₹10 lakh |
| Tarun Plus | ₹10 lakh to ₹20 lakh (for repeat borrowers with a clean Tarun repayment history) |
| Collateral | None required at any tier |
| Eligibility age | 18 years and above |
| Who can apply | Non-corporate, non-farm small/micro enterprises — individuals, proprietorships, partnerships |
| Interest rate | Bank-specific, based on MCLR plus a spread (roughly 9% to 13% per annum, varies by lender) |
| Interest subvention | 2% subsidy on timely repayment of Shishu loans, for eligible borrowers, for 12 months |
| Lenders | Commercial banks, Regional Rural Banks, Small Finance Banks, MFIs, NBFCs |
| Application portals | Udyamimitra, Jan Samarth, or any participating bank branch |
| Official scheme | mudra.org.in |
Who Qualifies
You can apply for a MUDRA loan if:
- You are an Indian resident, 18 years or older.
- You run, or plan to start, a non-corporate, non-farm small or micro business. This includes manufacturing, trading, services, and certain transport and allied agricultural activities like dairy, poultry, or beekeeping.
- You don’t have a history of major default on existing loans.
- For Kishor and Tarun loans, lenders generally expect some proof of an operating business, such as GST registration, Udyam registration, or a shop and establishment certificate.
- For Tarun Plus specifically, you must have already taken and successfully repaid a Tarun loan. This tier is not open to new borrowers.
MUDRA loans are not meant for pure agricultural activities like crop farming. Farmers should look at the Kisan Credit Card scheme instead. But allied activities like dairy, poultry farming, and beekeeping are covered.
What You Can Use a MUDRA Loan For
The scheme covers a genuinely wide range of small business activity. This includes manufacturing work like tailoring, food processing, small-scale fabrication, and handicrafts. It covers trading businesses like kirana stores, vegetable shops, small restaurants, and online resellers.
It covers services like salons, repair shops, photography studios, and courier businesses. It also covers vehicle loans for auto-rickshaws, taxis, e-rickshaws, and small transport vehicles used commercially.
The Mudra Card
Once your loan is sanctioned, you may receive a MUDRA Card. This works like a RuPay debit card, linked to the working capital portion of your loan.
It gives you flexible access to funds as you need them, rather than a single lump-sum disbursement, which can be genuinely useful for day-to-day business expenses like buying stock.
How to Apply
- Decide which tier fits your need. Don’t over-borrow. A Shishu loan is often the right starting point if you’re new to formal credit, even if you could technically qualify for more.
- Choose your channel. You can apply digitally through the Udyamimitra or Jan Samarth portal, which lets you compare offers from multiple lenders and get an in-principle approval quickly. This works well for Shishu and Kishor loans. Alternatively, visit a bank branch directly, which is often preferred for larger Tarun and Tarun Plus loans, since you’ll want more hands-on guidance.
- Gather your documents. Typically, this includes your Aadhaar card, PAN card, passport-size photographs, bank account details, and, for Kishor and Tarun loans, some proof of business activity like GST or Udyam registration.
- Submit your application, either online or at the branch. For Kishor and Tarun loans, expect the bank to review your application and may visit your business location as part of their assessment.
- On approval, sign the loan agreement. The bank sets up EMI auto-debit and issues your MUDRA Card if applicable.
Most applications are decided within 7 to 15 working days, though this can vary depending on the lender and how complete your documents are.
Common Mistakes That Delay Approval
- Applying for a higher tier than your business history supports. If you’re a first-time borrower without an established business, applying directly for Tarun or Tarun Plus will likely be turned down. Start at the tier that matches your actual track record.
- Not maintaining proof of business activity. For Kishor and Tarun loans especially, lenders want to see some formal trace of your business, like GST or Udyam registration. Get this in order before applying.
- Assuming Tarun Plus is open to everyone. It specifically requires a successful repayment history on a prior Tarun loan. New entrepreneurs should not expect to qualify for this tier directly.
- Ignoring the interest rate comparison across lenders. Since MUDRA interest rates are set by individual banks based on their own MCLR, rates can vary meaningfully between lenders. It’s worth comparing a couple of options through Udyamimitra before committing.
- Missing the 2% interest subvention window. This applies specifically to Shishu loans repaid on time, for a 12-month period. If you qualify, make sure your bank has actually applied it, since this isn’t always automatic.
Bottom Line
MUDRA gives small business owners access to collateral-free loans, from as little as a few thousand rupees up to ₹20 lakh, through four tiers that scale with your business’s growth.
There’s no property or guarantor needed at any stage. The scheme works best when you start at the tier that genuinely matches your current business size, and build a repayment history that lets you move up over time.
Mudra Yojana: FRQs
Do I need collateral for a MUDRA loan?
No. MUDRA loans are collateral-free at every tier, including Tarun Plus.
Can a completely new business apply?
Yes, particularly for Shishu and Kishor loans. Tarun Plus is the exception, since it requires a prior, successfully repaid Tarun loan.
What is the interest rate on a MUDRA loan?
There’s no single fixed government rate. Each lender sets its own rate, based on its MCLR plus a spread, typically in the range of 9% to 13% per annum. Compare a few lenders before choosing.
Can farmers apply for a MUDRA loan?
Not for core crop farming, since MUDRA is meant for non-farm businesses. But allied activities like dairy, poultry, and beekeeping are eligible.
How do I apply?
Through the Udyamimitra or Jan Samarth portal, or by visiting any participating bank branch, including public sector banks, private banks, Regional Rural Banks, and many NBFCs.
What is the MUDRA Card?
It’s a RuPay-linked debit card issued against the working capital portion of your sanctioned loan, giving you flexible access to funds as needed.
Is there really no application fee?
Correct — there’s no fee to apply for a MUDRA loan through official channels.
How long does approval take?
Usually 7 to 15 working days, though this depends on the lender and how complete your application is.
What happens if I can’t repay on time?
Talk to your lender as early as possible if you’re facing repayment difficulty. Missing payments can affect your ability to access higher tiers later, including Tarun Plus.
Is Tarun Plus available at every bank?
It should be, since it’s a scheme-wide category, but individual banks may have their own internal processes for assessing eligibility. Confirm directly with your lender.
Related Schemes
- PMEGP — margin-money subsidy for starting a new manufacturing or service unit.
- Stand-Up India — larger loans specifically for women and SC/ST entrepreneurs.
- PM SVANidhi — small working-capital loans for street vendors. Browse all scheme guides
Last verified: July 2026. Information compiled from the official PMMY portal (mudra.org.in), Ministry of Finance press releases, and RBI guidelines on the Tarun Plus category introduced in Budget 2024-25. This is independent informational content, not affiliated with the Government of India. Interest rates are set independently by each lending bank and change periodically — always confirm current terms directly with your bank before applying.