PM MUDRA Loan 2026: Eligibility, Shishu Kishor Tarun, and How to Apply
The Pradhan Mantri MUDRA Yojana (PMMY) is a Government of India scheme that provides collateral-free loans up to ₹10 lakh to non-corporate, non-farm micro and small enterprises. Launched on 8 April 2015 by Prime Minister Narendra Modi, the scheme operates through three loan categories: Shishu (up to ₹50,000), Kishor (₹50,001 to ₹5 lakh), and Tarun (₹5,00,001 to ₹10 lakh). Since inception, PMMY has sanctioned over 47 crore loans with total disbursement exceeding ₹27.75 lakh crore through banks, NBFCs, and microfinance institutions. If you are planning to start or expand a small business in India and need funding without pledging assets, the PM MUDRA Loan is the most accessible government-backed credit programme available in 2026. Here is the complete breakdown of eligibility criteria, loan types, application process, interest rates, documents, and approval timelines.
- PM MUDRA Yojana provides collateral-free loans up to ₹10 lakh for non-farm micro enterprises
- Three loan categories: Shishu (up to ₹50,000), Kishor (₹50,001-₹5 lakh), Tarun (₹5,00,001-₹10 lakh)
- No collateral, no guarantor, no processing fee for Shishu category loans
- Interest rates range from 7.30% to 12% per annum depending on the bank and category
- Over 47 crore loans worth ₹27.75 lakh crore disbursed since April 2015
- Available through public sector banks, private banks, RRBs, small finance banks, NBFCs, and MFIs
- Women borrowers receive preferential rates and account for 68%+ of total MUDRA loans disbursed
What is PM MUDRA Yojana (PMMY)?
The Pradhan Mantri MUDRA Yojana is a flagship scheme of the Government of India established under the Micro Units Development and Refinance Agency Ltd (MUDRA), a subsidiary of SIDBI. The scheme was launched on 8 April 2015 with the objective of providing institutional credit to the non-corporate, non-farm small and micro enterprise sector. Before PMMY, an estimated 5.77 crore small businesses in India operated without access to formal credit, relying on informal money lenders charging 30-60% annual interest. PMMY was designed to close this credit gap.
MUDRA does not lend directly to borrowers. Instead, it refinances lending institutions, including commercial banks, regional rural banks (RRBs), small finance banks, NBFCs, and microfinance institutions (MFIs), that disburse loans to micro-enterprise borrowers. The scheme covers manufacturing, trading, and service sector activities, but explicitly excludes farm and agricultural activities (which fall under schemes like Kisan Credit Card).
The legal framework for MUDRA was established through a notification by the Department of Financial Services (DFS), Ministry of Finance. MUDRA Ltd operates as a refinance institution registered with the Reserve Bank of India. The scheme is monitored at the national level by a steering committee chaired by the Secretary, DFS, with quarterly progress reviews published on the official MUDRA portal.
MUDRA stands for Micro Units Development and Refinance Agency Ltd. It is a wholly-owned subsidiary of SIDBI (Small Industries Development Bank of India), registered with the RBI. The implementing ministry is the Department of Financial Services (DFS), Ministry of Finance, Government of India.
Three Categories of MUDRA Loans: Shishu, Kishor, and Tarun
MUDRA loans are structured into three categories based on the growth stage and funding requirement of the borrower's enterprise. Each category has a defined loan amount range, and borrowers can progress from one category to the next as their business grows. Understanding which category fits your requirement is the first step in the application process.
| Parameter | Shishu | Kishor | Tarun |
|---|---|---|---|
| Loan Amount | Up to ₹50,000 | ₹50,001 to ₹5,00,000 | ₹5,00,001 to ₹10,00,000 |
| Target Stage | Startup / Early stage | Expansion stage | Growth / Scale-up stage |
| Collateral Required | None | None | None |
| Interest Rate (Typical) | 7.30% - 10% p.a. | 8.50% - 11% p.a. | 9% - 12% p.a. |
| Repayment Tenure | Up to 5 years | Up to 5 years | Up to 5-7 years |
| Processing Fee | Nil at most banks | 0.50% - 1% of loan amount | 0.50% - 1% of loan amount |
| Business Plan Required | Basic activity description | Detailed project report | Detailed project report |
| MUDRA Card Issued | No (typically) | Yes | Yes |
| Typical Approval Time | 7-10 working days | 15-20 working days | 20-30 working days |
| Best For | Street vendors, artisans, home-based businesses | Small shops, service units, micro-manufacturing | Established units needing equipment or expansion capital |
Shishu Loans: For First-Time Entrepreneurs
Shishu loans up to ₹50,000 are designed for individuals starting a business for the first time or running a very small enterprise. These loans have the simplest documentation requirements: Aadhaar, PAN card, one passport-size photograph, and a basic description of the proposed business activity. Most public sector banks charge no processing fee for Shishu loans. The approval process is faster because the amount is small and covered under the Credit Guarantee Fund for Micro Units (CGFMU), which provides credit guarantee coverage to lenders for Shishu loans, reducing their risk.
Kishor Loans: For Business Expansion
Kishor loans between ₹50,001 and ₹5 lakh target businesses that have been operational for at least 6-12 months and need capital for expansion. This could include purchasing additional inventory, upgrading equipment, hiring employees, or expanding to a second location. Banks require a project report or business plan for Kishor applications, along with 6 months of bank statements showing business transactions. Borrowers in this category receive a MUDRA Card (RuPay debit card) for flexible working capital withdrawal.
Tarun Loans: For Established Businesses
Tarun loans between ₹5,00,001 and ₹10 lakh are for established micro-enterprises with a proven track record. These loans fund significant capital expenditure: commercial vehicles, heavy machinery, shop renovation, or major inventory purchases. Banks conduct more thorough due diligence for Tarun applications, including business premises verification, revenue assessment, and credit score evaluation. Despite the higher scrutiny, no collateral is required.
Eligibility Criteria for PM MUDRA Loan 2026
MUDRA loan eligibility is intentionally broad to cover the widest possible range of micro-enterprise borrowers. The scheme is not limited to any specific caste, religion, gender, or geography. Here are the specific eligibility conditions.
Who Can Apply
- Indian citizens aged 18 years or above running or planning to start a non-farm income-generating activity
- Proprietorship firms operated by individuals (sole proprietorship registration strengthens the application)
- Partnership firms engaged in manufacturing, trading, or service activities
- Private limited companies and LLPs classified as micro enterprises with annual turnover under ₹5 crore
- Self-Help Groups (SHGs) and Joint Liability Groups (JLGs) seeking business credit
- Service sector units: beauty parlours, tailoring shops, taxi operators, repair workshops, food stalls, gyms, tutoring centres, courier services, laundry shops, and IT service providers
- Manufacturing units: small-scale manufacturers, artisans, handicraft producers, food processing units, and textile units
- Trading units: shopkeepers, vendors, hawkers, and small retailers
Who Cannot Apply
- Existing loan defaulters with any bank or financial institution
- Individuals with CIBIL score below 650 (for Kishor and Tarun categories)
- Corporate entities and large enterprises
- Agricultural and farming activities (covered under Kisan Credit Card and allied schemes)
- Businesses with annual turnover exceeding ₹10 crore
- Wilful defaulters listed by any bank or the RBI
- Borrowers with pending criminal proceedings related to financial fraud
While Shishu loans (up to ₹50,000) are approved with minimal credit checks, Kishor and Tarun category loans require a CIBIL score of 650 or above. Check your credit score before applying. If your score is below 650, clear any outstanding dues and wait 3-6 months for the score to improve before submitting your MUDRA loan application.
Documents Required for MUDRA Loan Application
Documentation requirements vary by loan category. Shishu loans require the least paperwork, while Tarun loans require the most detailed documentation. Here is the complete document checklist for each category.
| Document | Shishu | Kishor | Tarun |
|---|---|---|---|
| Identity Proof (Aadhaar/PAN/Voter ID) | Required | Required | Required |
| Address Proof | Required | Required | Required |
| Passport-Size Photographs | 2 copies | 2 copies | 2 copies |
| Business Plan / Project Report | Basic activity description | Required | Required (detailed) |
| Bank Statements (6 months) | Not required | Required | Required |
| Proof of Business (GST/Udyam/Licence) | Optional but helpful | Required | Required |
| Machinery/Equipment Quotation | Not applicable | If purchasing equipment | Required for asset purchase |
| Income Tax Returns | Not required | Last 1-2 years if available | Last 2 years required |
| Category Certificate (SC/ST/OBC) | If applicable | If applicable | If applicable |
| Existing Loan Details | If any | Required | Required |
While not mandatory for Shishu loans, having an Udyam registration certificate significantly improves your application credibility for Kishor and Tarun loans. Udyam registration is free, takes 10 minutes online, and formally classifies your business as a micro enterprise under the MSME Development Act, 2006.
How to Apply for a PM MUDRA Loan: Step-by-Step Process
There are three channels to apply for a MUDRA loan: directly at a bank branch, through the Udyamimitra online portal, or through a participating NBFC or microfinance institution. Here is the step-by-step process for each route.
Channel 1: Apply at a Bank Branch
- Identify a participating bank: Visit any branch of a public sector bank (SBI, PNB, Bank of Baroda, Canara Bank, Union Bank), private bank (HDFC, ICICI, Axis), RRB, or small finance bank near your business location
- Request the MUDRA loan application form: Banks provide a standard application form. Specify whether you are applying under Shishu, Kishor, or Tarun category
- Submit documents: Attach all required documents listed above along with the completed application form
- Bank verification: The bank verifies your documents, checks your CIBIL score (for Kishor and Tarun), and may visit your business premises
- Loan sanction and disbursement: Upon approval, the loan is sanctioned and the amount is credited to your bank account. For Kishor and Tarun, a MUDRA Card is also issued
Channel 2: Apply Online Through Udyamimitra Portal
- Visit udyamimitra.in and register with your Aadhaar number and mobile
- Select "MUDRA Loan" from the loan products section
- Fill in your business details, loan amount required, and preferred loan category
- Upload scanned copies of all required documents
- The portal matches your application with participating banks and NBFCs in your area
- Matched lenders review your application and contact you directly for further processing
Channel 3: Apply Through NBFCs and MFIs
NBFCs and microfinance institutions are particularly active in disbursing Shishu category loans in semi-urban and rural areas. Institutions like Bajaj Finserv, Muthoot Fincorp, Arohan Financial Services, and Bandhan Bank process MUDRA loans with minimal paperwork. The advantage of the NBFC route is speed: many NBFCs approve Shishu loans within 3-5 working days compared to 7-10 days at bank branches.
Register Your Business Before Applying
A formal business registration strengthens your MUDRA loan application. IncorpX handles proprietorship and company registration from start to finish.
Register Your ProprietorshipInterest Rates and Repayment Terms in 2026
One of the most common questions about MUDRA loans is the interest rate. Unlike schemes where the government fixes a subsidised rate, MUDRA loan interest rates are determined by individual lending institutions. The government does not prescribe a specific rate. However, since MUDRA Ltd provides refinance at concessional rates to lending institutions, borrower-facing rates are generally lower than standard unsecured business loans.
Current Interest Rate Ranges (2026)
| Lender Type | Shishu Rate | Kishor Rate | Tarun Rate |
|---|---|---|---|
| Public Sector Banks (SBI, PNB, BOB) | 7.30% - 8.60% | 8.50% - 10% | 9% - 11% |
| Private Banks (HDFC, ICICI, Axis) | 8% - 9.50% | 9% - 11% | 10% - 12% |
| Small Finance Banks | 8% - 10% | 9.50% - 11.50% | 10% - 12% |
| NBFCs and MFIs | 9% - 12% | 10% - 12% | 10.50% - 12% |
Women borrowers, SC/ST applicants, and borrowers in aspirational districts may receive concession of 0.25% to 0.50% at public sector banks. Always compare rates from at least 3 lenders before finalising your application. The rate quoted in the sanction letter is the binding rate for your loan.
Repayment Structure
MUDRA loans follow a standard Equated Monthly Instalment (EMI) repayment structure. The EMI is calculated based on the principal amount, interest rate, and tenure. For example, a Tarun loan of ₹10 lakh at 10% interest for 5 years results in an EMI of approximately ₹21,247 per month. For Kishor and Tarun borrowers with a MUDRA Card, working capital usage is on a revolving credit basis, where interest is charged only on the amount drawn.
Banks may offer a moratorium period of 3-6 months for new businesses, during which only interest is payable and principal repayment is deferred. This moratorium must be requested at the time of application and is subject to the bank's credit policy.
MUDRA Card: How It Works and Who Gets It
The MUDRA Card is a RuPay-based debit card that functions as a flexible credit line for Kishor and Tarun category borrowers. It is one of the most underused but valuable features of the PMMY scheme.
How the MUDRA Card Works
When a Kishor or Tarun loan is sanctioned, the bank may allocate a portion of the loan (typically 10-20% of the sanctioned amount) as a working capital limit accessible through a MUDRA Card. The borrower can withdraw funds from any ATM as and when needed for business operations. Interest is charged only on the amount actually withdrawn, not on the full sanctioned limit. The withdrawn amount can be repaid and re-drawn within the sanctioned limit, making it a revolving credit facility.
MUDRA Card Benefits
- Flexible withdrawal: Draw working capital as needed instead of receiving a lump sum
- Lower interest cost: Interest accrues only on the drawn amount, not the full sanction
- ATM access: Withdraw from any bank ATM across India using the RuPay card
- Reduced over-borrowing: Businesses draw only what they need, maintaining financial discipline
- Digital transactions: The card can also be used for POS purchases and online business payments
MUDRA Cards are issued to Kishor and Tarun category borrowers only. Shishu loan borrowers receive the full loan amount as a one-time disbursement into their bank account. Not all banks issue MUDRA Cards automatically. Request the card specifically during your loan application if you want the working capital flexibility.
PMMY Disbursement Statistics and Impact
The PMMY scheme is one of the largest financial inclusion programmes globally by loan volume. The disbursement numbers demonstrate the scale and reach of the programme since its launch in April 2015.
| Financial Year | Loans Sanctioned (Crore) | Amount Disbursed (₹ Lakh Crore) |
|---|---|---|
| 2015-16 | 3.49 | 1.32 |
| 2016-17 | 3.97 | 1.80 |
| 2017-18 | 4.81 | 2.54 |
| 2018-19 | 5.99 | 3.21 |
| 2019-20 | 6.22 | 3.37 |
| 2020-21 | 5.07 | 3.11 |
| 2021-22 | 5.37 | 3.39 |
| 2022-23 | 6.04 | 4.68 |
| 2023-24 | 6.20 | 5.40 |
Category-wise distribution shows that Shishu loans account for the highest volume (over 80% of total loan accounts) but only about 35-40% of total disbursement value. Tarun loans, while fewer in number, account for the largest share of disbursed amount due to the higher ticket size. This distribution reflects the pyramid structure of Indian micro-enterprise, with a large base of very small businesses and a smaller number of growth-stage units.
Key Impact Metrics
- Over 68% of all MUDRA loans have been disbursed to women borrowers
- SC/ST borrowers account for approximately 33% of total accounts
- Over 28% of loans have gone to new entrepreneurs (first-time borrowers)
- The average Shishu loan size is approximately ₹25,000-₹30,000
- The scheme covers all 36 states and union territories with presence in over 600 districts
MUDRA Loan vs Other Government Business Loan Schemes
Multiple government schemes provide credit to small businesses. Understanding how MUDRA compares to alternatives helps you identify the right programme for your specific funding requirement.
| Parameter | MUDRA (PMMY) | CGTMSE | Stand-Up India | PM SVANidhi |
|---|---|---|---|---|
| Loan Amount | Up to ₹10 lakh | Up to ₹5 crore | ₹10 lakh to ₹1 crore | ₹10,000 to ₹50,000 |
| Target Borrower | Micro enterprises | MSMEs | SC/ST and women | Street vendors |
| Collateral | None | None (guarantee cover) | None | None |
| Interest Subsidy | No direct subsidy | No direct subsidy | No direct subsidy | 7% interest subsidy |
| Business Type | Non-farm micro enterprises | Manufacturing and service MSMEs | Greenfield enterprises only | Street vending only |
| Disbursement Channel | Banks, NBFCs, MFIs | Banks (with CGTMSE cover) | Scheduled commercial banks | Banks, NBFCs, MFIs |
| Best For | New and small businesses needing ₹50K-₹10L | MSMEs needing ₹10L-₹5Cr without collateral | SC/ST or women starting new manufacturing/service units | Licensed street vendors needing working capital |
If your funding requirement exceeds ₹10 lakh, the CGTMSE scheme offers collateral-free credit up to ₹5 crore through a credit guarantee mechanism. If you are an SC/ST or woman entrepreneur starting a greenfield enterprise, Stand-Up India provides loans from ₹10 lakh to ₹1 crore. For street vendors, PM SVANidhi offers micro-credit with interest subsidy. These schemes are complementary, and a borrower can hold loans from multiple schemes simultaneously, provided each loan serves a different purpose.
Get MSME Registration for Better Loan Terms
Udyam-registered businesses receive priority processing and preferential rates on MUDRA loans. IncorpX completes your registration in one working day.
Apply for MSME RegistrationTips to Improve Your MUDRA Loan Approval Chances
While MUDRA loans are designed for easy access, applications do get rejected. Banks reject MUDRA loan applications due to incomplete documentation, poor credit history, or an unconvincing business plan. Here are specific actions that improve your approval probability.
Before You Apply
- Check your CIBIL score: For Kishor and Tarun loans, maintain a score of 700+ for smooth approval. Scores between 650-700 may face additional scrutiny. Below 650, your application will likely be rejected
- Register your business formally: Get a proprietorship registration, Udyam certificate, and GST registration. Formal registrations prove business legitimacy
- Maintain clean bank statements: Ensure your business account shows regular transactions for at least 6 months. Erratic deposits and withdrawals raise red flags
- Clear existing dues: Pay off any pending EMIs, credit card dues, or overdue payments before applying. Outstanding defaults are the primary reason for MUDRA loan rejections
During the Application
- Prepare a clear project report: For Kishor and Tarun loans, submit a project report that explains what the money will be used for, expected revenue, and repayment capacity. Banks need to see that your business can generate enough cash flow to service the EMI
- Apply at multiple lenders: Do not restrict your application to one bank. Apply at 2-3 banks simultaneously (this is permitted). Different banks have different credit appetites and approval criteria
- Choose the right category: Apply for only what you need. Requesting a Tarun loan (₹5-10 lakh) when your business only needs ₹2 lakh raises questions about repayment capacity and may result in rejection
- Visit the branch in person: For Kishor and Tarun applications, visiting the branch and speaking directly to the branch manager or loan officer helps. Personal interactions clarify doubts and accelerate processing
The top 5 reasons for MUDRA loan rejection are: (1) CIBIL score below 650, (2) incomplete or mismatched documents, (3) no clear business plan or revenue model, (4) existing loan defaults or overdue payments, and (5) applying for an amount disproportionate to business size. Address these before submitting your application.
MUDRA Loan for Different Business Types
MUDRA loans cover a wide spectrum of non-farm business activities. Here is how the loan applies to specific business categories that entrepreneurs commonly ask about.
MUDRA Loan for Shopkeepers and Retailers
Shopkeepers can use MUDRA loans for inventory purchase, shop renovation, display setup, or working capital. A grocery store owner needing ₹3 lakh for festive season inventory can apply under the Kishor category. The loan is repaid through monthly EMIs from business revenue. Having a valid shop and establishment licence and GST registration strengthens the application.
MUDRA Loan for Food Business
Food stall operators, tiffin service providers, restaurant owners, and cloud kitchen operators are all eligible. A food business owner can use a Tarun loan of ₹8 lakh for commercial kitchen equipment, refrigeration units, or delivery vehicle purchase. The FSSAI food licence is required for food business applications.
MUDRA Loan for Transport and Vehicle Purchase
Auto-rickshaw operators, taxi drivers, goods transport operators, and e-rickshaw buyers can use MUDRA loans for vehicle purchase. Under the Tarun category, a borrower can purchase a commercial vehicle worth up to ₹10 lakh. The vehicle itself serves as a hypothecated asset (not collateral), and the loan tenure may extend to 7 years for vehicle financing.
MUDRA Loan for Service Providers
Beauty parlours, salons, tailoring units, laundry services, repair shops, tutoring centres, and IT freelancers all qualify under MUDRA. A salon owner needing ₹2 lakh for equipment and interior work can apply under Kishor. The key is demonstrating that the service generates regular income to service the loan EMI.
MUDRA Loan for Manufacturing Units
Small-scale manufacturers, handicraft artisans, handloom weavers, and food processing units can use Tarun loans for machinery, raw material, or production facility setup. Having an Udyam registration classifying the unit as a micro-manufacturing enterprise is strongly recommended for manufacturing loan applications.
Common Process Questions
Beyond business-specific details, borrowers frequently have questions about specific eligibility scenarios. Here are the answers to the most common process-related queries.
Can Salaried Individuals Apply for MUDRA Loans?
No. MUDRA loans are exclusively for self-employed individuals and business owners. If you are a salaried employee, you are not eligible. However, if you are planning to leave employment and start a business, you can apply after resignation. You must demonstrate the intent and preparedness to run a business at the time of application.
Can I Use a MUDRA Loan for Working Capital Only?
Yes. MUDRA loans can be used for both term loans (equipment, machinery, setup) and working capital (inventory, raw materials, operational expenses). Many borrowers use the MUDRA Card feature specifically for working capital needs, drawing funds as required and repaying from business revenue.
Is There a Subsidy on MUDRA Loans?
There is no direct interest subsidy on MUDRA loans from the central government. However, some state governments offer interest subvention of 2-3% on MUDRA loans for specific categories like women entrepreneurs, SC/ST borrowers, or businesses in backward districts. Check your state's MSME department website for applicable subsidies.
Can NRIs Apply for MUDRA Loans?
No. MUDRA loans are available only to Indian citizens residing in India. NRIs, PIOs, and OCIs are not eligible. The business activity must be located in India and operated by the borrower personally. If an NRI wishes to fund a business in India, they must explore other FEMA-compliant investment routes.
Start Your Business with the Right Structure
Whether you choose a proprietorship, partnership, or private limited company, IncorpX sets up the right legal structure for your MUDRA-eligible business.
Register Your CompanySummary: Applying for PM MUDRA Loan in 2026
The PM MUDRA Yojana remains one of the most accessible government credit programmes for micro-entrepreneurs in India. With no collateral requirement, three clear loan categories, and availability across banks, NBFCs, and MFIs nationwide, the scheme removes the primary barrier to small business funding: the need for property or security. Over 47 crore loans and ₹27.75 lakh crore in disbursements since 2015 prove that the system works at scale. Your path forward is clear: identify whether you need a Shishu, Kishor, or Tarun loan, gather the required documents, check your CIBIL score, register your business formally through proprietorship registration or company incorporation, get your Udyam certificate, and apply at 2-3 participating lenders simultaneously. If you are a first-time entrepreneur, start with a Shishu loan to build your credit history and graduate to higher categories as your business grows. The capital is available. The framework is in place. The next step is yours.
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