Mudra Loan Scheme 2026: Complete Guide to PMMY (Shishu, Kishore, Tarun)

Starting or expanding a small business in India often runs into one major hurdle — access to affordable credit. Traditional bank loans demand collateral, extensive documentation, and a proven track record that most micro-entrepreneurs simply do not have. The Pradhan Mantri Mudra Yojana (PMMY), commonly known as the Mudra Loan scheme, was launched in 2015 to address exactly this problem. Since its inception, over 40 crore loans totalling more than Rs 23 lakh crore have been disbursed — making it one of the largest small business lending programmes in the world.

What is the Mudra Loan Scheme (PMMY)?

PMMY is a Government of India initiative under which banks, NBFCs, and Micro Finance Institutions (MFIs) provide loans up to Rs 10 lakh to non-corporate, non-farm small and micro enterprises. The scheme is managed by MUDRA (Micro Units Development and Refinance Agency), a subsidiary of SIDBI (Small Industries Development Bank of India).

The key highlight: Mudra Loans are collateral-free. No property, fixed deposit, or third-party guarantee is required. The government provides a credit guarantee through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which encourages banks to lend without security.

Three Categories: Shishu, Kishore, and Tarun

Mudra Loans are divided into three categories based on the business stage and loan amount needed:

1. Shishu (Up to Rs 50,000)

Designed for new businesses or those in the very early stage. If you are starting a small shop, tea stall, tailoring unit, or service business, Shishu is your entry point.

    - **Loan amount:** Up to Rs 50,000
    - **Interest rate:** Typically 10–12% per annum (varies by lender)
    - **Repayment tenure:** Up to 5 years
    - **Collateral:** None required
    - **Processing fee:** Nil or minimal
  
  

Shishu loans have the highest approval rate because the amounts are small and the risk to the bank is limited. Approximately 60% of all Mudra loans fall in this category.

2. Kishore (Rs 50,001 to Rs 5,00,000)

For businesses that are already established and need funds to expand — buying equipment, hiring staff, increasing inventory, or adding a new product line.

    - **Loan amount:** Rs 50,001 to Rs 5,00,000
    - **Interest rate:** Typically 11–15% per annum
    - **Repayment tenure:** Up to 7 years (for term loans)
    - **Collateral:** None required
    - **Processing fee:** 0.50% of loan amount (varies)
  
  

Kishore loans require slightly more documentation than Shishu — banks want to see that the business is operational and generating revenue.

3. Tarun (Rs 5,00,001 to Rs 10,00,000)

For well-established micro businesses ready for significant expansion. This could mean opening a second location, purchasing heavy equipment, or major working capital needs.

    - **Loan amount:** Rs 5,00,001 to Rs 10,00,000
    - **Interest rate:** Typically 12–16% per annum
    - **Repayment tenure:** Up to 7 years
    - **Collateral:** None required
    - **Processing fee:** 0.50–1% of loan amount
  
  

Tarun loans face the most scrutiny. Banks evaluate business financials, past repayment history (if any previous loans), and the viability of the expansion plan. A brief business plan or project report is usually required.

Eligibility Criteria for Mudra Loan

Mudra Loans have relatively relaxed eligibility criteria compared to traditional business loans:

    - **Age:** 18 to 65 years
    - **Business type:** Any non-farm income-generating activity including manufacturing, trading, services, and allied agriculture activities (food processing, poultry, dairy, fishery, etc.)
    - **Business stage:** Both new and existing businesses qualify
    - **Entity type:** Sole proprietorship, partnership, private limited company, LLP, or individuals
    - **Turnover limit:** Annual turnover should not exceed Rs 1.5 crore (above this, you would need a regular MSME loan)
    - **No collateral needed:** The loan is unsecured
  
  

Importantly, there is no minimum CIBIL score requirement specified by the government for Mudra Loans. However, individual banks may apply their own credit assessment criteria. A CIBIL score above 650 improves your chances significantly. If you have past loan defaults or are a wilful defaulter, your application will likely be rejected.

Documents Required for Mudra Loan

Documentation requirements vary by category and lender, but here is the general list:

For Shishu Loans

    - Completed application form
    - PAN card and Aadhaar card
    - 2 passport-size photographs
    - Proof of business existence (Udyam registration, shop licence, GST registration, or even a self-declaration for very small businesses)
    - Quotation for machinery/equipment (if applicable)
  
  

For Kishore and Tarun Loans

    - All documents listed above for Shishu, plus:
    - Business plan / project report (for Tarun, this is usually mandatory)
    - Last 2 years' ITR and financial statements (if available)
    - 6–12 months' bank statements of the business account
    - GST returns for the last 12 months
    - Proof of business address (rent agreement, utility bill)
    - Udyam / MSME registration certificate
  

  

How to Apply for a Mudra Loan

You can apply for a Mudra Loan through multiple channels:

1. Through Banks

All public sector banks (SBI, Bank of Baroda, PNB, etc.), most private banks (HDFC, ICICI, Axis), and Regional Rural Banks offer Mudra Loans. Visit the nearest branch with your documents. SBI alone has disbursed over Rs 3 lakh crore in Mudra Loans to date.

2. Through NBFCs and MFIs

Non-Banking Financial Companies and Micro Finance Institutions also disburse Mudra Loans. These are often more accessible in rural and semi-urban areas.

3. Online via Udyamimitra Portal

The government's Udyamimitra portal (www.udyamimitra.in) allows you to apply for Mudra Loans online. You can submit your application and choose from multiple lenders. The portal also shows your application status.

4. Through a DSA / Loan Agent

Agents like Money Matrix Hub can help you apply to the right lender and prepare your documentation for higher chances of approval.

Mudra Loan Interest Rates 2026

Mudra Loan interest rates are not fixed by the government — each lending institution sets its own rate. However, here are the typical ranges in 2026:

      CategoryTypical Interest RateProcessing Fee
    
    
      Shishu (up to Rs 50K)10–12% p.a.Nil
      Kishore (Rs 50K–5L)11–15% p.a.0.50%
      Tarun (Rs 5L–10L)12–16% p.a.0.50–1%
    
  
  

Public sector banks generally offer lower rates than NBFCs and MFIs. Women entrepreneurs and SC/ST applicants may get preferential rates under specific sub-schemes.

Types of Mudra Loan: Term Loan vs Working Capital

Mudra Loans can be disbursed as:

    - **Term Loan:** For purchasing machinery, equipment, or other capital assets. Repaid in monthly EMIs over 3–7 years.
    - **Working Capital Loan (Cash Credit / Overdraft):** For day-to-day business expenses like inventory, raw materials, and operational costs. This is a revolving facility where you pay interest only on the amount used.
    - **Mudra Card:** A RuPay debit card linked to a working capital account. You can withdraw funds as needed at ATMs or use it for business purchases, providing flexibility similar to a credit card.
  

  

Special Sub-Schemes Under PMMY

    - **Mahila Udyami (Women Entrepreneurs):** Banks are encouraged to prioritise lending to women under Mudra. Some banks offer 0.25–0.50% lower interest rates for women borrowers.
    - **SC/ST/OBC Entrepreneurs:** Special allocation ensures adequate credit flow to entrepreneurs from reserved categories.
    - **Mudra for Agriculture-Allied Activities:** Food processing, dairy farming, poultry, fishery, and beekeeping qualify under Mudra even though direct farming does not.
  

  

Common Reasons for Mudra Loan Rejection

    - Poor CIBIL score (below 600) or history of loan defaults
    - Incomplete or inconsistent documentation
    - Business plan that does not demonstrate viability
    - Existing outstanding loans in default
    - Applying for a category (Kishore/Tarun) without sufficient business history
    - Business type not covered under Mudra (e.g., direct agriculture, non-income-generating activities)
  

  

Tips to Improve Your Mudra Loan Approval Chances

    - Register your business on the Udyam portal before applying — it strengthens your application
    - Start with a Shishu loan if you are a new business. Repay it on time, and applying for a Kishore loan becomes much easier
    - Prepare a clear, one-page business plan even for Shishu loans — it shows the bank you are serious
    - Maintain a separate bank account for business transactions
    - File GST returns and ITR regularly, even if your turnover is below the threshold
    - Approach public sector banks first — they have government mandates to disburse Mudra Loans and may be more flexible than private lenders
  

  

Conclusion

The Mudra Loan scheme is a game-changer for India's micro and small business ecosystem. Collateral-free loans of up to Rs 10 lakh with reasonable interest rates and minimal documentation make it accessible to millions of entrepreneurs who were previously shut out of formal credit markets. Whether you are starting a small kirana store, expanding a tailoring unit, or buying equipment for a food processing business, PMMY has a category for you.

If you are in Ahmedabad or Gujarat and need help applying for a Mudra Loan, contact Money Matrix Hub. We guide you through the process, help prepare your documents and business plan, and connect you with the right lender for your needs.

Talk to an advisor: Home loan in Ahmedabad · Business loan · Personal loan · Contact / WhatsApp