Mudra Loan Yojana

All About Pradhan Mantri Mudra Loan Yojana (PMMY)

Mudra loan of Pradhan Mantri Mudra Yojana is a Government of India undertaking designed to meet the financing needs of non-corporate small business units of the country. The idea is to provide financial support for small business which employ majority of the Indian working population.

A Bit of Details About Mudra Loan

Under Mudra Loan Yojana, the government has come up with a 3-teir loan structure targeted towards different businesses depending on the size and stage of the business. The three tiers of this Yojana are:

Mudra Loan Card

  • SHISHU Loan offering financial support of up to INR 50,000.
  • KISHOR Loan offering financial support of amount ranging between INR 50,000 and INR 500,000.
  • TARUN Loan offering financial support of amount ranging between INR 500,000 and INR 10,00,000.

SHISHU loan is designed for startups while the KISHOR loan is designed for businesses who have already started up and require financial help for establishing themselves. The TARUN loan is designed for those business which are already established but require financial help for expansion of the business.

Eligibility Criteria for Mudra Loan for Applicants and Loaners

All non-farming micro business that generate income and are in need of monetary aid below or up to INR 10 lakh can apply for this loan under the Pradhan Mantri Mudra Yojana that has been launched under Micro Units Development and Refinancing Agency scheme.

The participating banks, i.e. banks that are willing to offer Mudra loan have strict eligibility criteria. Public Sector Banks, Public Sector Banks, State Co-operative Banks, Micro Finance Institutions, Non-Banking Financial Companies and Regional Rural Banks are allowed to participate and offer the Mudra loan. However, they all need to ensure:

  • They have profit records for 3 years straight.
  • They have NPAs less than 3% or 3%.
  • They have CRAR of at least 9%.
  • They have net worth of at least 100 crores.

Unless these requirements are met by banks and non-banking companies, they will not be eligible for offering Mudra Loan to anyone.

Method for Taking Out a Mudra Loan

In order to take out a Mudra Loan, an applicant (i.e. a borrower) needs to first identify his or her nearest bank offering the loan and visit personally along with a business plan. Loan application is to be submitted along with a comprehensive business plan, identity proof, address proof and passport photographs. Once all paper documentations are completed, the bank will review the business plan and the need. If approved, the bank will sanction the loan.

Mudra – Key Features

  • Micro unit development & refinance agency ltd. popularly known as Mudra has set up by the Indian government to support the micro business and start ups. It is a refinancing agency and not a direct financial institution.
  • Mudra is a common platform where financial institutions such as banks, RRBs, MFIs, NBFCs will meet the applicants who are willing to set up their micro and small enterprises.
  • The Mudra was set up and announced by the Finance Minister of India during the budget announcement of financial year 2016.
  • Mudra is also associated with a government scheme namely Pradhan Mantri Mudra Yojana, under which the applicants can apply for the loan for their small and micro enterprises.
  • Mudra will provide financial supports to only those enterprises which are non-corporate small business segments. Under these segments there can be sole proprietors, partnership firms, manufacturers, machinery business and many more can be considered.

Aim of Mudra

  • The main objective of setting up Mudra is to provide financial assistance to the non-corporate small businesses. The government of India has already started a number of schemes that provide financial and technical support to the start ups and small businesses. Mudra is a way to support the micro sector of the country.
  • Small businesses like food service, artisans, vendors and other micro businesses both in urban and rural areas will be boosted up by the assistance Mudra is providing. These sectors are often get avoided by the government but a lot of people are depending on these. Mudra will take a step forward to encourage the sectors from now on.
  • Mudra will connect the financial institutions with the common people who are in need of loans for their micro enterprises. Through this Mudra can be liquefy the money into more channels especially in rural areas.

Implementation / Functions of Mudra

Mudra acts as a loan facilitator under the scheme namely Pradhan Mantri Mudra Yojana. In Mudra they have already set up a three tier loan facility depending upon the requirement. There are three stages of growth that Mudra has identified. Based on these growth stages Mudra will help one to acquire loans.

  • Stage 1: Shishu (Kid): It is the lowest stage of the business where your enterprise is tiniest. Under this stage the loan amount is up to Rs. 50, 000/-
  • Stage 2: Kishor (Young): In second stage, a little more growth has already happened to your enterprise Mudra will lend you loan ranging from Rs. 50, 000/- to Rs. 5 Lac.
  • Stage 3: Tarun (Adult): Under this stage, the loan amount will be Rs. 5 Lac to Rs. 10 Lac for the micro enterprise that is in good shape and growing more.

As mentioned that Mudra is not a direct financial institute which provides loan. Mudra primarily channelizes the loan to the leading financial agencies like Banks, RRBs, NBFCs, MFIs and etc. Mudra has also tied up with other trusts, industries, financial institutions and other sectors which provide informal loans to the micro enterprises.

Businesses and Mudra

To avail the Mudra loan there must be some rules that one needs to keep in his mind. Mudra does not support any start ups in India. The start up must be a non-corporate micro or small segment. The fields in which an applicant can start their business and can avail loans under Mudra are as follows:

Food service units, truck operators, vegetable and fruit vendors, repair shops, fashion store, artisans, small industries, food processor units, shopkeepers, service sector units, potters, carpentry, RO water purifier and such are the fields of businesses that are eligible for the Mudra Loans. Manufacturing, processing and trading related to these fields can be financed by Mudra under Pradhan Mantri Mudra Yojana.

Eligibility of Mudra Loans

To avail Mudra loans under PMMY one has to follow some eligibility criteria. The rules are as follows:

  • The applicant must be an Indian citizen, above 18 years old and has to have a business plan to show. The business plan must contain the structure, investment plans, nature of product, marketing and future results as well.
  • The nature of industry should be non-farm earning activity related and needs investment of not more than Rs. 10 Lac. Other regulations will be same as the RBI guidelines and PMMY rules.
Mudra LoansAvailable under Pradhan Mantri Mudra Yojana
BeneficiariesSmall and micro enterprises
AimTo encourage micro segments
Interest RatesAs per RBI guideline



Pm Modi have declared that Mudra Yojana have created around 1 Lakh self jobs. These People have further created many jobs. But since these jobs usually do not get registered and thus are not showing in stats.

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