Introduction
In India, small businesses, micro-enterprises, and budding entrepreneurs play a vital role in driving the economy. However, one of the biggest challenges for these businesses is access to affordable credit. Under this scheme, Mudra Loans are offered to small business owners, shopkeepers, street vendors, traders, artisans, and micro-industrial units.
This scheme has helped millions of individuals get the financial support they need to start or grow their businesses without depending on informal moneylenders. In this article, we will explore the full details of the PM Mudra Loan Scheme, its types, eligibility, benefits, documents required, and how to apply step by step.
What is the PM Mudra Loan Scheme?
It provides loans up to ₹10 lakh to non-corporate, non-farm small and micro-enterprises.
The primary aim is to empower individuals and small businesses by giving them access to institutional credit for business-related activities such as:
- Starting a small shop or business
- Expanding an existing enterprise
- Purchasing equipment, machinery, or tools
- Working capital needs
- Service sector or trading activities
Objectives of the Scheme
The PM Mudra Loan Scheme was launched with some clear objectives:
- Financial Inclusion – To bring small entrepreneurs into the formal banking system.
- Empowering Youth & Women – Encourage young people and women entrepreneurs to become self-reliant.
- Boost to MSMEs – Strengthen the backbone of India’s economy by supporting micro and small industries.
- Reduction in Informal Lending – Reduce dependency on private moneylenders who often charge very high interest.
- Employment Creation – Support self-employment and generate new jobs.
Types of Mudra Loans
Mudra Loans are categorized into three types based on the stage of business and funding requirement:
- Shishu Loan
- Loan amount: Up to ₹50,000
- Best for: New entrepreneurs and very small businesses just starting.
- Example: Street vendors, small shopkeepers, and startup owners.
- Kishor Loan
- Loan amount: ₹50,001 – ₹5,00,000
- Best for: Businesses looking to expand or upgrade.
- Example: A small trader expanding inventory, or a workshop upgrading tools.
- Tarun Loan
- Loan amount: ₹5,00,001 – ₹10,00,000
- Best for: Established businesses wanting larger investments.
- Example: Manufacturing units purchasing machinery, service providers expanding branches.
Eligibility Criteria
To apply for a Mudra Loan, you must meet the following conditions:
- Must be an Indian citizen.
- Age limit: 18 to 65 years.
- Loan can be availed by:
- Small manufacturing units
- Shopkeepers and traders
- Service providers (salons, gyms, repair shops, etc.)
- Truck/taxi operators
- Food businesses (restaurants, food stalls, etc.)
Documents Required
Applicants need to provide the following documents:
- Address Proof – Aadhaar, Passport, Utility Bills, Ration Card.
- Business Proof – Business license, GST registration, shop act license, etc.
- Bank Statements – Last 6 months.
- Passport Size Photographs.
- For larger loans (Kishor/Tarun) – Detailed project report or business plan.
How to Apply for a Mudra Loan?
1. Online Application
You can apply online for a Mudra Loan through:
- mudra.org.in (MUDRA official website)
- Government portals like JanSamarth Portal
Steps:
- Visit the chosen bank’s Mudra Loan section.
- Download and fill the Mudra Loan Application Form.
- Upload required documents.
- Submit your business plan/project report if needed.
- Bank verifies details and sanctions the loan.
2. Offline Application
- Visit the nearest bank branch offering Mudra Loans (almost all public & private banks, regional rural banks, small finance banks, and MFIs participate).
- Collect the Mudra Loan form.
- Fill in personal and business details.
- Attach necessary documents.
- Submit to the loan officer.
- Once verified, the loan is approved and credited to your account.
Features of the PM Mudra Loan Scheme
- Loan Amount: ₹50,000 to ₹10,00,000
- No collateral required (unsecured loan).
- Interest rate: Varies between 8% – 12% depending on the bank and applicant’s profile.
- Flexible repayment tenure: Up to 5 years.
- Women entrepreneurs may get special concessions.
- Credit Guarantee: Loans are covered under CGFMU (Credit Guarantee Fund for Micro Units).
- Mudra Loan comes with a Mudra Debit Card for easy withdrawals.
Benefits of Mudra Loan
- Easy Access to Credit – No need for heavy collateral.
- Support for Startups & Small Traders – Encourages new businesses to grow.
- Low Interest Rates compared to private moneylenders.
- Flexible Repayment – Suitable for small entrepreneurs with variable income.
- Government-Backed Security – Increases trust between lenders and borrowers.
- Encourages Self-Employment – Helps reduce unemployment.
- Special Focus on Women – Promotes women entrepreneurship with reduced interest rates.
Who Can Benefit from Mudra Loans?
- Street vendors & small traders
- Shopkeepers & retail stores
- Food businesses (restaurants, stalls, tiffin services)
- Small manufacturing units
- Service providers like salons, tailoring shops, mechanics
- Transport services (auto, taxi, goods carriers)
- Artisans and craftsmen
Common FAQs
1. Is collateral required for Mudra Loans?
No, Mudra Loans are unsecured loans.
2. Can students apply for Mudra Loan?
Yes, if they are 18+ and starting a business.
3. What is the repayment period?
Generally 3 to 5 years, depending on the loan type.
4. Which banks provide Mudra Loans?
All public sector banks, private banks, regional rural banks, small finance banks, cooperative banks, and micro-finance institutions.
5. Is CIBIL score important?
A good CIBIL score helps but is not always mandatory for small loans.
Conclusion
The PM Mudra Loan Scheme is a landmark initiative by the Government of India to empower small businesses and entrepreneurs. Whether you are a street vendor, shopkeeper, trader, or running a small service unit, Mudra Loans can give you the much-needed financial support to start or expand your business.