Mudra Loan (PMMY) — Complete Guide to Shishu, Kishore, and Tarun Schemes
The Pradhan Mantri Mudra Yojana (PMMY), launched on 8 April 2015, is a flagship government scheme to provide collateral-free institutional credit to micro and small enterprises across India. Managed by Micro Units Development and Refinance Agency Ltd (MUDRA), a subsidiary of SIDBI, the scheme has disbursed over Rs. 27 lakh crore to more than 47 crore loan accounts since its inception (as of March 2025). MUDRA itself does not lend directly — it provides refinancing support to banks, NBFCs, MFIs, and other lending institutions that provide MUDRA loans to end-borrowers.
Loan Categories
Shishu: Loans up to Rs. 50,000. For businesses in the nascent or startup stage. Lowest interest rates (typically 10-12 per cent per annum depending on the lending institution). No collateral, no processing fee for most banks. Most Shishu loans are sanctioned by MFIs and Regional Rural Banks.
Kishore: Loans from Rs. 50,001 to Rs. 5,00,000. For established micro-enterprises seeking growth capital. Requires a basic business plan and 6 months of bank statements. Interest rates typically 12-16 per cent depending on the lender and borrower profile. No collateral required.
Tarun: Loans from Rs. 5,00,001 to Rs. 10,00,000. For well-established enterprises needing expansion capital. Requires detailed business plan, 2 years of financial statements (if available), GST registration (if applicable), and Udyam Registration. Interest rates typically 14-17 per cent. No collateral, but some lenders may seek hypothecation of assets purchased from loan proceeds.
Tarun Plus: Loans from Rs. 10,00,001 to Rs. 20,00,000. Introduced in the Union Budget 2024 for borrowers who have successfully repaid a previous Tarun loan. This rewards responsible borrowing behaviour. Available through participating banks and NBFCs.
Eligibility Criteria
Any Indian citizen engaged in or planning to start a non-farm income-generating activity in manufacturing, trading, services, or allied activities with credit needs up to Rs. 20 lakh is eligible. Eligible entities include proprietorships, partnership firms, HUFs, LLPs, private limited companies, and individuals. The business must be a micro or small enterprise as defined under the MSME Development Act 2006 (amended by the Micro, Small and Medium Enterprises Development (Amendment) Act 2018) — investment in plant and machinery up to Rs. 1 crore and turnover up to Rs. 5 crore for micro, and investment up to Rs. 10 crore and turnover up to Rs. 50 crore for small.
Activities covered: food processing, textile, handicraft, tailoring, beauty parlour, repair shops, transport (auto rickshaw, taxi, goods carrier), trading (retail, wholesale), professional services, and all other non-farm income-generating activities. Agriculture and allied activities are excluded from MUDRA — they are covered under Kisan Credit Card (KCC) and other agricultural credit schemes.
Application Process
Step 1 — Prepare Documents: Identity proof (Aadhaar, PAN), address proof, business proof (GST certificate, Udyam Registration, Shops and Establishment certificate), bank statements (6-12 months if existing business), quotation for machinery or equipment (if seeking asset finance), and a basic business plan or project report (for Kishore and Tarun).
Step 2 — Choose Lending Institution: MUDRA loans are available through all public sector banks, private banks, regional rural banks, small finance banks, NBFCs, and MFIs. Compare interest rates, processing fees, and repayment terms across institutions. The Udyamimitra portal (www.udyamimitra.in) operated by SIDBI connects borrowers with lenders.
Step 3 — Apply: Submit application at the bank branch or online through the bank's portal. Some banks accept applications through the Udyamimitra portal or the Jan Samarth portal (www.jansamarth.in — the government's integrated credit portal). A Mudra Card (RuPay debit card) is issued for working capital loans, providing flexible drawdown and repayment.
Step 4 — Loan Processing: The bank verifies documents, conducts credit assessment (CIBIL score check for Kishore and Tarun), and may conduct a field inspection. Processing time: Shishu — 7-10 days, Kishore — 2-3 weeks, Tarun — 3-4 weeks.
Step 5 — Disbursement: Loan amount is credited to the borrower's bank account or the Mudra Card. For asset purchase (equipment, machinery), the bank may directly pay the supplier.
Interest Rates and Repayment
MUDRA does not prescribe a fixed interest rate — rates vary by lending institution and borrower profile. Indicative rates (as of 2025-26): Shishu 10-12 per cent, Kishore 12-16 per cent, Tarun 14-17 per cent. Public sector banks generally offer lower rates than NBFCs and MFIs. Repayment tenure: typically 3-5 years (term loan) or 12 months renewable (working capital). No prepayment penalty. EMI structure: monthly repayment via ECS/NACH or through the Mudra Card for working capital facilities.
Government Support and Subsidy Linkage
MUDRA loans can be combined with government subsidy schemes for enhanced benefit: PMEGP (up to 25-35 per cent subsidy for new manufacturing units), CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises — provides guarantee cover to lending institutions, enabling collateral-free lending up to Rs. 5 crore), and Stand-Up India (for SC/ST and women entrepreneurs). The interest subvention scheme provides 2 per cent interest subsidy on Shishu loans to women borrowers in certain categories.
Latest Updates (2024-2026)
Tarun Plus category (loans up to Rs. 20 lakh for borrowers with good repayment history) was announced in Budget 2024 and operationalised in late 2024. The MUDRA scheme crossed the cumulative milestone of Rs. 27 lakh crore disbursements and 47 crore loan accounts by March 2025. The integration of MUDRA with the Jan Samarth portal has simplified the application process. The RBI's guidelines on digital lending (2022, updated 2024) apply to MUDRA loans disbursed through digital channels. Interest rates have stabilised following the RBI's pause in the repo rate cycle at 6.5 per cent (October 2023 through early 2025), with a 25 bps cut to 6.25 per cent in February 2025.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Loan terms vary by lending institution. Please visit your nearest bank branch or the Udyamimitra portal for specific information.