A Mudra loan is a collateral free business loan for a non corporate, non farm micro enterprise, given by a bank, NBFC, microfinance institution, regional rural bank or small finance bank under the Pradhan Mantri MUDRA Yojana. There are four categories: Shishu up to Rs 50,000, Kishore up to Rs 5 lakh, Tarun up to Rs 10 lakh, and Tarun Plus up to Rs 20 lakh. Tarun Plus is only for a borrower who has already taken and successfully repaid a Tarun loan. Apply at a bank branch, or online on JanSamarth or Udyami Mitra. MUDRA itself does not lend to you directly.
The short version
| Fact | Position |
|---|---|
| Who lends | Banks, NBFCs, MFIs, RRBs and small finance banks |
| Collateral | No collateral, cover for the lender under the Credit Guarantee Fund for Micro Units |
| Maximum for a first time borrower | Rs 10 lakh under Tarun |
| Maximum overall | Rs 20 lakh under Tarun Plus, with the repayment condition |
| Interest rate | No single scheme rate, lender decides, indicative range below |
| Where to apply | Branch, jansamarth.in, udyamimitra.in |
MUDRA stands for Micro Units Development and Refinance Agency. It refinances lenders and supports the scheme. When an advertisement suggests that MUDRA will give you a loan directly, or that an agent can arrange approval for a fee, be careful. MUDRA's own site warns that there are no agents or middlemen engaged by MUDRA for these loans. The November 2026 check of mudra.org.in confirmed the four product names, Shishu, Kishore, Tarun and Tarun Plus, the lender list, the Udyami Mitra application route, and Tarun Plus covering loans above Rs 10 lakh and up to Rs 20 lakh.
Which category you fit
| Category | Loan amount | Who it is for |
|---|---|---|
| Shishu | Up to Rs 50,000 | Starting out, very small needs: tools, initial stock, a small machine |
| Kishore | Above Rs 50,000 to Rs 5 lakh | A running business buying stock, equipment or a small vehicle |
| Tarun | Above Rs 5 lakh to Rs 10 lakh | An established micro enterprise expanding capacity or premises |
| Tarun Plus | Above Rs 10 lakh to Rs 20 lakh | Only a borrower who availed and successfully repaid a Tarun loan |
Tarun Plus came from the Budget for 2024-25 and has applied from October 2024. Headlines that lead with Rs 20 lakh without the condition mislead first time borrowers. If you have never had a Tarun loan and repaid it, you cannot apply directly for Tarun Plus, however strong your business is. Your ceiling in the scheme as a first time borrower is Rs 10 lakh. A lender page claiming a Rs 50 lakh Tarun Plus ceiling is wrong and should not be relied on. The ruling figure is Rs 20 lakh.
Choose the category by the amount you actually need and the stage you are at, not by the maximum available. A Shishu borrower who asks for Tarun money without the track record, statements and project detail that Tarun appraisal needs invites a rejection that could have been avoided with a correctly sized application.
Who can apply
The scheme is for non corporate, non farm micro enterprises. In practice that includes proprietors, partnership firms, and small units in manufacturing, trading and services. A private limited company is a corporate form and does not fit the non corporate condition in the same way, so company borrowers should ask the lender what product applies to them instead of assuming Mudra eligibility.
Allied agriculture activities are covered in the scheme descriptions consulted, including dairy, poultry, fisheries and food processing. Pure crop farming is not the target of this scheme. If your activity sits on the border, for example a dairy unit that also grows fodder, describe the exact activity in the application and let the lender classify it.
You must not be a defaulter to any bank or financial institution. Treat that as a scheme condition to verify with the lender on your facts. Lenders also assess credit history. No official CIBIL cut off was found in the scheme material consulted for this article, despite ranking guides quoting precise scores for higher slabs. Do not let a guide's score stop you from applying, and do not assume a good score guarantees sanction. The lender appraises the proposal, the banking track record and repayment capacity.
Udyam registration is strongly expected as business proof in practice, and banks ask for it. Read Udyam registration benefits and complete registration before you apply if you have not done so. It costs nothing on the official portal and removes a common reason for delay.
Collateral and guarantee: what collateral free really means
Mudra loans are collateral free. You do not pledge property or other security for the loan in the ordinary scheme structure. For the lender, eligible loans are backed by the Credit Guarantee Fund for Micro Units, called CGFMU. That guarantee protects the lender if a loan fails. It does not remove your obligation to repay, and it does not make approval automatic.
This distinction matters. Some borrowers hear collateral free and expect a formality. The bank still checks identity, business existence, bank statements, existing loans and whether the proposed use of funds makes sense. A weak file can still be declined, and a declined application is easier to avoid by preparing the file properly than to reverse afterwards.
If a lender asks for collateral on a loan presented as a Mudra loan, ask in writing which scheme condition requires it and whether the proposal is actually being processed under PMMY or as a different business loan. For a comparison with the other main guarantee route, see CGTMSE: loans without collateral.
Interest and tenure: indicative only
There is no single Mudra interest rate fixed by the scheme. The lender sets the rate based on its own pricing, your category and your profile. Opened guides consulted for this article indicate a broad range of around 9 to 12 percent per year or more. One guide's category table gave narrower bands: Shishu about 8.85 to 10 percent, Kishore about 9 to 12 percent, Tarun about 9.5 to 12 percent, and Tarun Plus about 10 to 12 percent. Treat all of these as indicative, secondary source figures, not a promise. Your sanction letter is the only rate that counts.
Tenure in the same guides is commonly 3 to 5 years, with Tarun Plus shown up to 7 years in one table. The lender decides tenure on the asset life and cash flow in your proposal. A machine with a long working life supports a longer tenure than working capital for stock that turns over quickly. Ask for the EMI at the actual rate and tenure offered, and check whether processing charges or other fees apply, in writing, before you accept.
Because rates vary, compare two things that are fully in your control: the total interest over the tenure at the quoted rate, and whether the EMI fits your monthly cash flow in a lean month, not only in your best month.
Documents banks ask for
Document lists vary by lender and category, but the pattern below reflects what opened guides and lender practice consistently ask for. Carry originals and copies to a branch visit.
| Document group | What to keep ready |
|---|---|
| Identity proof | Aadhaar, PAN |
| Address proof | Aadhaar address, utility bill, rent agreement or other lender accepted proof |
| Photographs | Recent passport size photographs of the applicant |
| Business proof | Udyam registration, trade licence, GST registration where applicable, shop or establishment proof |
| Bank statements | Last 6 months of the business or proprietor account, as the lender asks |
| Purpose proof | Machinery or equipment quotations where the loan buys an asset |
| Project detail | Business plan or project report, expected for Kishore and Tarun, essential for Tarun Plus |
Application forms follow a pattern reported from the MUDRA bankers kit: a one page form for Shishu, and a common form for Kishore and Tarun. The November 2026 check found lender pages repeating the same distinction and pointing to the forms on mudra.org.in under the PMMY Bankers Kit. Download the correct form, fill it before you visit, and keep a copy of everything you submit.
The most common document problem is a name mismatch. Your name should read the same way on Aadhaar, PAN, the bank account and the business proof. A spelling difference that looks minor to you can stall verification. Fix mismatches first, at the source document, rather than explaining them at the counter.
How to apply: three routes
Route one is the branch route. Visit the bank where you hold your business account, or a lender active in PMMY lending near you. Ask for the PMMY application for your category. Submit the form with the documents above. The branch appraises the proposal and decides. An existing account relationship helps because the bank can see your track record in its own statements.
Route two is Udyami Mitra at udyamimitra.in. MUDRA's own site directs borrowers to this portal for online application. Register, choose the category, fill the application and follow the portal's routing to lenders.
Route three is JanSamarth at jansamarth.in, the national portal for credit linked government schemes. You can check eligibility, apply and track the application there for participating lenders.
Whichever route you use, the decision still sits with the lender. A portal application is not a sanction. Keep the acknowledgement, note the application reference, and respond quickly if the lender asks for a missing document or a clarification. Many delays that borrowers blame on the scheme are in fact a file waiting for one paper.
No scheme guaranteed timeline for approval was found in the sources consulted. Do not plan a machine purchase or a lease around a day count quoted by a guide. Ask the branch for its realistic timeline on your file and keep a margin.
Worked example: a Tarun Plus EMI, with the arithmetic
Take a Kanpur footwear stitching unit with turnover of Rs 18 lakh. The owner previously took a Rs 7 lakh Tarun loan and repaid it in full. That repayment history is what makes this example a Tarun Plus case. The owner now seeks Rs 14 lakh for two machines.
Loan amount: Rs 14,00,000. This sits inside the Tarun Plus band, above Rs 10 lakh and up to Rs 20 lakh.
Interest assumption, labelled clearly: 11 percent per year on a reducing balance. This is an example rate inside the indicative range discussed above. It is not a scheme rate and it is not a quote. Your lender's rate will differ.
Tenure assumption: 5 years, which is 60 monthly instalments.
Monthly rate: 11 divided by 12 divided by 100 equals 0.0091667.
EMI formula for a reducing balance loan: EMI equals principal times monthly rate times (1 plus monthly rate) to the power 60, divided by ((1 plus monthly rate) to the power 60 minus 1).
Substituting: Rs 14,00,000 times 0.0091667 times (1.0091667) to the power 60, divided by ((1.0091667) to the power 60 minus 1). The EMI works out to approximately Rs 30,439 per month.
Total payable: Rs 30,439 times 60 equals approximately Rs 18,26,364.
Total interest: Rs 18,26,364 minus Rs 14,00,000 equals approximately Rs 4,26,364.
Read those three lines before you sign anything for any loan, not only a Mudra loan. The EMI tells you the monthly pressure. The total interest tells you the full price of the money. If Rs 30,439 a month does not fit a lean month for this unit, the right answer is a smaller loan or a longer discussion with the lender about tenure, not hope.
Now the contrast that incumbents hide. A first time borrower who needs Rs 14 lakh cannot use Tarun Plus at all. That borrower must either fit the need inside Tarun at up to Rs 10 lakh, stage the purchase, or discuss a non Mudra business loan with the lender. Planning a Rs 14 lakh purchase on the assumption that Rs 20 lakh is open to everyone is the most expensive mistake in this topic.
Common reasons for delay or rejection
Name mismatch across Aadhaar, PAN and the bank account. Fix the source document first.
Missing business plan at Kishore and Tarun level. Even a short plan that states what you will buy, what it costs, and how the business will pay the EMI changes the quality of the appraisal.
Applying for Tarun Plus as a first time borrower. The category requires a repaid Tarun loan. No branch can waive that scheme condition for you.
No banking track record. If your business runs mainly in cash and the account shows little activity, the lender has almost nothing to appraise. Route business receipts through the account for a period before you apply, so the statements tell your story.
Asking for the maximum instead of the need. An amount that matches quotations and a clear purpose reads as a serious proposal. A round maximum figure with no breakup reads as a guess.
Paying an agent. MUDRA engages no agents for these loans. Apply at a branch or on the official portals yourself.
Decision framework
If you need up to Rs 50,000, apply under Shishu with the one page form and basic KYC and business proof.
If you need up to Rs 5 lakh and the business is running, apply under Kishore with six months of statements and quotations for what you will buy.
If you need up to Rs 10 lakh and you have a track record, apply under Tarun with a project report and full financial papers.
If you need up to Rs 20 lakh, first ask one question: have I taken and successfully repaid a Tarun loan? If yes, Tarun Plus is open to discuss. If no, it is not, whatever a headline promised.
If you are choosing between schemes rather than only within Mudra, compare the routes side by side in PMEGP, Mudra and Stand-Up India: which scheme fits and, for a subsidy linked manufacturing or service project, in PMEGP loan: how to apply online.
Frequently asked questions
Choose your category by amount, keep KYC, business proof and six months of statements ready, then apply at your bank branch or on JanSamarth or Udyami Mitra. The bank appraises the proposal and decides. MUDRA does not lend directly.
Sources: MUDRA (mudra.org.in), Udyami Mitra and JanSamarth portals, Pradhan Mantri MUDRA Yojana scheme material, verified November 2026. Rules and rates change; check the official portal before you apply.