{"id":34765,"date":"2023-07-04T06:54:09","date_gmt":"2023-07-04T06:54:09","guid":{"rendered":"https:\/\/www.tatacapital.com\/blog\/?p=34765"},"modified":"2025-12-29T16:37:25","modified_gmt":"2025-12-29T11:07:25","slug":"mudra-loan-for-small-business-loan-under-pmmy","status":"publish","type":"post","link":"https:\/\/www.tatacapital.com\/blog\/loan-for-business\/mudra-loan-for-small-business-loan-under-pmmy\/","title":{"rendered":"Mudra Loan for Small Business under PMMY: Eligibility, Documents & Schemes"},"content":{"rendered":"\n

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An economic survey from 2021-22 branded India as the world\u2019s third-largest startup ecosystem. Another report suggests that startups will contribute 4-5% of India\u2019s GDP between 2022-2027.<\/p>\n\n\n\n

Startups are an integral part of the Indian economy, and the Government recognises this. This is why it even launched schemes to boost the zeal of Indian entrepreneurs.<\/p>\n\n\n\n

The Pradhan Mantri Mudra Yojana (PMMY) is one such government initiative which helps in providing financial support to small and micro enterprises in India.<\/p>\n\n\n\n

Curious to know more about the Mudra loan? Then read on. <\/p>\n\n\n\n

What is a PMMY Mudra Loan for Small Businesses?<\/strong><\/h2>\n\n\n\n

Introduced in 2015, the Mudra in Mudra loan stands for Micro Units Development and Refinance Agency. The slogan of the Mudra loan is \u201cFunding the unfunded\u201d, aiming to empower small-scale businesses in India. <\/p>\n\n\n\n

With the easy loan process and lower interest rates of the Mudra loan, the Government aims to support micro-businesses in trading, manufacturing and services. It also helps to empower women entrepreneurs or business owners in marginalised communities by providing them with concessional interest rates.<\/p>\n\n\n\n

During FY 2022-23, about 6,23,10,598 such loans<\/a> got sanctioned, and the Government disbursed loans amounting to Rs. 4,50,423.66 crores.<\/p>\n\n\n\n

Here are some additional details about the loan you should know about.<\/p>\n\n\n\n

Also, read – Top Government Schemes for Startups and MSMEs in India<\/a><\/p>\n\n\n\n

Types of PMMY Mudra Loans: Shishu, Kishore, Tarun<\/strong><\/h2>\n\n\n\n

The Mudra loan for business has been classified into three different categories based on the disbursed loan amount:<\/p>\n\n\n\n

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Scheme name<\/td>Loan amount<\/td>Purpose<\/td><\/tr>
Shishu<\/td>Up to Rs. 50,000<\/td>Suited for entrepreneurs looking to set up their businesses. They must submit quotations from suppliers to purchase machinery through the loan.<\/td><\/tr>
Kishore<\/td>Between Rs. 50,000 to Rs. 5,00,000<\/td>Suited for established businesses to grow their operations. Here, borrowers need to submit a project report attached to the loan documents to be eligible.<\/td><\/tr>
Tarun<\/td>Between Rs. 5,00,000 to Rs. 10,00,000<\/td>Suited for well-established businesses wanting to expand their operations or offer various products. They have stricter eligibility requirements, and the loan is disbursed only after careful verification of the loan eligibility.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Also, read – <\/strong>Government Schemes for Women Entrepreneurs in India<\/strong><\/a><\/p>\n\n\n\n

Key Benefits of PMMY Mudra Loans for Small Businesses<\/strong><\/h2>\n\n\n\n

The Mudra loan is designed to benefit and encourage the growth of small businesses:<\/p>\n\n\n\n

1. Collateral-free loan: The Mudra loan is a type of unsecured loan<\/a>. This means you don\u2019t have to put up any security as collateral to the lending institution. A collateral-free loan reduces mental stress and helps you focus on business growth without worry. <\/p>\n\n\n\n

2. Loans for specific business needs: The biggest benefit of the Mudra loan is that you can find a loan suited for the size of your business and its purpose. Besides, the loan eligibility requirements are lower for loans of lower amounts, and one can get a loan through the scheme at both banks and NBFCs<\/a>. This makes it easier for new business owners to obtain a business loan<\/a>.<\/p>\n\n\n\n

Note that businesses can also secure sector-specific loans through the Mudra scheme. For instance, they can avail of loans if they are engaged in businesses that involve food processing, poultry farming, etc.<\/p>\n\n\n\n

3. Low interest rates: Unlike traditional loans<\/a>, business owners can use the Mudra scheme at lower interest rates. This does two things. It makes loan repayments more manageable and allows business owners to direct their funds to run other essential aspects of their business.<\/p>\n\n\n\n

4. Easy loan disbursal: The Government has directed financial institutions to provide a streamlined loan approval process. With minimal documentation and complications, applying for the Mudra loan has become more accessible.<\/p>\n\n\n\n

5. Fees: The Mudra loan has reduced certain extra charges from business loans. There are no foreclosure charges and no processing fees. This means business owners can repay the entire loan amount before the term ends without incurring additional costs. Plus, they save up to 0.5% of the total loan amount, which typically accounts for processing fees.<\/p>\n\n\n\n

Also, read – Mahila Udyam Nidhi Scheme<\/a><\/p>\n\n\n\n

Eligible Business Activities for PMMY Mudra Loans<\/strong><\/h2>\n\n\n\n

The Mudra loan is targeted towards non-farming and non-corporate startups and MSMEs. The following types of business activities are eligible for this scheme:<\/p>\n\n\n\n

<\/p>\n\n\n\n

Business sector<\/td>Business activity<\/td><\/tr>
Trading sector <\/td>Shop set-ups, non-farming business activities, trading activities<\/td><\/tr>
Commercial vehicle<\/td>Financing purchase of commercial vehicles, including tillers, transport vehicles, tractors, e-rickshaws, etc.<\/td><\/tr>
Merchants<\/td>Shop set-ups, inventory purchase for non-farming-related activities 9up to Rs. 10 lakhs per borrower\/enterprise<\/td><\/tr>
Food outlets<\/td>Inventory purchases, machinery purchases<\/td><\/tr>
Agri-allied business<\/td>Poultry, beekeeping, dairy, fisheries<\/td><\/tr>
Community Service and PersonalService focused businesses<\/td>Salons, Gyms, boutiques, photocopying facilities, courier agents, dry cleaning, motorcycle repair shops, etc.<\/td><\/tr>
Textile Products<\/td>Handloom, furnishing accessories, products like bags, dyeing, printing, etc.<\/td><\/tr>
Equipment finance scheme for Micro Units<\/td>Machinery to set up micro-enterprises (up to Rs. 10 lakhs)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Also, read – All you Need to Know About Pradhan Mantri Awas Yojana for Existing Home Loan<\/a><\/p>\n\n\n\n

PMMY Mudra Loan Eligibility Criteria<\/strong><\/h2>\n\n\n\n

Before you apply for the PM Mudra loan, check for the required eligibility criteria:<\/p>\n\n\n\n

1. You must be an Indian citizen with a small business or partnership firm<\/p>\n\n\n\n

2. You must be at least 18 years old and at most 65 years old<\/p>\n\n\n\n

3. The business segment must be trading, manufacturing or service related<\/p>\n\n\n\n

4. Loan requirements should not be related to farming activities<\/p>\n\n\n\n

5. Should have a good credit score and loan repayment history<\/p>\n\n\n\n

6. Enterprises, including sole proprietorship, LLPs, NGOs, co-operative societies, Pvt. & Public Ltd. Companies can apply for the loan<\/p>\n\n\n\n

Also, read – What is the Seed Money Scheme?<\/a><\/p>\n\n\n\n

Documents Needed for PMMY Mudra Loan Application<\/strong><\/h2>\n\n\n\n

When you apply for the\u00a0Mudra loan online, you will have to submit the following during the application process:<\/p>\n\n\n\n

<\/p>\n\n\n\n

Required document<\/td>Accepted document<\/td><\/tr>
Identity proof<\/td>Self-attested copy of Adhaar card, Voter ID card, Passport, or PAN Driver\u2019s licence<\/td><\/tr>
Address proof<\/td>Self-attested copy of Adhaar card, Voter ID card, Passport, or PAN Driver\u2019s licence, along with electricity bill<\/td><\/tr>
Photographs<\/td>Two passport-sized photos<\/td><\/tr>
Purchase proof<\/td>Proforma invoice of material to be purchased<\/td><\/tr>
Proof of business<\/td>Registration certificate or copy of trade licence<\/td><\/tr>
Category proof<\/td>Caste certificate (If applicable)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Also, read – What is the Stree Shakti Yojana for Businesswoman?<\/a><\/p>\n\n\n\n

How to Apply for a Mudra Loan Online<\/strong><\/h2>\n\n\n\n

Follow these steps to apply for a Mudra PMMY loan online<\/a>:<\/p>\n\n\n\n

Step 1:<\/strong> Visit the official PM MUDRA website and select the Udyamimitra portal.
<\/p>\n\n\n\n

Step 2:<\/strong> Click on \u201cApply Now\u201d under the Mudra loan section.
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Step 3:<\/strong> Choose your category: New Entrepreneur, Existing Entrepreneur, or Self-Employed Professional.
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Step 4:<\/strong> Enter the applicant\u2019s name, email ID, and mobile number, then generate and verify the OTP to complete registration.<\/p>\n\n\n\n

Step 5:<\/strong> After successful registration, fill in personal and professional details.
<\/p>\n\n\n\n

Step 6:<\/strong> If assistance is required for preparing a project report, select a hand-holding agency. Otherwise, proceed by clicking \u201cLoan Application Centre.\u201d
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Step 7:<\/strong> Select the loan category\u2014Mudra Shishu, Mudra Kishore, or Mudra Tarun.
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Step 8:<\/strong> Enter business details such as business name, activity, and industry type (manufacturing, service, trading, or allied agricultural activities).
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Step 9:<\/strong> Provide additional details including ownership information, existing banking or credit facilities, proposed credit requirement, future estimates, and preferred lender.
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Step 10:<\/strong> Upload the required documents such as ID proof, address proof, applicant photograph, signature, and business identity or address proof.
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Step 11:<\/strong> Submit the application. An application number will be generated, which should be saved for future reference and tracking.<\/p>\n\n\n\n

Source: https:\/\/www.myscheme.gov.in\/schemes\/pmmy<\/a> <\/p>\n\n\n\n

Mudra Loan for Specific Sectors: Dairy, Textile, and More<\/strong><\/h2>\n\n\n\n

Under the Pradhan Mantri Mudra Yojana (PMMY), loans are available to micro and small enterprises engaged in income-generating activities in the non-farm sector, including manufacturing, trading and services. This broad coverage allows businesses in diverse sectors to access credit, making the scheme relevant for activities such as small textile or garment units and services allied to these industries. <\/p>\n\n\n\n

For sector-specific examples such as dairy, beneficiaries typically include allied agriculture or agro-processing activities that generate income outside traditional farming (e.g., dairy processing, food production). These enterprises fall under the wider scope of non-farm income-generating businesses covered under PMMY. <\/p>\n\n\n\n

The scheme\u2019s flexibility helps entrepreneurs in textiles, dairy-linked processing, retail, transport and services access loans under Shishu, Kishore and Tarun categories, supporting business setup, expansion or working capital needs. <\/p>\n\n\n\n

Also, read – PM Vishwakarma Scheme<\/a><\/p>\n\n\n\n

Comparing PMMY Mudra Loans with Other Government Schemes<\/strong><\/h2>\n\n\n\n

The Pradhan Mantri Mudra Yojana (PMMY) is one of the most accessible government credit schemes for micro and small entrepreneurs. It focuses on non-farm, income-generating activities and offers loans up to \u20b910 lakh under Shishu, Kishore, and Tarun categories, largely without collateral. Its key strength lies in wide reach, simple eligibility, and suitability for very small or first-time businesses.<\/p>\n\n\n\n

Other government schemes for entrepreneurs, such as Stand Up India or sector-specific MSME programmes, typically cater to larger funding needs or defined borrower segments. These schemes may offer higher loan limits, longer tenures, or additional benefits like subsidies, but often involve stricter eligibility criteria, detailed project reports, and longer processing timelines.<\/p>\n\n\n\n

Mudra loans prioritise ease of access and scale at the grassroots level, while other schemes are better suited for businesses ready for structured growth. The choice depends on business size, funding requirement, and readiness for formal compliance.<\/p>\n\n\n\n

Also, read – Udyogini Scheme<\/a><\/p>\n\n\n\n

Common Mistakes to Avoid When Applying for a Mudra Loan<\/strong><\/h2>\n\n\n\n