The Pradhan Mantri MUDRA Yojana (PMMY) exists to solve small business's oldest problem: banks wanting collateral that tiny enterprises don't have. Under PMMY, loans to non-farm micro and small enterprises are collateral-free — backed by a government guarantee framework instead of your property.
The four tiers
| Tier | Loan amount | Typical stage |
|---|---|---|
| Shishu | Up to ₹50,000 | Just starting — a cart, a machine, first stock |
| Kishore | ₹50,001 – ₹5 lakh | Running business buying equipment / working capital |
| Tarun | ₹5 – 10 lakh | Established unit expanding |
| Tarun Plus | ₹10 – 20 lakh | Previous Tarun borrowers who repaid successfully |
Tarun Plus (added in 2024) rewards track record: you must have availed and repaid a Tarun loan to access the ₹20 lakh window.
Who qualifies
- Non-corporate, non-farm micro/small enterprises: shopkeepers, traders, artisans, food processors, service units, transport operators buying vehicles for business.
- Proprietors, partnerships and small private companies all qualify; it's the enterprise that's funded, not personal consumption.
- Allied-agriculture activities (dairy, poultry, beekeeping) qualify; crop farming itself doesn't.
Where and how to apply
MUDRA is not an office you visit — it's a scheme delivered through banks, small finance banks, MFIs and NBFCs. Apply at any of these, or through the government's digital lending portals; udyamimitra.in lists lenders. There is no fee to any agent — anyone charging to "arrange" a MUDRA loan is defrauding you. Interest rates aren't subsidised to zero either; they're set by each lender within scheme norms.
Why applications get rejected — fix these first
- No Udyam registration. Registering your enterprise (free, at udyamregistration.gov.in) massively strengthens the file.
- No paper trail. Even informal businesses can show 6–12 months of bank credits, purchase bills, GST (if applicable). Cash-only invisibility is the biggest killer.
- Vague purpose. "Business expansion" fails; "₹3.2 lakh: second sewing machine ₹1.4L + 3 months' fabric stock ₹1.8L" passes.
- Personal credit mess. Your individual CIBIL still matters — clean it up before applying.
Check business loan matches →
Frequently asked questions
Is a MUDRA loan interest-free or subsidised?
No — MUDRA loans carry normal interest set by the lending bank/NBFC within scheme norms. The scheme's benefit is collateral-free access, not free money. Anyone promising subsidised MUDRA loans for a fee is a fraud.
What is the maximum MUDRA loan amount?
₹10 lakh under Tarun, and up to ₹20 lakh under Tarun Plus for entrepreneurs who have successfully repaid a previous Tarun loan.
Do MUDRA loans require collateral or a guarantor?
No collateral and no third-party guarantee — coverage comes from the government's credit guarantee framework. The business's viability and your credit conduct decide approval.
Where do I apply for a MUDRA loan?
Through any participating bank, small finance bank, MFI or NBFC — there's no separate MUDRA office. Walk into your existing bank branch first, or find lenders via udyamimitra.in. Never pay an agent.
Solvifin is a loan-comparison and referral platform, not a lender. This guide is general information, not financial advice — final rates, eligibility and approval are always decided by the lender. RBI rules summarised here are simplified; refer to rbi.org.in for the authoritative text.