18 Dec 2023 8 min read Business Financing

PM Mudra Loan Interest Rate, Eligibility, Apply

What is a Mudra Loan?

A Mudra Loan is a financial assistance provided under the Pradhan Mantri Mudra Yojana (PMMY), aimed at supporting micro and small enterprises. These loans are designed to help non-corporate, non-farm sector income-generating activities1. The loans are categorized into three types based on the funding needs of the beneficiary:

Shishu: Loans up to ₹50,000
Kishore: Loans above ₹50,000 and up to ₹5 lakhs
Tarun: Loans above ₹5 lakhs and up to ₹10 lakhs
Mudra Tarun Plus: Tarun Plus is a new category under the Pradhan Mantri Mudra Yojana (PMMY) introduced to support emerging entrepreneurs. Loan Amount: Loans range from ₹10 lakhs to ₹20 lakhs

Mudra Loans can be availed through various Member Lending Institutions (MLIs) such as public sector banks, private sector banks, state-operated cooperative banks, rural banks, microfinance institutions (MFIs), non-banking financial companies (NBFCs), and small finance banks.

Mudra Yojana Launch

The Pradhan Mantri Mudra Yojana (PMMY) was launched on April 8, 2015, by the Prime Minister of India, Narendra Modi. The scheme was introduced to provide affordable credit to micro and small enterprises in the non-farm sector

Categories of Loans Under PMMY:

The loans under PMMY are classified into three categories, based on the stage of development of the business and the corresponding financial needs. These categories are:

Shishu: This is the first category under PMMY and targets businesses in the initial stages of their operations. Entrepreneurs who need a small amount of credit to establish or expand their micro-enterprises can avail of loans up to Rs. 50,000 under the Shishu scheme.
Kishore: This category is for businesses that are already established but need additional funding to expand or strengthen their operations. Entrepreneurs can apply for loans above Rs. 50,000 and up to Rs. 5 lakhs under the Kishore scheme.
Tarun: The Tarun category is aimed at businesses that are in a more advanced stage of their development. Entrepreneurs who need substantial financial assistance to grow their enterprises further can apply for loans ranging from Rs. 5 lakhs to Rs. 10 lakhs.
Tarun Plus: Tarun Plus is a new category under the Pradhan Mantri Mudra Yojana (PMMY) introduced in October 2024. It covers loans above ₹10 lakh and up to ₹20 lakh. This scheme aims to support the growth and expansion of businesses by providing higher loan amounts to eligible entrepreneurs.

PM Mudra Loan Eligibility

The Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of the Government of India designed to provide financial support to micro and small enterprises. Here are the key eligibility criteria for PM Mudra loans:

Eligible Borrowers: Individuals, proprietary concerns, partnership firms, private limited companies, public companies, and any other legal forms.
Loan Amounts: The scheme is divided into three categories based on the funding needs of the beneficiary:
- Shishu: Loans up to ₹50,000
- Kishore: Loans above ₹50,000 and up to ₹5 lakhs
- Tarun: Loans above ₹5 lakhs and up to ₹10 lakhs
- Tarun Plus: loans above 10 lakh and up to 20 lakh
Age Range: Applicants should be between 18 and 65 years old.
Industry Type: Open to individuals and enterprises in manufacturing, trading, and services.
Credit History: The applicant should not be a defaulter to any bank or financial institution and should have a satisfactory credit track record.
Skills/Experience: Individual borrowers may be required to possess the necessary skills/experience/knowledge to undertake the proposed activity.

Member Lending Institutions (MLIs):

Loans under PMMY can be availed through a wide range of Member Lending Institutions (MLIs), which include:

Public Sector Banks
Private Sector Banks
State-Operated Cooperative Banks
Regional Rural Banks
Micro Finance Institutions (MFIs)
Non-Banking Financial Companies (NBFCs)
Small Finance Banks (SFBs)
Other Financial Intermediaries approved by Mudra Ltd.

The wide availability of MLIs ensures that businesses across the country, even in rural and remote areas, can access Mudra loans without hassle.

PM Mudra Loan Interest Rate

The interest rates for Mudra loans are determined by the Member Lending Institutions by Reserve Bank of India (RBI) guidelines. The rate of interest is decided by each institution based on their policies, taking into consideration the borrower’s profile and creditworthiness.

Parameter	Details
PMMY Loan Interest Rate	Start at 9.30% annum
Loan Processing Charges	Up to Rs. 300/- per lakh or part thereof
Pre-payment charges	2% on the outstanding pre-paid amount
Charges for late payment of EMI	2% to 4% per month on EMI / Principal

Mudra Loan Repayment Period

Here's the repayment period for Mudra loans:

Term / Demand Loans: Maximum up to 84 months with a suitable moratorium period, subject to annual review.
Working Capital Loans: For 12 months, subject to annual review.

Application Process:

The application process for Mudra loans is simple and can be completed online through the official PM Mudra website. Here’s a step-by-step guide:

PM Mudra Loan Online Apply

Visit the PM MUDRA official website and select the Udyamimitra portal.
Click on the "Apply Now" button for Mudra loans.
Choose the appropriate option from New Entrepreneur, Existing Entrepreneur, or Self-Employed Professional.
Fill in basic details such as the applicant’s name, email address, and mobile number. An OTP will be generated for verification.
After successful registration, the applicant needs to provide personal and professional details.
Select if any assistance is required for preparing project proposals, or proceed to the "Loan Application Center" to apply.
Choose the type of loan (Shishu, Kishore, or Tarun).
Provide business details such as the name of the business, business activity, and industry type (manufacturing, service, trading, or agriculture).
Provide owner details, banking information, and future business estimates.
Attach all the required documents, including ID proof, address proof, business details, etc.
Submit the application. An application number will be generated, which can be used for future reference.

Documents Required:

To apply for a Mudra loan, certain documents are necessary. Here’s a list of the required documents for different categories of loans:

For Shishu Loans (up to Rs. 50,000):

Proof of Identity: Voter ID, PAN Card, Aadhaar Card, etc.
Proof of Residence: Utility bill, bank statement, Aadhar card, etc.
Recent Passport-size photographs.
Quotation for the machinery/items to be purchased.
Proof of Identity and Address of the Business (if applicable).

For Kishore and Tarun Loans (above Rs. 50,000):

Proof of Identity: Voter ID, PAN Card, Aadhaar Card, etc.
Proof of Residence: Utility bill, bank statement, Aadhaar card, etc.
Recent Passport-size photographs.
Proof of Identity and Address of the Business.
Statement of accounts (last six months).
Balance sheets for the last two years.
Projected balance sheets.
Project report outlining the technical and economic viability of the proposed business.
Partnership deed or Memorandum and Articles of Association (if applicable).

Benefits of PMMY:

PMMY offers numerous benefits to small businesses, including:

Easy access to affordable credit.
No collateral is required for Shishu loans.
Loans tailored to the specific stage of the business.
The wide availability of loans through multiple financial institutions.
No middlemen are involved, making the process transparent and straightforward.

FAQs:

What is the Mudra Full Form?

The full form of MUDRA is Micro Units Development and Refinance Agency.

What is the Mudra loan?

Mudra Loan is a financial scheme under the Pradhan Mantri Mudra Yojana (PMMY) that provides loans up to Rs. 10 lakhs to small and micro-enterprises in the non-agricultural sector for income-generating activities. It aims to support entrepreneurs in manufacturing, trading, and services, including activities like poultry, dairy, and beekeeping. The loans are classified into three categories: Shishu (up to Rs. 50,000), Kishore (Rs. 50,000 to Rs. 5 lakhs), and Tarun (Rs. 5 lakhs to Rs. 10 lakhs).

What is the maximum loan amount under PMMY?

The maximum loan amount under PMMY varies depending on the lender and the category of the borrower. However, the maximum loan amount is generally higher for borrowers who are part of the "Shishu" category (loans up to Rs. 50,000), followed by the "Kishore" category (loans between Rs. 50,001 and Rs. 2,00,000), and the "Tarun" category (loans above Rs. 2,00,000).

What is the interest rate for PMMY loans?

The interest rate for PMMY loans varies depending on the lender and the borrower's creditworthiness. Generally, the interest rate is from 9.30% per Annum.

Can I get a PMMY loan without collateral?

Yes, in many cases, PMMY loans are offered without collateral. However, the lender may require some form of security, such as a guarantor, for larger loan amounts.

How long does it take to get a PMMY loan?

The time it takes to get a PMMY loan depends on various factors, such as the lender, the borrower's creditworthiness, and the completeness of the application. However, many lenders strive to process PMMY loan applications quickly.

What are the eligibility criteria for PMMY?

To be eligible for PMMY, a borrower must be a citizen of India, a small or micro-enterprise, have a business plan or proposal, and meet the income eligibility criteria set by the lender.

Can I apply for PMMY online?

Yes, you can apply for PMMY online through the website of a participating lender.

What documents are required for a PMMY loan?

The specific documents required for PMMY may vary depending on the lender and the borrower's circumstances. However, some common documents that may be required include proof of identity, address, income, business plan or proposal, and photographs.

Can I prepay my PMMY loan?

Yes, you can prepay your PMMY loan at any time without incurring any prepayment charges.

Can I get a PMMY loan if I have a bad credit history?

It may be more difficult to get a PMMY loan if you have a bad credit history. However, some lenders may be willing to consider borrowers with a bad credit history, especially if they can provide a strong business plan and other supporting documents.

What are the benefits of PMMY?

PMMY offers several benefits to small and micro-enterprises, including affordable credit, collateral-free loans, a simplified application process, financial inclusion, and job creation.

Who is eligible for a mudra loan?

Indian citizens with business plans for non-farm activities like manufacturing, trading, or services, seeking credit up to 10 lakh, can approach banks, MFIs, or NBFCs for Mudra loans under PMMY.

What is the interest rate for Mudra Loans?

Is Mudra loan interest-free? Interest rates for Pradhan Mantri Mudra Loans vary based on the category - Shishu, Kishor, or Tarun. Typically, they start from 9.30%.

What is the maximum loan in Mudra?

Under the Pradhan Mantri Mudra Yojana, the maximum loan amount available is Rs. 10 lakhs. However, this amount varies depending on three schemes categorized by the stage of business growth and financing requirements.

Can I apply for a Mudra Loan without collateral?

Yes, Mudra Loans are collateral-free, making them accessible to a wider spectrum of aspiring entrepreneurs.

Is there any subsidy available under the Mudra Yojana?

While there isn't a direct subsidy, eligible borrowers may avail of interest subsidies under various government schemes, enhancing the affordability of credit.

What is the CIBIL score for Mudra Loan?

The typical MUDRA loan eligibility CIBIL score for businesses ranges from 650 to 700. However, banks don't strictly rely on CIBIL score alone as a determinant of eligibility.

What happens if the Mudra loan is not paid?

Civil Court Proceedings: Lenders have the legal right to file civil suits against defaulters to recover outstanding amounts. This may result in court proceedings and incurring legal expenses for both parties involved.

Can I take a Mudra loan two times?

Communicate with your lender about requiring additional funds. Applying for a MUDRA loan updates your credit report. If you apply for another MUDRA loan elsewhere, the new lender will be aware of your existing application.

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