MUDRA (Micro Units Development and Refinance Agency) is one of the most popular and successful initiatives by the Union Government. The scheme is offered under the Pradhan Mantri Mudra Yojana (PMMY). Commonly known as Mudra loans, this scheme provides support and encourages growth and development of MSMEs in India. 

Its main aim is to provide refinancing support to banking institutions, MFIs, NBFCs for lending to micro segments. The maximum loan amount is set at Rs. 10 Lakhs. On the other hand, there is no restriction on the minimum amount one can borrow under this scheme.  Let’s take a look at the key features, types, benefits of Mudra loans. 

Types of Mudra Loans 




Covering loans upto Rs. 50,000. 

Covering loans above Rs. 50,000 and upto Rs. 5 lakhs

Covering loans above Rs. 5 lakhs and upto Rs. 10 lakhs

Apt for start-ups and new businesses

Apt for buying equipment/machinery, raw materials, business expansion for existing enterprises

Apt for established businesses and enterprises

With an objective to promote entrepreneurship among the new generation, the government of India gives higher priority to loans under the Shishu category, followed by Kishore and then Tarun category.

Within the framework and overall objective of development and growth of the micro enterprises sector under Shishu, Kishore and Tarun, the products being offered by Mudra are so designed, to meet requirements of small businesses across different sectors. These loans are also offered to startups and aspiring entrepreneurs. 

How do Mudra loans work? 

The funding support from Mudra are of two types:

  • Micro Credit Scheme (MCS) for loans up to Rs. 1 lakh, financed through MFIs.
  • Refinance Scheme for Commercial Banks / Regional Rural Banks (RRBs) / Small Finance Banks / Non Banking Financial Companies (NBFCs).

Different banks like Commercial Banks, Regional Rural Banks, Small Finance Banks and NBFCs can only avail refinancing support from Mudra for financing micro enterprise activities. The refinance is available for term loans and working capital loans up to a maximum amount of  Rs. 10 lakhs. 

The eligible banks/NBFC, who comply with the requirements as notified, can avail of refinance from Mudra for the loans sanctioned by them for eligible businesses under Shishu, Kishore and Tarun categories. In order to encourage women entrepreneurs, the financing banks/MFIs may consider extending additional facilities, including interest reduction on their loan. At present, Mudra extends a reduction of 25bps in its interest rates to MFIs/NBFCs, who sanction Mudra loans to women entrepreneurs.

Mudra Loans at a Glance

Interest Rate

Varies from bank to bank, depends on business requirements


Not required

Minimum Loan Amount

No limit

Maximum Loan Amount

Up to Rs. 10 lakh

Repayment Tenure

From 3 years to 5 years

Processing Charges


Types of Mudra Scheme

Shishu, Kishor and Tarun

Who can avail Mudra loans? 

Mudra loan can be availed for various income generating activities as mentioned below:

  • Commercial vehicles like purchase of commercial transport vehicles like tractors, auto-rickshaws, taxis, goods transports vehicles, 3-wheelers , etc.
  • Service Sector Activities like starting businesses of salons, gyms, tailoring shops, medicine shops, repair shops, and dry cleaning and photocopying shops, etc.
  • Food and Textile Product Sector Activities like various activities involved in respective fields
  • Business activities for Traders and Shopkeepers like setting up shops, service enterprises, trading and business activities and non-farming related income generating activities
  • Equipment Finance Scheme for Micro Units with maximum loan up to Rs. 10 lakh
  • Agri-allied Activities like activities related to businesses in agri-clinics and agribusiness centres, food & agro-processing units, poultry, horticulture, bee keeping, sorting, livestock-rearing, grading, aggregation agro industries, diary, fishery, etc.

Mudra Loan Eligibility Criteria 

Individuals who have their own business setups, ideas to begin a service sector activity, trading or manufacturing activity and require amounts of up to Rs.10 lakhs can apply for Mudra loans. Mudra loans can be availed from public sector banks, private sector banks, regional rural banks (RRBs), small finance banks (SFBs), and micro finance institutions (MFIs).

As per the eligibility criteria for Mudra Loan, an applicant should be:

  • At least 18 years old 
  • Can be an individual or an MSME 

Eligible applicants include traders, manufacturers, business owners, startup business owners, small-scale industrialists, shopkeepers, individuals engaged in allied agricultural activities, etc. 

Mudra Loan Bank List

Financial institutions that are eligible to provide MUDRA Loans, directed by RBI are as follows:

Bank of Baroda

Syndicate Bank

Central Bank of India

United Bank of India


Andhra Bank

Indian Overseas Bank

Bank of Maharashtra

Oriental Bank of Commerce

Dena Bank

State Bank of India


Union Bank of India

Karnataka Bank

Allahabad Bank

Punjab National Bank

Bank of India

Tamilnad Mercantile Bank

Corporation Bank

Axis Bank


Canara Bank

J&K Bank

Federal Bank

Punjab and Sind Bank

Indian Bank

Kotak Mahindra Bank

UCO Bank

Documents Required for Mudra Loan Application


Document type

Application Form

Duly filled up application form related to the loan formality

Proof of Identity

Aadhaar card, Voter’s ID card, driving license, passport, etc.

Proof of Address

Electricity bill, phone bill, and so on, Aadhaar card, Voter’s ID card, passport, etc. 

Caste Certificate

If required


2 passport-sized photographs of the applicant

Other important filings

Quotation of the products or items which are to be bought and used for the business

Key Takeaways

  • Mudra loans are majorly offered to shopkeepers, traders, vendors, and MSMEs engaged in manufacturing, trading and service sector activities
  • Mudra loans are covered under Credit Guarantee Schemes from Govt. of India
  • Availed loan amount can also be used as term loans and overdraft facilities
  • All Non-farm enterprises, i.e. small or micro firms engaged in the income generating activities can avail Mudra loan
  • Mudra loan can be availed via Mudra cards, as well. 

Understand the different types of Mudra loans and choose the right one that best fits your needs.