Mudra Loan Interest Rates 2026

The financial institution launched Micro Units Development and Refinance Agency Limited to encourage micro entrepreneurs to engage in manufacturing, trading, services, and other income-generating activities. You can avail of a loan under the PMMY scheme directly through a bank, NBFC, or Micro Finance Institution to fill out the application form and submit the required document

Where Will You Get Mudra Loans Under the PMMY Scheme?

The Pradhan Mantri Mudra Yojana scheme provides financial assistance from Member Lending institutions to non-corporate, non-farm activities of various micro and small entities. These micro and small entities encompass sole proprietorships, partnership firms, service sector units, shopkeepers, fruit or vegetable vendors, truck operators, repair shops, machine operators, food processors, and so on.

Some of the eligible Member Lending Institutions where you can avail the loan from include:

• Public Sector Banks
• Private Sector Banks
• State Operated Co-operative Banks
• Rural Banks from Regional Sectors
• Micro Financial Institutions
• Non-Banking Finance Companies
• Small Finance Banks

Other Financial Intermediaries that Mudra Limited approves as Member Financial Institutions.

Types of Mudra Loans & Loan Amounts

Shishu Loan:

• Covers an amount of Rs.50,000
• Caters to the needs of entrepreneurs who are yet to start their business or whose enterprise is at a budding stage.

Kishore Loan:

• Covers between Rs.50,000 and Rs.5 Lakhs.
• Caters to businesses that have kicked off but require funding for equipment and finances to survive in the market.

Tarun Loan:

• Covers loans between Rs.5 Lakhs and Rs. 10 Lakhs.
• Caters to entrepreneurs expanding their businesses who need funds to operate as a large enterprise.

Tarun Plus:

• Covers loans between Rs.10 Lakhs and Rs.20 Lakhs.
• Caters to entrepreneurs who have taken the Tarun loan and repaid it successfully.
• Under this scheme, it helps in the support of small and micro entrepreneurs in the trading, manufacturing, and service sectors by providing financial assistance.

Mudra Loan Interest Rates in 2026 by Various Banks

The PMMY loans are collateral free loans offered to individuals and entrepreneurs at a competitive rate of interest. Women entrepreneurs are awarded concessional rate of interest with nominal processing fees and foreclosure charges. The following table enlists the bank-wise comparison of the rate of interest and tenure of the loan.

The above interest rates are subject to change from time to time on account of Government directions or RBI regulations as the case may be.

Mudra Loan Interest Rate for 1 Lakh

• A ₹1 lakh Mudra loan is typically sanctioned under the Kishor loan category, meant for early-stage and growing micro businesses.
• This loan amount is commonly used for inventory purchase, small equipment, raw materials, or day-to-day business expenses.
• The interest rate for a ₹1 lakh Mudra loan generally starts from around 9.4% per annum and may go up to 12% per annum, depending on the lender.
• Government banks usually offer more competitive rates, while private banks may apply slightly higher margins.
• Banks determine the final rate after evaluating the nature of business, cash flow consistency, and overall risk profile.
• Applicants are allowed a flexible repayment period of up to 7 years, reducing monthly repayment pressure.
• No collateral or guarantor is required for this loan amount under the Mudra scheme.
• Some banks may provide a repayment holiday at the beginning, especially for newly established businesses.
• Choosing a suitable tenure and maintaining timely repayments can help borrowers minimise the total interest cost.

Mudra Loan Interest Rate for 10 Lakhs

• A ₹10 lakh Mudra loan comes under the Tarun Mudra Loan category, meant for well-established micro and small businesses.
• In 2026, the Mudra loan interest rate for ₹10 lakhs usually ranges from 10% to 13% per annum, depending on the bank and borrower profile.
• Public sector banks generally offer lower interest rates compared to private sector banks for Tarun Mudra loans.
• The final interest rate is decided based on factors such as business stability, turnover, repayment history, and credit profile.
• Most banks offer a repayment tenure of up to 7 years, helping reduce monthly EMI burden.
• A ₹10 lakh Mudra loan is commonly used for business expansion, machinery purchase, working capital needs, and infrastructure upgrades.
• Mudra loan interest rates are not fixed or subsidised by the government and are linked to the bank’s internal lending benchmarks.
• Comparing multiple banks before applying can help secure a lower interest rate and better repayment terms for a ₹10 lakh Mudra loan.

Factors Affecting Mudra Loan Interest Rates

The following are some factors affecting Mudra Loan interest rates. They are:

• Type of Business: The nature of the business and the various resultant products or outcomes of the company are considered. The specific business involves a high degree of risk in awarding loans.
• Category of Loan: Mudra loans are given to eligible entrepreneurs or businesses based on the level of business they operate.
• Creditworthiness of Borrower: A strong credit history and stable financial history indicate the borrower's reliability, which can ultimately lead to better interest rates.
• Loan Amount and Tenure: A larger loan amount and a longer tenure may influence the loan's interest rate. This poses a greater risk to the lender.
• Lender’s Policies: Different banks and NBFCs have their own policies to grant loans. This will also influence their interest rates.
• Market Conditions: Broader factors, such as inflation and credit supply and demand, also indirectly affect lending rates.
• MUDRA’s Role: MUDRA sets guidelines and provides refinance to lending institutions to ensure reasonable and affordable interest rates for micro-enterprises.

How to Get the Lowest Mudra Loan Interest Rate in 2026

Getting a Mudra loan at the lowest interest rate in 2026 depends on a few smart choices you make before applying. Since banks decide the final interest rate, following the steps below can help you reduce your borrowing cost.

Choose the Right Mudra Loan Category

If your funding requirement is small, apply under the Shishu category. Banks usually charge lower interest rates for smaller loan amounts because the risk is minimal. Kishor and Tarun loans may have slightly higher rates due to higher exposure.

Apply Through Your Existing Bank

Banks prefer lending to customers they already know. Applying through a bank where you maintain a savings or current account improves trust. A stable banking relationship often helps you get better interest rates and faster approval.

Maintain a Clean Banking and Credit History

Even though Mudra loans do not strictly require a high CIBIL score, banks still review your repayment behaviour and account activity. Regular transactions, no cheque bounces, and timely repayments improve your chances of securing a lower interest rate.

Submit Complete and Accurate Documents

Incomplete or incorrect documents increase the bank’s risk assessment, which can result in higher interest rates. Make sure you submit all required documents such as business proof, bank statements, and identity details without errors.

Compare Interest Rates Across Banks

Interest rates vary from one bank to another. Public sector banks generally offer lower Mudra loan interest rates compared to private banks. Comparing multiple banks before applying can help you save significantly on EMIs.

Select a Practical Repayment Tenure

While longer tenures reduce monthly EMIs, they may increase the overall interest cost. Choose a repayment period that matches your business cash flow to keep both EMIs and interest burden manageable.

Is Mudra Loan Interest Rate Subsidised by Government?

No, the Mudra loan interest rate is not directly subsidised by the Government of India. Under the Pradhan Mantri Mudra Yojana (PMMY), the government’s role is to facilitate easy access to credit, not to fix or discount the interest rate charged to borrowers.

Mudra loans are extended through banks, NBFCs, and MFIs, and each lending institution decides the interest rate based on its internal policies, RBI guidelines, and the borrower’s risk profile. Factors such as loan category (Shishu, Kishor, or Tarun), business viability, repayment capacity, and banking history influence the final rate offered.

However, what makes Mudra loans affordable is the credit guarantee support provided by the government, which reduces the lender’s risk. Because of this reduced risk, many banks offer Mudra loans at lower interest rates compared to regular business loans, even without a direct subsidy.

Eligibility Criteria for Mudra Loan

The following is a list of eligibility criteria set for Prime Minister Mudra Yojana Scheme. They are:

• Any individual, sole-proprietorship firm, partnership firm, private limited company, public limited company, or any other legally recognized business can apply.
• Age must be between 21 and 65 years old.
• Business needs to be a non-farm, income-generating small and medium-sized business.
• Applicants should not be on any bank defaulter list and should have maintained a good credit history.
• The applicant should have the skills, acumen, experience, and knowledge required for the business activity.
• Possess the required educational qualifications to carry out business operational requirements.
• The business expansion plan must remain in place.

Documents Required for Mudra Loan

The following is the list of documents that are required for the Prime Minister Mudra Yojana (PMMY) loan scheme. They are:

1. Identity Proof: PAN card/Aadhar card/ Voters ID card/Passport
2. Address Proof: Voter's ID card/Passport/Aadhar card/Utility Bills
3. Business Proof: Business License, Registration certificate, Certificate of Incorporation, GST Certificate, Udyam Certificate, Trade License, Shop Establishment Certificate
4. Income Proof: Business Tax Returns, Financial Statements, Profit & Loss Statement, Balance Sheet, Cash Flow Statement.
5. Photographs: Multiple copies of recently clicked photographs

How to Apply for a Mudra Loan (Step-by-Step Process)

The following is the step-by-step process for obtaining a loan under the Prime Minister Mudra Yojana Scheme. They are:

Offline Application:

• Visit the nearest bank, NBFC, or MFI branch.
• Locate the application form for the PMMY scheme.
• Go through the terms and conditions of the loan.
• Submit the filled-in application form.
• In addition, you need to submit identity proof, address proof, passport-sized photographs, and any other documents required by the lender.

Online Application:

• Visit the udyamimitra portal.
• Go to the “Mudra Loan” segment.
• Register and Log in. Fill in the personal and business details.
• Select the Loan Category, ‘Shishu’, ‘Kishore’, and ‘Tarun’, and enter the required amount.
• Upload the scanned copies of the required documents.
• Submit the application form.
• The lender goes through the application form, verifies the documents, and approved the loan amount in the applicant.

What is a Mudra Card?

Mudra card is a debit card issued to beneficiaries of Mudra loans. This card is the key to their accessing the loan amount. Individuals can make multiple withdrawals with the Mudra card. This is to manage various withdrawals and minimise the interest. The transactions are stored digitally, helping borrowers track their credit history. This card can be used nationwide for cash withdrawals at ATMs/micro ATMs, and for various payments at point-of-sale machines.

Benefits of Mudra Loan

If you are a budding entrepreneur keen to establish your enterprise and require funds, the PMMY is the best choice for you. The following is the list of benefits for getting a loan under the Prime Minister Mudra Yojana scheme. They are:

• Collateral-Free Loans: Unsecured loans that are a great boon for small entrepreneurs, without the risk of losing their assets.
• Access to Funding: The loan obtained from the PMMY scheme is intended for non-corporate, non-agricultural micro and small entrepreneurs in the manufacturing, trading, and service sectors.
• Different Loan Categories: The PMMY scheme offers loans under various categories-Shishu, Kishore, Tarun, and Tarun Plus-giving businesses looking to grow the flexibility they need.
• Competitive Rate of Interest: The ROI charged on these loans is affordable and competitive with market rates.
• Women Entrepreneurs: As the government introduced this loan to support microentrepreneurs, women applicants are given special consideration and a subsidized interest rate.
• Flexible Repayment: The repayment tenure is flexible. Options can always be extended on the loan’s economic life and cash flow.
• Financial Inclusion: PMMY supports small-time entrepreneurs in entering the formal financial system, promoting entrepreneurship and economic growth.
• Online Application: Borrowers can apply for loans online through the Government portal.

Mudra Loan for Women Entrepreneurs

There is an impending need in today’s world for women to be self-reliant. Not only does it give them financial support, but being self-reliant always gives them a significant boost in confidence to face the world. Having this in mind, the Government of India has been very considerate towards Women entrepreneurs and is offering loans under the PMMY scheme at a subsidized interest rate. Most banks are willing to provide a 0.25% lower interest rate to women entrepreneurs than the rate stipulated. The loan supports ventures in the manufacturing, trading, and service sectors.

Disclaimer: This page includes information that has been compiled from many sources and is only offered for informational purposes. Given that this type of data may change over time, we cannot guarantee the accuracy of the information supplied or included within it. It is anticipated that the user will confirm with the relevant source before making any choices or taking any actions.

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