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MUDRA (Micro Units Development and Refinance Agency) has launched micro financing options for the MSME sector under the Pradhan Mantri Mudra Yojana (PMMY). This scheme was launched to provide the MSMEs with easy and collateral free access to funds up to a maximum of Rs. 10,00,000. The loans under PMMY are divided under three schemes depending on the quantum of the loan required as well as the stage of the business organization.

Eligibility under PMMY

The loans are PMMY and are targeted specifically for small businesses. The underlying condition for this scheme is that the business unit should be a non-corporate and from the non-farm sector. Other sets of conditions that are required for eligibility are stated as under.

  • The business unit or the individual has to be engaged in income generating activities or should have income generating avenues.
  • The eligible businesses have to be engaged in either manufacturing or trading activities or service related activities. This requirement also includes allied agricultural activities since 1st April 2016.
  • The age requirement for the entrepreneurs to qualify for the loans under OPMMY is minimum 18 years of age and maximum 65 years of age.
  • The applicant has to have a good credit history
  • Another requirement is that the applicant should not have defaulter of any financial institution
  • The applicant should also possess the required skills or talent to start a new business or expand an existing one.

Eligible entities under MUDRA scheme can be any of the following persons/entities

  • Professionals
  • Business owners
  • Traders/ Shopkeepers
  • Manufacturers
  • Startups
  • Small Industries

The above list is suggestive and not exhaustive.

Documents for PMMY

The scheme is aimed to provide prompt and hassle free financial assistance to the small industries or small businesses belonging to the MSME sector. The documentation process has thus been kept very simple and requires minimum documentation keeping this in mind. The majority of documents required under this loan scheme are basic KYC documents and a few additional ones that are required to ascertain the business proof and income proof among others.

The list of documents required is stated below.

  • Identity Proof (Aadhaar Card, PAN Card, Voter's Id, etc.)
  • Address Proof (Aadhaar Card, Utility Bills, Passport, etc.)
  • Income Proof (Latest ITR/ Financial Statements/ Balance Sheet and P&L Statement)
  • Business Proof (Partnership Deed, Memorandum and Articles of Association as the case may be)
  • Business Registration Certificate
  • Registration under the Required Statutory Acts (shops and Establishments’ Act, MSME Registration, Etc.)

Loan Details under PMMY

As mentioned above, the loans under PMMY are divided into 3 categories depending on the amount of loan required as well as the stage of business (Start/Sustain/Expansion). The loans details under the scheme are mentioned below.

Shishu Mudra Yojana

Under this scheme the loans are offered for starting or setting up of a new business unit. The maximum amount of loan allowed under this scheme is Rs. 50,000.

The rate of interest under this scheme usually is on the lower side given the lower amount of loans as well as longer repayment tenure.

Kishore Mudra Yojana

Kishore Mudra loans are for the next stage of business development i.e. sustenance of the business organization. The loans under this scheme are from a minimum amount of Rs. 50,001 to a maximum amount of Rs. 5,00,000. The repayment tenure is up to 5 years in majority of cases, however, loans for a higher duration of 7 years can also be availed under this scheme for selected borrowers depending on case to case basis.

Tarun Mudra Yojana

This is the final stage or highest stage of loans available to the small and medium enterprises under the Mudra Loan Scheme. The loans under this scheme are from Rs. 5,00,001 to Rs. 10,00,000. The repayment tenure is 5 years but can be increased up to 7 years at the discretion of the bank.

Interest Rates for Mudra Loans

The Government has enabled the following institutions to offer Mudra Loans under the PMMY scheme.

  • Public Sector Banks
  • Private Sector Banks
  • Regional Rural Banks (RRBs)
  • Co-operative Banks
  • Micro Finance Institutions (MFIs)
  • Non Banking Finance Companies

The rates of interest offered by the lenders for loans under the Mudra Scheme are stated below.

BankRate of Interest per annum

State Bank of India

8.65% to 16.95% approximately

Bank of Baroda


Bank of India

As prescribed by the Bank (MCLR linked)

Bank of Maharashtra

MCLR+BSS+0.75% - MCLR+BSS+2.00%

Canara Bank

As per prevailing Guidelines under MSME

Corporation Bank

Starts from 9.50% approximately

IDBI Bank Ltd.

Linked to Bank’s Base Rate and Rating

Punjab National Bank


Syndicate Bank

8.75% onwards

Oriental Bank of Commerce

10.65% onwards

Axis Bank

As per Bank Guidelines

Federal Bank

12.20% onwards

HDFC Bank Ltd.

As per Bank Guidelines

ICICI Bank Ltd.

As per Bank Guidelines

City Union Bank Ltd.

12.00% - 12.50% approximately

Karur Vysya Bank Ltd.

12% onwards approximately

Kotak Mahindra Bank Ltd. 

11.5% onwards approximately

Nainital Bank Ltd.

10.10% onwards approximately

IndusInd Bank Ltd. 

As per Bank Guidelines

DCB bank Ltd.

As per Bank Guidelines

Telengana Grameena Bank

12.50% approximately

Kerala Gramin Bank

10.60% to 11.60% approximately

Fullerton India Credit Co.Ltd

17% to 21% approximately

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.

COVID-19 Aid in Interest Rates

The recent coronavirus pandemic has impacted one and all in the world. The most affected from the result of the nationwide lockdown on account of COVID-19 are the small businesses. The Government has come out with a series of relief packages especially for the MSME sector. These measures include not only the change in the definition of the basic definition of the micro, small and medium industries according to the Ministry of MSME but also a moratorium in the existing loans by all the lenders across the nation as well as relief in the interest rates for Shishu loans under PMMY in the form of interest subvention of 2%.

FAQs – Mudra Loan Interest Rates

1. What are MUDRA Loans?

Mudra Loans are the loans targeted for the MSME sector under the Pradhan Mantri Mudra Yojana.

2. What is the maximum loan amount that can be availed under the scheme?

The maximum loan amount available under the scheme is Rs. 10,00,000.

3. What is the interest subvention offered by the Government due to COVID crises?

The Government has offered an interest subvention of 2% due to the ongoing COVID crises.

4. What are the interest rates under the SHISHU scheme of PMMY?

The interest rates under the SHISHU scheme of PMMY are lower and usually start from as low as 8.50% or 8.65% depending on the lender and the scheme guidelines.

5. What is the maximum age limit for Mudra loans?

The maximum age limit for eligibility under Mudra loans is 65 years of age.

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