Are you running a Micro, Small, or Medium Enterprise? Whether it is in the infancy phase or an adolescent state, chances are that you require some financial assistance to accomplish your business goals or to fulfill your financial obligations. Either way, relying on Government Loan Schemes for small businesses can prove to be of great help. One such project is the Micro-Units Development and Refinance Agency Loan, also known as MUDRA Loan or MUDRA Yojana.
For the uninitiated, the MUDRA Loan is essentially a financial initiative launched by the Government of India, on April 8th, 2015, under the Pradhan Mantri Jan Dhan Yojana. The scheme aims at offering collateral-free credit to the 577 crores + micro, small and medium businesses, currently functioning across the nation.
Let us take a closer look at the intricate details of this Noteworthy Loan Scheme for small businesses.
Key Objectives of the MUDRA Loan
The MUDRA Loan was launched to meet a wide array of objectives, the most prominent of which are as follows:
To lay down the policy guidelines for financing small/ micro enterprises.
To encourage the registration of all the Microfinance Institutions as well as related entities for regulating easy lending for small and micro enterprises.
To promote the development and growth of small businesses.
To aid the establishment and expansion of companies in the lower-income groups.
To make finance accessible for people belonging to unbanked groups, and to offer help in reducing the cost of funding for them.
To assist in lending preference to people belonging to SC/ST categories.
To regulate Microfinance Institutions, for trading, manufacturing, and service.
MUDRA Loan Interest Rates and Loan Limits
MUDRA Loans are divided into three distinct categories, based on the stage of business growth. The level of your business primarily determines your eligibility limit. Let us take a quick look at these categories and unfold their characteristics.
Shishu: As the name indicates, this category is for businesses in their nascent stage, wherein they can avail of a loan amount of up to Rs. 50,000. The interest in this category of loans is 12% per annum, while the repayment period is four years.
Kishor: This category is designed for established businesses that need working capital. The loan amount offered under this category is between Rs. 50,000 and Rs. 5 lakh. In this case, the interest is determined by the bank which is providing the loan, based on the applicant’s repayment history. The repayment tenure is also dependent on the alternatives available with the bank.
Tarun: Designed for well-established businesses requiring additional funds for business expansion, the Tarun category offers loan amounts of up to Rs. 10 lakh. As is the case with ‘Kishor,’ the interest for ‘Tarun’ is also determined by the bank which is offering the loan, based on the repayment history. The repayment tenure is also dependent on the alternatives available with the bank.
As of today, 60% of the MUDRA Loans are slated to be offered under ‘Shishu,’ while the remaining constitute loans under ‘Kishor’ and ‘Tarun’ combined.
Institutions offering MUDRA Loans
Currently, MUDRA Loans are disbursed by:
27 Public Sector Banks,
31 Regional Rural Banks,
17 Private Sector Banks,
36 Microfinance Institutions,
25 Non-Banking Financial Institutions,
and 4 Co-Operative banks
Purpose of MUDRA Loans
The loan amount disbursed under these loans can be used for one of the following objectives –
Purchase of a Car
Purchase of a Commercial Vehicle
Purchase of a Two-wheeler
As Working Capital
Purchase or Set Up of Plant and Machinery
Revamping of Business Space
Eligibility for MUDRA Loans
To procure a MUDRA Loan, you must own a non-farm business that generates income through trading, manufacturing, or services. Besides, the credit need of your business must be less than Rs. 10 lakh. Moreover, you should not be a defaulter to any financial institution in the past.
You can conveniently apply for a business loan under this scheme, by approaching any of the financial institutions facilitating the Mudra finance. Ensure the application form is duly filled. In addition to the form, you must submit the following MUDRA Loan documents:
Quotation for the Vehicle/Machinery/Item to be purchased
Details, price as well as the supplier details of the Vehicle/Machinery/Item
Identity Proof of Business
Address Proof of the Business
Category Proof if any
If approved, you will not require a processing fee or collateral for disbursement of the Mudra Loan.
Updated On Jun 26, 2026
Written By
Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
