Starting your own business is a dream for many Indians, especially young entrepreneurs, small traders, and self-employed workers. However, one of the biggest challenges in turning that dream into reality is access to affordable finance. To address this issue and promote self-employment across the country, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY).
This flagship scheme enables eligible individuals to obtain business loans at affordable interest rates through banks and financial institutions—without the need to provide collateral. In a recent Union Budget, the maximum loan limit under the scheme was increased from ₹10 lakh to ₹20 lakh, bringing new hope to small and growing enterprises.
If you are planning to start a small shop, service business, manufacturing unit, or transport venture, this detailed guide explains everything you need to know about eligibility, loan categories, documents, and the step-by-step application process.
What Is Pradhan Mantri Mudra Yojana (PMMY)?
The Pradhan Mantri Mudra Yojana is a government-backed credit scheme designed to support micro and small enterprises operating in the non-corporate, non-farm sector.
The primary objectives of the scheme are:
- Promote entrepreneurship
- Generate employment opportunities
- Strengthen the Indian economy
- Provide financial inclusion
- Encourage self-reliance among youth
Under PMMY, loans are provided through public sector banks, private banks, regional rural banks, microfinance institutions, and NBFCs.
The scheme focuses particularly on small traders, artisans, service providers, and first-time entrepreneurs who may not have access to traditional business loans.
Revised Loan Limit: Big Boost for Small Businesses
In a major update, the government increased the maximum loan amount under the Mudra scheme from ₹10 lakh to ₹20 lakh.
This move is particularly beneficial for:
- Expanding businesses
- Entrepreneurs upgrading operations
- Small manufacturers scaling production
- Traders expanding inventory
The higher limit gives micro-entrepreneurs the confidence to plan larger ventures without worrying about collateral requirements.
Introduction of “Tarun Plus” Category
A special expansion under the scheme is the Tarun Plus category.
This category is meant for:
- Existing Mudra borrowers
- Entrepreneurs who have successfully repaid previous Mudra loans
- Business owners seeking additional funds for expansion
Under Tarun Plus, eligible entrepreneurs can now avail loans up to ₹20 lakh, provided they have maintained a good repayment record.
This creates a growth ladder—borrow small, repay successfully, and then access higher funding.
Types of Mudra Loans
Mudra loans are categorized into three main segments depending on business stage and funding requirements:
1. Shishu (Up to ₹50,000)
Ideal for:
- First-time entrepreneurs
- Small vendors
- Street sellers
- Home-based businesses
This category supports very small start-ups and working capital needs.
2. Kishore (₹50,001 to ₹5 lakh)
Suitable for:
- Growing businesses
- Small shop owners
- Service providers expanding operations
This helps businesses that have moved beyond the initial stage.
3. Tarun (₹5 lakh to ₹10 lakh)
For:
- Established small businesses
- Entrepreneurs scaling operations
Now, under the extended framework, Tarun Plus allows loans up to ₹20 lakh for eligible borrowers.
Businesses Eligible Under Mudra Loan
The Mudra scheme is not limited to one industry. It covers a wide range of activities in manufacturing, trading, and service sectors.
Retail and Trading
- Small grocery shops
- Supermarkets
- Vegetable and fruit vendors
- Garment shops
- Mobile stores
Service Sector
- Beauty parlors
- Gyms
- Tailoring shops
- Dry cleaning services
- Photography studios
- Repair workshops
Manufacturing Activities
- Papad and snack-making units
- Bakery production
- Small garment units
- Furniture manufacturing
- Handicrafts
Transport Sector
- Taxi purchase
- Auto-rickshaw financing
- Goods transport vehicles
- Delivery vans
Agriculture-Related Allied Activities
- Dairy farming
- Goat rearing
- Fish farming
- Poultry
- Beekeeping
These allied activities are eligible because they support income generation beyond traditional farming.
Who Is Eligible to Apply?
To apply for a Mudra loan, applicants must meet certain eligibility criteria:
Age Requirement
- Applicant must be at least 18 years old.
Business Intent
- Must be planning to start a new business
OR - Already running a small enterprise
Credit Score
While there is no strict rule, banks generally prefer applicants with:
- CIBIL score of 650 or above
- Clean repayment history
However, first-time entrepreneurs may still be considered based on project viability.
Non-Corporate, Non-Farm Sector
The business must fall under micro or small enterprise category and should not be a large corporate entity.
Collateral-Free Loan: Biggest Advantage
One of the most attractive features of PMMY is that it offers collateral-free loans.
In traditional bank loans, borrowers are required to pledge assets such as:
- Property
- Gold
- Land
- Fixed deposits
Under Mudra, no physical collateral is required.
Instead, loans are backed by a government-supported Credit Guarantee Fund, which provides security coverage to banks.
This makes it easier for:
- Middle-class families
- Youth without assets
- First-generation entrepreneurs
to access funding confidently.
Where to Apply for Mudra Loan?
Applicants can approach:
- Public sector banks
- Private banks
- Regional rural banks
- Cooperative banks
- Microfinance institutions
- NBFCs
It is advisable to apply at the bank where you already hold an account.
How to Apply Offline?
Step 1: Visit your nearest bank branch.
Step 2: Request a Mudra loan application form.
Step 3: Fill in business details carefully.
Step 4: Attach required documents.
Step 5: Submit the form and attend verification.
Bank officials may ask for clarification regarding:
- Business plan
- Expected income
- Cost estimates
- Repayment capacity
Online Application Process
Applicants can also apply online through the official government credit portal:
JanSamarth Portal
Step-by-Step Online Process:
Step 1: Visit the JanSamarth Portal.
Step 2: Register using your mobile number.
Step 3: Create login credentials.
Step 4: Select Mudra Loan category.
Step 5: Fill in personal and business details.
Step 6: Upload required documents.
Step 7: Submit the application.
After submission, you may need to visit your selected bank branch for final verification.
Documents Required
To apply for a Mudra loan, keep the following documents ready:
- Aadhaar Card
- PAN Card
- Address proof (Ration card / Electricity bill)
- Udyam Registration Certificate
- Bank statement (last 6 months)
- Business project report
- Passport-size photographs
- Caste and income certificate (if applying under reservation benefits)
Importance of Project Report
A well-prepared project report increases the chances of approval.
It should include:
- Business objective
- Investment requirement
- Expected revenue
- Monthly expenses
- Profit estimate
- Market demand
Banks assess the feasibility before sanctioning loans.
Interest Rates and Repayment
Interest rates vary depending on:
- Lending bank
- Loan category
- Applicant profile
Repayment tenure usually ranges from 3 to 5 years, depending on loan size.
Timely repayment improves credit score and eligibility for higher funding under Tarun Plus.
Benefits of Mudra Loan Scheme
- No collateral required
- Easy access to finance
- Encourages entrepreneurship
- Boosts employment generation
- Supports rural and urban businesses
- Promotes financial inclusion
Why Mudra Loan Is Important for India’s Economy
Small and micro enterprises form the backbone of India’s economy.
By supporting small businesses, the scheme:
- Creates jobs
- Reduces unemployment
- Encourages innovation
- Strengthens local production
- Promotes “Make in India” vision
Entrepreneurship not only benefits individuals but also drives national growth.
Final Thoughts
The Pradhan Mantri Mudra Yojana is one of India’s most impactful credit schemes for small entrepreneurs. With the increased loan limit of ₹20 lakh and the introduction of Tarun Plus, the scheme now provides greater opportunities for expansion and growth.
Whether you are planning to open a shop, start a manufacturing unit, launch a service business, or invest in transport vehicles, Mudra loans can provide the financial push you need.
Prepare your documents, create a solid business plan, maintain a good credit record, and apply through your bank or online portal.
