PRADHAN MANTRI MUDRA YOJANA/ MUDRA Loan : Detailed explanation of scheme and Application procedure

Table Of Content


What is Mudra Loan?

PRADHAN MANTRI MUDRA YOJANA (PMMY) is a flagship scheme of Government of India launched on 8th April 2015. The objective of the scheme is to “fund the unfunded” i.e., to provide funding to the micro and small enterprises (non-corporate, non-farm) whose credit requirements are below ten Lakh rupees. This scheme is launched under Micro Units Development and Refinance Agency (MUDRA). The responsibilities of MUDRA is to make policy guidelines, credit guarantee schemes and create a good framework to serve the micro business. MUDRA is also responsible to also look after the registration and regulation of the Micro Finance Institution entities.

Key highlights of the scheme

  • Mudra has created 3 products. This classification is done on the basis of their growth stage, development and funding requirements. The three categories are as follows:
  1. Shishu category: loan coverage by this category is up to Rs. 50,000 (Fifty thousand)
  2. Kishore category: loan coverage by this category is above Rs. 50,000 and up to Rs. 5, 00,000.
  3. Tarun category:loan coverage by this category is above Rs. 5, 00,000 and up to Rs.10, 00,000.
  • Loans under this scheme are collateral free loans.


Eligibility criteria For getting a loan under this scheme:

All Non-Corporate Small Business Segment (NCSBS) are eligible for MUDRA loan. The list comprises proprietorship or partnership firms which are running as

  • Small manufacturing units,
  • Service sector units,
  • Shopkeepers
  • Fruits/vegetable vendors
  • Truck operators
  • Food-service units
  • Repair shops
  • Machine operators
  • Small industries
  • Food processors
  • Other industries in rural and urban areas.


Eligibility criteria for Lenders :

Eligibility criteria to take a loan under this scheme are given below:

  • The scheduled commercial banks in public and private sector must have 3 years of continuous track record and their net NPAs not exceeding 3%. Other than this, their minimum net worth should Rs.100 crore and not less than 9% of CRAR.
  • The rural banks must have a net NPA of 3%. Other than this, they must have a profitable operation, CRAR more than 9% and must not carry any accumulated losses.
  • Micro Finance Institutions and Small Business Companies are also eligible to lend the loan if they fulfill the requirements.

An applicant can get Mudra loan for the following purposes:

  • Car loan
  • Commercial vehicle loan
  • Two-wheeler loan
  • Loan for working capital requirement
  • Loan for buying plant and machinery
  • Renovating the business space
  • Dropline overdraft or working capital loans or overdraft facility is provided to business groups and rural businesses.




MUDRA loan is availed in the form of a MUDRA card (RuPay card). This helps the borrower to get credit in a hassle free and flexible manner. The MUDRA card will provide working capital in the form of Cash Credit or Over Draft. The card can be used to draw cash from ATM or make purchases using Point of Sale credit card swiping machines. The borrower can also repay the amount by using MUDRA card whenever a surplus is available, thereby reducing interest burden.


Mudra loan


Application process to avail Mudra Loan


To apply for Mudra Loan for all the categories, an applicant will have to go through the following process:

  • So the borrower who wishes to take a loan under the Mudra scheme must visit the closest private or the commercial bank.
  • Then there she/he will have to present the business idea with the loan application and the other required documents.
  • Then the borrower will have to fulfill all the formalities as per the bank instructions.
  • Finally, the loan will be sanctioned and the applicant will receive a mudra after completing the above steps.


Documents Required

To get the MUDRA loan applicant needs the following documents.

  • MUDRA Loan Application form
  • Applicant’s business plan should be ready beforehand.
  • Identity proof like PAN card / Driving License / Aadhaar Card / Passport etc.
  • Residence proof like recent telephone bill/electricity bill or property tax receipt etc.
  • Applicant’s recent photograph (less than 6 months old)
  • Quotation of machinery or other items should be ready with the name of supplier and prices of machinery.
  • and also need to have proof of business address

NOTE:- Loans under this scheme are collateral free loans and no other fee.

Application form for Shishu

Mudra Loan application Form

Checklist for Shishu Application

documents required for Shishu loan

Read more about Mudra Loan

Read about Seekho Aur Kamao Scheme

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