SBI Mudra loan – Eligibility, Documentation, How to apply & credit score

Mudra stands for Micro Units Development & Refinance Agency Ltd and is a scheme started by the Government of India. SBI, the leading bank in our country, offers this scheme to the customers. This scheme was initiated by the Honourable Prime Minister Narendra Modi on 8th April 2015 and is a scheme under Pradhan Mantri Mudra Yojana.

This scheme aims at helping budding as well as established business aspirants belonging to the non-corporate, non-farm MSME units by providing them with credit facilities of up to 10 lakhs INR. It is a collateral-free loan given to applicants who need these funds to establish their businesses, expand them, and modernize them.

If you are a small business owner looking to access some funds needed for your operations, I have discussed the Mudra scheme launched by the Government of India and easily availed through SBI.

Features of mudra loan

The funds of this scheme can be used as working capital or as a term loan. This scheme aims to help individuals with capital start up their own small businesses that aren’t corporate in nature. The repayment tenure of this loan is from 3-5 years. 

The interest rates for these loans are linked to the MCLR rates. MCLR stands for Marginal Cost of Funds based Lending Rate and is the minimum lending rate below which the bank is not permitted to lend.MCLR was introduced by the RBI in 2016 and is closely linked to the bank’s repo rate and fund costs. This was introduced so that borrowers can enjoy the benefits associated with repo rate cuts. If there is a change in the repo rate it will immediately impact MCLR.

 The mudra loan is an unsecured line of credit meaning that it is collateral-free and is covered by the credit guarantee for micro-units and provided by the National Credit Guarantee Trustee Company.

The maximum repayment tenure for this loan is for 5 years with a moratorium (legally, the payment can be delayed in these months; it is a grace period for the borrower) of 6 months. Annual reviews of the business will be conducted by the bank (SBI) and the tenure will be decided based on the activity of the business and the income generated.

There is a margin on the mudra loans per the RBI rules. SBI has no margin for the Shishu category but charges 10% of the loan amount for the Kishore and Tarun category. This means you will be required to pay a 10% down payment to SBI on the amount of loan you are borrowing.

For example, if you want a 500000 INR mudra loan for your business, you need to pay a 10% margin of 50000 INR as a down payment to SBI.

A Mudra Rupay card will be issued to all-cash credit account holders, enabling instant funds access. The funding will be decided on the stage of growth and development of the micro-unit and the entrepreneur’s merit. Looking at the applicant’s credit profile competitive interest rates are determined.

There are additional benefits to this scheme as well. The Mudra Rupay cards have daily cash withdrawals and Point of Sales limits for each of the categories. I hope the below excerpt gives you better clarity.

This scheme also has different categories based on the funds you are looking to borrow.

Different categories of mudra loan

There are 3 different categories of mudra loans depending on the amount of funds borrowed:

SHISHU category: Loans funds up to 50000 INR and has no processing fees.

KISHORE category: Loans funds from 50001 to 500000 INR and has no processing fees

TARUN category: Loans funds from 500001 to 1000000 INR with 0.5% of the loan amount as processing fee along with taxes.

Who it aims to help?

The MUDRA scheme aims to help the non-corporate small business sector (NCSBS) without having access to any financial support. According to government sources, more than 90% of this sector does not have access to formal sources of finance. Hence, this scheme was set up through a statutory enactment to help bring this sector to the mainstream. 

The target customers of this scheme are small business owners, small manufacturing units, service sector units, shopkeepers, fruit /vegetable vendors ruck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, and others, both in rural and urban areas.

So, for example, you want to open an ice-cream parlor based on a franchise model, you can approach SBI Bank and submit your application for this scheme. Based on your eligibility and business model your loan will get approved and the funds will be disbursed to you.

Eligibility criteria for Mudra Loans

To avail of the mudra loan, you need to be a citizen of India and be aged anywhere between 18 and 60 years. It can be availed by entrepreneurs who want to set up their business or further expand their existing business. Various business organizations from a sole proprietorship to partnership can avail of this loan.

If you are a start-up, you need to present a viable business model, clearly depicting the profit-making ability of your business to avail of this loan. Start-ups usually come under the Shishu category and get around 50,000 INR, but then again it depends on the kind of business you are in. 

Established businesses in the MSME sector that are already making profits need to provide proof of profits and also substantiate the need for machinery and equipment up gradation and can avail the loans under Kishore and Tarun categories.

If you are already an established business and require funds, you would need to explain how the funds will be used to generate more profits and generate more employment opportunities.

How to apply from SBI Bank?

If you are an existing customer of SBI Bank maintaining a savings bank account or a current account, you can apply for e-mudra online up to 50,000 INR on their official website or by clicking this link: SBI e-Mudra Loan. Your account should be active for a minimum of 6 months.

If you are not a customer of SBI bank, you can visit the nearest SBI branch to avail of this loan. It is not mandatory for you to be an SBI customer to avail of this loan. 

To avail of the loan online from their e-mudra portal, I have listed the steps below:

  • Visit SBI e-Mudra Loan Click on proceed of the homepage
  • Read the instructions given and click on ok to proceed further
  • Key in your mobile number, SBI savings/current account number and provide the loan amount required
  • Click on proceed again
  • Fill in the required details on the online application, you can also select your answer from the drop down menu
  • Upload the required documents
  • Accept the terms and conditions of SBE e-mudra
  • Provide your aadhaar number
  • Tick the consent box that will use your aadhaar for e-sign
  • You will get an OTP to your mobile number that is registered with Aadhaar
  • Enter the OTP to complete your online application

This facility of e-mudra by SBI helps in disbursing loans at a faster rate with minimum documentation. For any queries regarding this scheme, you can contact SBI for further directions

Documentation required for this scheme

I have also listed the documents required for availing this facility:

  1. ID Proof: Any ID proof will do. Like driver’s license, PAN, Aadhaar, passport, voter’s ID, or any other photo ID proof.
  2. Residence Proof: Telephone, bill, gas bill, electricity bill, property tax receipt, Aadhaar Card, Passport, Certificate issued by a government authority, local Panchayat or municipality, etc.
  3. Bank Statement: Last 6 months bank statement from your primary bank
  4. Photograph: 2 passport size photographs that have been taken recently
  5. Caste Certificate: Only applicable to SC, ST, OBC, or minority group
  6. Income tax documents: Your IT returns for the past 2 years along with the tax returns of your business entities should be submitted.
  7. Business Proof: Includes copies of relevant licenses, registration certificates, lease or rental agreements, documents that establish ownership, identity, and address of the business unit.
  8. Quotations for the proposed purchase of equipment or machinery: The quotation for the machines or equipments that are needed for the business needs to be submitted along with the application.

The loans provided under this scheme are unsecured hence there is no need for collateral. However, SBI might ask you to hypothecate any assets you might have like your stocks, or term deposits.

Hypothecation means you need to pledge an asset as collateral to SBI but you still retain the asset’s title, ownership, and rights. You will receive all the income that is earned from your asset.But, if you default, SBI can seize your asset and liquidate it to make up for the missed payments.

CIBIL scores don’t impact this scheme as these loans are issued collateral-free. I have discussed the impact of credit scores and how a high score can work to your advantage when availing this facility.

Impact of Credit score on Mudra

As discussed earlier Mudra loans don’t require a credit score, but having a high credit score can work to your advantage. It will give you leverage while negotiating the terms and conditions of the loan with SBI, especially when it comes to the interest rates and EMI. You can also avail various banking facilities by having a good credit score.

In case you have good credit scores please showcase it along with your application, even though it’s not mandatory.


The mudra scheme is an ideal choice for all those business owners who didn’t have access to funds before. This scheme was introduced to help such owners and encourage the entrepreneurship spirit in India. It has also succeeded in generating a lot of employment. 

This in turn has helped the GDP grow. I hope my blog on the Mudra scheme has given you a better picture of this facility. It can be easily available, has no collateral, and has competitive interest rates. The mudra credit has become the most effective way to make your entrepreneurial dream a reality.

Frequently Asked Questions

What is the Mudra loan Rupay card?

The Mudra loan Rupay card is issued when you have successfully opened a mudra loan with SBI. The card is both a debit card and an ATM card that can be used to withdraw money as well as make point of sales transactions to enable business transactions. It also has a withdrawal limit which I have discussed above.

What is the grievance mechanism against bank officials in case of any untoward event?

Any grievance regarding the mudra loan should be registered with the higher authorities of the loan issuing bank. If you have applied for this facility in SBI, you need to address the regional manager or the zonal manager of SBI regarding the loan.

Is PAN compulsory to avail of Mudra loans?

PAN is not compulsory to avail of this facility. But you need to satisfy the KYC criteria of the financing institution, in this case, SBI.

Are persons of disability (handicapped) eligible for this loan?

Yes, a person of disability can also avail of this facility as long as they are an Indian citizen and their age is between 18 and 60 years.

Are there any subsidies provided under the SBI loan mudra scheme?

There are no subsidies provided under the SBI Loan mudra scheme.

Also read,

  1. How to get a personal loan for a CIBIL score of 550?
  2. How to get a loan with bad credit scores in India urgently?
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