Pradhanmantri Mudra loan Yojana – Apply, Eligibility & Credit score

Pradhanmantri Mudra loan Yojana stands for Micro Units Development & Refinance Agency Ltd and is a scheme started by the Government of India. All leading banks, financial institutions, RRBs, MFIs, and NBFCsin our country offer 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. 

According to a SKOCH Group India’s leading think tank report, the scheme has generated around 1.68 incremental jobs in the first two years of its initiation.

If you are a small business owner looking to access some funds needed for your operations, then we have discussed about the Pradhanmantri Mudra loan Yojana launched by the Government of India and easily availed through 

pradhan mantri mudra yojna

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Features of the Pradhanmantri Mudra loan Yojana

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 small businesses that aren’t corporate. 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 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. The financial institution will conduct annual reviews of the business 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 as per the RBI rules. The margin for the Shishu category depends on the financial institution you are borrowing from butmost of them charge 10% of the loan amount for the Kishore and Tarun category. This means you will be required to pay a 10% down payment based on the loan you are borrowing.

For example, if you want a 900000 INR mudra loan for your business, you need to pay a 10% margin of 90000 INR as a down payment to the financial institution.

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.

Mudra loan withdrawal limit

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

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. You should also check the eligibility of mudra loan through SBI.

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 parlour 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 the Pradhanmantri Mudra loan Yojana

To avail 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 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 this loan. Start-ups usually come under the Shishu category and get around 50,000 INR, but 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 online

You can apply online for this loan at . I have also given the steps to complete this procedure

  • As soon as you go to the link above there is a section on the page that asks you to apply for the loan
  • Once you are directed to this page select the option that suits you the best New entrepreneur, existing entrepreneur or Self-employed professional
  • They will also ask for your name email and mobile number
  • An OTP will be generated and this step will open an account with this scheme.
  • Fill the online application and key in the required details
  • Upload the required documents in the correct format
  • Agree to all the terms and conditions

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 and your business entities’ tax returns 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, financial institutions 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 financial institutions, but you still retain the asset’s title, ownership, and rights. You will receive all the income that is earned from your asset. But, in case you default financial institutions can seize your asset and liquidate it to make up for the payments missed.

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 financial institutions, especially when it comes to the interest rates and EMI. You can also avail various banking facilities by having a good credit score.

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

We have given you some statistics to understand how this scheme has helped the non-corporate small business sector. Hopefully, this will give you a better picture of this scheme and aid you in taking better decisions. Also, if you want more information, you can visit their official website at this link

Mudra scheme statistics for your information: The government has sanctioned more than 15.5 lakh crore since its inception. This can be seen from the excerpt from Economic times India’s leading financial newspaper.

And for Financial Year 2022 loans worth 3804 crores have been sanctioned by 13 public sector banks.


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. We hope our information 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. This is all about the Pradhanmantri Mudra loan Yojana

Also read,

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

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