Pradhan Mantri Mudra Yojana for Startups, Mudra short for Micro Units Development & Refinance Agency, is a financial institution setup to provide financial assistance to small businesses to borrow loans from banks up to ₹1,000,000, for non-farming income generating activities. Under this scheme, the banks issue loans up to ₹1,000,000 to small businesses without any collateral. MUDRA itself does not provide loans directly; it facilitates the same through different banks, NBFCs and other FIs. The PM Narendra Modi launched the MUDRA scheme on April 8, 2015. MUDRA aims to provide finance or refinance to the “Last Mile Financial Institutions (LMFIs) like Commercial Banks/RRBs/Cooperative Banks/NBFCs/ MFIs and other financial intermediaries which are in the business of financing Micro Enterprises in manufacturing, trading and service sector units, shopkeepers, fruits / vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others in rural and urban areas. Accordingly, MUDRA would be extending refinance to the Banks for their lending to Micro Enterprises in the country.

What defines a Startup in India?

The Department of Industrial Policy and Promotion (DIPP) defines a startup as an entity that is headquartered in India, and was opened less than seven years ago, and has an annual turnover less than ₹25 crore. For the biotechnology sector, the eligibility period is 10 years. To be defined as a startup a venture should also be working towards innovation, development, deployment, and commercialization of new products, processes, or services driven by technology or intellectual property. The government also considers such ventures to be startups if they meet above criteria and propose a scalable business model with a high potential to generate employment or create wealth. If the venture is a part of an already existing business then it will not be considered as startup. Also a startup should not be a part of any public unit or public undertakings.

START UP INDIA: Boon for Start-ups

Loans under Pradhan Mantri Mudra Yojana

MUDRA Bank grants three types of loans, based on the stage of growth and financial requirements of the startup:

  1. Shishu: If the startup requires loan amount within ₹50,000 the loan falls under ‘Shishu’ category.
  2. Kishor: If the startup requires loan amount above ₹50,000 and within ₹500,000, the loan falls under ‘Kishor’ category.
  3. Tarun: If the startup requires loan amount of more than ₹500,000 and up to ₹1,000,000, the loan falls under ‘Tarun’ category.


MUDRA loan can be availed for a variety of purposes which provides income generation and employment creation in Manufacturing, Services, Retail and Agriculture allied activities.

What are the Eligibility Criteria for Pradhan Mantri Mudra Yojana?

Below are the basic eligibility criteria to be fulfilled by anyone willing to avail a loan under PMMY:

  1. The applicant should be a citizen of India.
  2. The applicant should have a business plan.
  3. The business should belong to the non-farm income generating category, such as manufacturing, processing, trading or service sector.
  4. The maximum loan amount required should be up to ₹1,000,000.
  5. To avail loans under PMMY, the borrower/applicant may have to follow the usual terms and conditions of the lender.

Guide to Funding Your Start-up Business in India

What is the process of applying a loan from MUDRA Yojana?

A startup can apply for a loan under MUDRA Yojana in a simple 5 step process as below:

Step 1: To obtain the scheme application form, the applicant will need to visit the nearest bank associated with the scheme. The MUDRA portal provides a list of lenders under the scheme.

Step 2: The applicant would need to fill up the application form and submit it along with documents required.

Step 3: The applicant would need to provide documents such as Identity Proof, Residence Proof, Applicant’s Photograph, Business Address Proof and Proof of Category of the business. Depending on the type of loan applied for, additional documents may be required.

Step 4: The banks do not charge a processing fee for loans under PMMY. Additionally the loans are collateral-free.

Step 5: Upon loan approval the applicant will receive a MUDRA Card, which is functionally similar to a credit card.