Pradhan Mantri Mudra Yojana – Loan for Startups

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.

Who can Borrow through Pradhan Mantri Mudra Yojana?

Individual business owner, private companies, public sector companies, proprietary firms or any legal business entity can apply for the Mudra loan.

Any business owner who has not defaulted on any loan repayment previously is eligible to borrow under the PMMY (Pradhan Mantri MUDRA Yojana). i.e it requires a good CIBIL score to avail PMAY.

Mudra Loan can be availed by small businesses owners who run specific business in manufacturing, services or trading sector. Funds through MUDRA has to be especially utilized for marketing purposes, or to increase the working capital or for acquiring capital assets for the business growth.

Interest rates

Funding from MUDRA Scheme are offered with nominal interest rates and can vary depending upon the amount and tenure of the loan.


MUDRA Loans under Shishu Yoyana can be availed up to the maximum limit of ₹50,000. The interest under this scheme starts from 12% annually.


MUDRA Loans exceeding ₹50,000 but up to ₹500,000 comes under Kishore Yojana. The rate of interest varies depending on the bank sanctioning the loan and the creditworthiness of the applicant.


MUDRA Loans exceeding ₹ 500,000 but are up to ₹1,000,000 come under Tarun yojana. The rate of interest applicable to this scheme also varies on a case to case basis.

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:

  • The applicant should be a citizen of India.
  • The applicant should have a business plan.
  • The business should belong to the non-farm income generating category, such as manufacturing, processing, trading or service sector.
  • The maximum loan amount required should be up to ₹1,000,000.
  • 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 for 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.

(Updated – 20-05-2019)