PM Mudra Yojana: How to Get a Collateral-Free Business Loan up to ₹20 Lakh
The Pradhan Mantri Mudra Yojana (PMMY) lets small and micro businesses borrow without putting up any collateral or security. It is meant for the millions of tiny enterprises — shopkeepers, food stalls, small manufacturers, repair shops, beauty parlours, transporters — that struggle to get a loan from a bank because they have nothing to pledge.
If you run, or want to start, a small non-farm business, this guide explains exactly how much you can borrow, who qualifies, and how to apply.
What is the Mudra loan
Mudra (Micro Units Development & Refinance Agency) loans are given by banks, NBFCs, small finance banks and microfinance institutions to non-corporate, non-farm micro and small enterprises. The two things that make them special:
- No collateral — you don't have to pledge property or assets.
- No processing fee on the smallest loans, and interest rates set per RBI norms (they vary by lender, so compare).
The loan can be for a new business or to grow an existing one.
The four loan categories
Mudra loans are grouped by how much you borrow:
| Category | Loan amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishore | ₹50,001 to ₹5 lakh |
| Tarun | ₹5 lakh to ₹10 lakh |
| Tarun Plus | ₹10 lakh to ₹20 lakh (for those who took and fully repaid a Tarun loan) |
Most first-time borrowers start with Shishu or Kishore, then move up as the business grows and the repayment record builds.
Who can apply
You are eligible if you are an Indian citizen running (or starting) a non-farm, income-generating micro or small business — for example:
- Shops, kirana and retail traders
- Food stalls, tiffin services, small restaurants
- Tailors, artisans, repair services, salons
- Small manufacturing or processing units
- Transport vehicles used for the business
Allied agriculture activities like dairy, poultry and beekeeping are also covered. Pure crop farming is not — that is served by the Kisan Credit Card instead.
What you can use the money for
The loan is strictly for business needs, such as:
- Working capital (stock, raw materials, daily running costs)
- Buying equipment, machinery or tools
- A commercial vehicle used in the business
- Setting up or expanding the business premises
A Mudra RuPay card can also be issued against the loan for easy working-capital withdrawals. The money is not for personal expenses.
Documents you need
- Identity proof — Aadhaar and PAN
- Address proof
- Recent passport-size photos
- Business proof / details (registration, licence, or a simple business plan for new units)
- Bank statements (usually last 6 months) for existing businesses
- Quotations for any machinery or equipment you plan to buy
How to apply, step by step
Step 1: Choose a lender
Any bank, small finance bank, NBFC or microfinance institution that offers Mudra loans will do. Start with the bank where you already have an account — your existing relationship makes approval easier.
Step 2: Apply online or in branch
- Online: use the government's Jan Samarth portal (jansamarth.in) or udyamimitra.in, which let you apply to multiple lenders in one place.
- In person: visit the branch with your documents and ask for the Mudra loan application.
Step 3: Fill the application and attach documents
Give your business details, the amount you need, and the category (Shishu / Kishore / Tarun). For a new business, attach a short, realistic plan showing what the money is for and how you'll repay.
Step 4: Lender review and sanction
The lender checks your documents, business viability and credit history. For Shishu loans the process is lighter; larger Kishore and Tarun loans get a closer look. On approval, the amount is disbursed to your account — often with a Mudra card for working capital.
Why applications get rejected — and how to avoid it
- Weak or missing business proof → keep registration, licences and a clear plan ready
- Poor credit history → clear overdue dues before applying; start with Shishu to build a record
- Unrealistic loan amount → ask for what the business genuinely needs and can repay
- Incomplete documents → double-check the lender's checklist before submitting
Frequently asked questions
Do I need collateral for a Mudra loan? No. Mudra loans are collateral-free — that is the whole point of the scheme.
What is the interest rate? There is no single fixed rate. Each lender sets it as per RBI guidelines, so it varies — always compare two or three lenders before choosing.
Can a new business get a Mudra loan? Yes. New units can apply, usually in the Shishu category, with a simple business plan.
Is Mudra only for manufacturing? No. Trading, services and allied agriculture (dairy, poultry, etc.) are all covered — not pure crop farming.
How do I get more than ₹10 lakh? The Tarun Plus category allows ₹10–20 lakh, but only for borrowers who have already taken and fully repaid a Tarun loan.
Check what else you qualify for
Running a small business often means you're eligible for more than one scheme. Use our eligibility checker to see what fits you in a minute, and if you're a street vendor, look at PM SVANidhi — a dedicated collateral-free working-capital loan.
Loan terms, categories and limits can change. Always confirm the latest details on the official portals — mudra.org.in and jansamarth.in — before applying.