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Pradhan Mantri Mudra Yojana (PMMY) – A Complete Guide

Companies from both profit and non-profit sector can avail a loan under Pradhan Mantri Mudra Loan scheme and can avail a loan of up to Rs.10 lakh to kickstart their business.

Posted by CMV360 Editorial Staff on 10-Feb-2023 12:26 PM



Pradhan Mantri Mudra Yojana (PMMY) is a government-backed scheme launched by the Prime Minister of India, Narendra Modi, in 2015. The scheme is administered by the Micro Units Development and Refinance Agency (MUDRA) and is implemented through participating banks and other financial institutions.

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The main objective of PMMY is to provide financial assistance to micro, small and medium enterprises (MSMEs) and non-corporate small businesses, who otherwise would not have access to credit from formal financial institutions. The scheme provides loans up to Rs. 10 lakhs to these businesses, which can be used for various purposes such as working capital, machinery, equipment, and vehicles.

What is the Pradhan Mantri Yojana Scheme?

Pradhan Mantri Yojana was launched in 2015 with the aim to help small scale businesses expand and attain success. Companies from both profit and non-profit sector can avail a loan under this scheme and can avail a loan of up to Rs.10 lakh to kickstart their business.

Entities Eligible for a Loan under the Pradhan Mantri Yojana scheme

  • Railway Recruitment Boards (RRB’s)
  • Commercial Banks
  • Micro Finance Institutions (MFIs)
  • Small Finance Banks
  • Non-Banking Financial Corporations (NBFCs)

Types of businesses that can access a loan under the Pradhan Mantri Yojana scheme include:

  • Retail vendors and shopkeepers
  • Agriculture and food production industries
  • Handicrafts and small-scale manufacturers
  • Self-employed entrepreneurs and service providers
  • Repair and restoration shops
  • Truck owners and other transportation businesses.

Types of Mudra Loan schemes

The scheme is divided into three categories, depending on the amount of loan required:

  • Shishu: Loans up to Rs. 50,000
  • Kishor: Loans between Rs. 50,000 and Rs. 5 lakhs
  • Tarun: Loans between Rs. 5 lakhs and Rs. 10 lakhs

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To avail the loan under PMMY, individuals need to have a business plan and meet the eligibility criteria set by the scheme. The loan is provided at a competitive interest rate and the repayment period ranges from 1 to 5 years.

Goals of the Pradhan Mantri Mudra Loan Scheme

The Pradhan Mantri Mudra Loan Yojana (PMMY) is a loan scheme aimed at providing financial assistance to micro, small and medium enterprises (MSMEs) in the country. The purpose of this scheme is to provide financial support to entrepreneurs and businesses in order to help them create employment and generate income. The main purposes for which Mudra loans can be taken include:

  • Business loans for shopkeepers, traders, vendors, and other activities in the service sector.
  • Equipment financing for small enterprise units.
  • Working capital loans via MUDRA cards.
  • Transport vehicle loans.
  • Loans for people involved in Agri-allied non-farm income generating activities such as poultry farming, bee-keeping, and pisciculture.
  • Loans for people who use tractors, tillers, and two-wheelers for commercial activities.

PMMY has been widely welcomed by the people of India as it provides much-needed financial assistance to small businesses and entrepreneurs, who play a vital role in the country's economy. The scheme has helped in creating new jobs, generating income and boosting economic growth.

How to apply for Pradhan Mantri Mudra Yojana (PMMY)

The process of applying for Pradhan Mantri Mudra Yojana (PMMY) is as follows:

1. Identify the type of loan: The first step is to identify the type of loan you need – Shishu, Kishore, or Tarun. Each loan category has different eligibility criteria and loan limits.

2. Find a lender: You can apply for a PMMY loan through a variety of lending institutions such as banks, microfinance institutions, and NBFCs. You can visit the official website of PMMY or check with local banks to find a lender.

3. Gather necessary documents: You will need to provide proof of identity, residence, and business ownership. You may also need to provide financial documents such as income tax returns, balance sheet, and profit and loss statement.

4. Fill out the application form: Once you have gathered all the necessary documents, you will need to fill out an application form. This can be done online or in-person at the lender's office.

5. Submit the application form: After filling out the application form, you will need to submit it along with the required documents to the lender.

6. Wait for the loan approval: After the lender receives your application, it will be reviewed and processed. You will be notified of the loan approval status.

7. Sign the loan agreement: Once the loan is approved, you will need to sign a loan agreement and provide any additional information or documents that the lender may require.

8. Receive the loan disbursement: Once all the formalities are completed, the loan amount will be disbursed to your account.

It is important to note that the process and requirements may vary depending on the lender and the loan category you are applying for.

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Eligibility Criteria for MUDRA Loan

Indian citizens who own a business in the service, trading, or manufacturing sector and require a loan of up to Rs.10 lakh can apply for a MUDRA loan. It can be obtained from banks such as public sector banks, private sector banks, regional rural banks (RRBs), small finance banks (SFBs), and micro finance institutions (MFIs).
To be eligible for a MUDRA loan, an applicant must meet the following criteria:

  • Minimum age of 18 years
  • Maximum age of 65 years
  • Eligible for both new and existing business units
  • No collateral or third-party security is required
  • Available from institutions such as Public Sector Banks, Private Sector Banks, Micro Finance Institutions, and Regional Rural Banks
  • Required documents include proof of identity, proof of residence, an application form, and passport-sized photos

Activities Eligible for Mudra Loan

The following activities are eligible for a Mudra loan:

  • Production and sales of food products
  • Transportation of goods and passengers
  • Community, social and personal services
  • Business loans for shopkeepers and traders
  • Textile production and related activities
  • Agriculture and allied activities
  • Equipment financing for Micro Units

What is the interest rate for a MUDRA loan?

The interest rate for a Mudra loan varies depending on the lending institution and the borrower's profile. Public and p
rivate sector banks have their own guidelines for determining the interest rate, which is based on factors such as the applicant's business needs and creditworthiness. The final rate of interest is determined by the lender.

Documents needed to apply for MUDRA Loan

The list of documents required to apply for a MUDRA loan includes:

  1. Application form - Duly filled application form based on the loan category
  2. Identity proof - Proof of identity, such as Aadhaar card, Voter's ID card, driver's license, or passport
  3. Address proof - Proof of address, such as utility bills, Aadhaar card, Voter's ID card, or passport
  4. Photos - Two passport-sized photographs of the applicant
  5. Caste certificate - Only if applicable
  6. Additional Documents - Quotation for the commodity or items to be purchased for the business.


A MUDRA Card is a debit card issued to individuals who have successfully applied for a Mudra Loan. After the loan application is approved, the borrower must open an account and the card is linked to that account. The card can be used to withdraw the loan amount which will be credited to the Mudra account.

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Key benefits of MUDRA Loan

  • Provides banking and financial services in both rural and urban areas
  • Offers financial support for micro-small businesses and start-ups
  • Allows for small business loans at affordable interest rates
  • The government provides credit guarantee for borrowers, covering any losses if they are unable to repay
  • Suitable for small business owners such as food vendors and shopkeepers
  • Provides financial aid in areas with limited access to basic banking facilities
  • Long repayment period of up to seven years
  • Discounted interest rates for women borrowers
  • Refinance options available through designated lenders
  • Can be used to generate income through micro-enterprise activities
  • Aligned with the "Make in India" campaign to foster innovation and improve infrastructure
  • No collateral or security required
  • Funds can only be used for business purposes.

Latest Benefits Offered under the Mudra Shishu Category as per the Atmanirbhar Abhiyan
The Indian Government, under the Atmanirbhar Abhiyan, recently announced a range of benefits for borrowers under the Mudra Shishu category. These include:

  • Relief of up to Rs. 1,500 crore will be provided to borrowers in the Mudra Shishu category.
  • Interest subsidies worth Rs. 1,500 crore will be provided to Mudra Shishu borrowers.
  • Quick recipients will receive a 2% discount on their interest rate for a one-year period, as provided by the Government of India.

In conclusion, Pradhan Mantri Mudra Yojana (PMMY) is a government-backed scheme that provides financial assistance to micro, small and medium enterprises (MSMEs) and non-corporate small businesses. The scheme provides loans up to Rs. 10 lakhs at a competitive interest rate and is divided into three categories based on the loan amount. PMMY has been widely welcomed by the people of India as it helps in creating new jobs, generating income and boosting economic growth.

Frequently Asked Questions about MUDRA Loan

1. What is the purpose of Mudra Loan?

Mudra Loan is a type of term loan that can be used to expand a business, purchase inventory, and other business-related expenses.

2. What is the maximum loan amount available from banks for Mudra Loan?

The maximum loan amount that can be obtained from banks is Rs.10 lakh.

3. Is it necessary to provide Income Tax Returns (ITR) for Mudra Loan?

Yes, applicants must provide their ITR for the past two years when applying for a Mudra Loan.

4. Does Cibil score affect the approval of Mudra Loan?

No, Cibil score is not considered when evaluating a Mudra Loan application.

5. Who is the target client for MUDRA loans?

MUDRA loans are targeted at the Non-Corporate Small Business Segment, which includes millions of partnership firms, proprietorships, and small businesses that operate in the service sector, small industries, and manufacturing units in both urban and rural areas.

6. Are there any subsidies available under the Pradhan Mantri MUDRA Yojana?

No, there are no subsidies offered under the Pradhan Mantri MUDRA Yojana.

7. Can recent college graduates apply for MUDRA loans?

Yes, college graduates who wish to start their own business can apply for MUDRA loans. The loan amount and terms will depend on the business plan and project requirements.

8. Can women entrepreneurs apply for MUDRA loans?

Yes, women entrepreneurs can benefit from a special refinance scheme offered through the Mahila Uddyami Scheme. This scheme offers an interest rebate of 0.25% when a MUDRA loan is obtained from an NBFC or micro finance institution.

9. Is PAN card necessary to apply for MUDRA loan?

A PAN card is not mandatory to apply for a MUDRA loan, but other KYC requirements set by the financing institution must be met.

10. Who is eligible to borrow from Mudra Bank?

Individuals or MSMEs who have small businesses can apply for mudra loan.

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