Are you a small business owner in India looking for financial support to grow your venture? Whether you’re a street vendor, a small shop owner, or a budding entrepreneur, the Mudra Loan scheme is one of the most accessible forms of a Business Loan offered by the Government of India.
In this guide, we’ll walk you through everything you need to know—what a Mudra Loan is, eligibility, documents required, how to apply, and how to make the most of this opportunity.
What is a Mudra Loan?
The Pradhan Mantri Mudra Yojana (PMMY) was launched in 2015 by the Government of India to provide easy business loans to micro and small enterprises. MUDRA stands for Micro Units Development and Refinance Agency.
These loans aim to support non-corporate, non-farm small and micro enterprises involved in:
- Manufacturing
- Trading
- Service sectors
Mudra Loans are classified under three categories based on the stage and size of the business:
Key Features of Mudra Business Loans
- Loan Amount: Up to ₹10 Lakhs
- No Collateral Required: These loans are unsecured
- Interest Rates: As per RBI guidelines, varies between banks (usually 7%–12% p.a.)
- Repayment Tenure: Up to 5 years
- Processing Fee: Minimal or zero (especially for Shishu loans)
Who Can Apply for a Mudra Loan?
Anyone engaged in income-generating activities in the non-farm sector can apply. This includes:
✅ Small manufacturers
✅ Retail traders
✅ Artisans
✅ Street vendors
✅ Service providers (like beauty parlours, repair shops, etc.)
✅ Transport operators (e.g., auto/taxi drivers)
✅ Self-employed professionals
Both individuals and small business entities like proprietorships and partnerships are eligible.
Documents Required for a Mudra Business Loan
To keep the process simple, only basic documents are needed:
Personal KYC:
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Aadhaar Card
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PAN Card
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Voter ID / Driving License / Passport
Business Proof:
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Business registration certificate (if applicable)
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Shop & Establishment Certificate
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GST Registration (if applicable)
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Bank account statement for past 6–12 months
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Quotation for machinery/equipment (for Kishor or Tarun loans)
Other:
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Passport-size photographs
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Mudra Loan application form with a business plan
How to Apply for a Mudra Business Loan
Here’s a simple step-by-step process to apply:
🏦 Option 1: Apply at a Bank Branch
You can apply at any of the following lending institutions:
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Public sector banks (e.g., SBI, PNB, Bank of Baroda)
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Private banks (e.g., ICICI, HDFC)
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Regional Rural Banks (RRBs)
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Micro Finance Institutions (MFIs)
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Small Finance Banks (SFBs)
Steps:
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Visit the bank where you have an account or prefer to take the loan.
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Ask for the Mudra Loan application form or download it from the bank’s website.
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Fill the form and attach documents mentioned above.
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Submit the form at the loan desk or MSME department.
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Loan officer review: Your documents and business plan will be evaluated.
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Loan sanction and disbursal: Once approved, the funds are deposited directly into your bank account.
💡 Tip: Choose a bank that offers low interest rates and is nearby for easy follow-up.
📱 Option 2: Apply Online
Many banks now allow you to apply online for Mudra Loans through their websites or mobile banking apps.
Example: Apply via SBI Online Portal
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Visit https://sbi.co.in
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Go to “Loans” → “Mudra Loan”
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Select loan type (Shishu/Kishor/Tarun)
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Fill in the details, upload scanned documents, and submit.
✅ You’ll receive updates via SMS or email after submission.
Tips to Get Your Business Loan Approved
Applying for a Mudra Loan is easy—but to increase your chances of approval, follow these tips:
1. Prepare a simple business plan
It should include:
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Business activity
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Expected monthly income
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Loan usage (e.g., for buying equipment, expanding shop, etc.)
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Estimated profits
2. Maintain a clean banking record
Avoid bounced cheques or overdrafts in your existing bank account.
3. Apply for the right category
Start small with a Shishu loan if your business is new. Move up to Kishor or Tarun as your business grows.
4. Compare banks
Interest rates and processing time may vary. Public sector banks often offer lower rates.
Success Stories: Real People, Real Growth
✨ Radha, Beauty Parlour Owner (Tamil Nadu)
Radha used a Shishu Loan of ₹40,000 to set up a beauty parlour in her village. Today, she earns over ₹20,000/month and has hired one assistant.
🚚 Arvind, Auto Driver (Maharashtra)
With a Kishor Loan of ₹2 Lakhs, Arvind bought a second-hand auto. He now drives full-time and supports his family’s education.
These stories show how business loans like Mudra can empower everyday Indians to become entrepreneurs.
Common Myths About Mudra Loans
🚫 Myth 1: You must pay a bribe to get the loan.
✅ Truth: Banks are not allowed to charge any unofficial fees. You can file a complaint if someone demands extra money.
🚫 Myth 2: Only registered businesses are eligible.
✅ Truth: Even unregistered micro-businesses (like street vendors) are eligible under PMMY.
🚫 Myth 3: Only men can apply.
✅ Truth: Women entrepreneurs are encouraged and may get interest subsidies.
FAQs: Mudra Business Loan in India
Q1. Is collateral required for a Mudra Loan?
No. Mudra Loans are collateral-free.
Q2. Can I apply for a second Mudra Loan?
Yes, once your first loan is repaid successfully, you can apply for a higher category (e.g., move from Shishu to Kishor).
Q3. What is the maximum repayment period?
Usually up to 5 years, depending on the lender and loan category.
Q4. Do I need a CIBIL score?
Not mandatory, but a good banking history helps.
Q5. Are Mudra Loans available for online businesses?
Yes, if you can show income generation and basic business proof.
Final Thoughts
If you’re dreaming of growing your small business in India, a Mudra Loan could be your first step toward financial freedom. It’s a safe, government-backed business loan with low interest rates, minimal paperwork, and no collateral requirement.
Whether you run a tea stall or want to buy a sewing machine, don’t hesitate—visit your bank or apply online. India is full of small business success stories, and yours could be next!
