For the millions of Micro, Small, and Medium Enterprises (MSMEs) that form the backbone of the Indian economy, access to timely and affordable credit has often been a hurdle. The Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, was designed specifically to bridge this gap. By “funding the unfunded,” PMMY provides collateral-free institutional credit to small business owners, helping them transition from informal setups to organized, scalable enterprises.
Whether you are a shop owner, manufacturer, service provider, trader, or startup entrepreneur, PMMY can be a powerful financial support tool for your business growth.
What is Pradhan Mantri Mudra Yojana (PMMY)?
Pradhan Mantri Mudra Yojana (PMMY) was launched in April 2015 to provide loans up to ₹10 lakh to non-corporate, non-farm micro enterprises.
Under this scheme, loans are offered through:
- Banks (Public & Private)
- Regional Rural Banks (RRBs)
- Small Finance Banks
- NBFCs
- Micro Finance Institutions (MFIs)
The loans are given without any collateral, making it easier for MSMEs to access credit.
Objectives of Pradhan Mantri Mudra Yojana (PMMY) for MSMEs
The core objectives of PMMY are:
- Promote entrepreneurship at the grassroots level
- Enable easy access to formal credit for small businesses
- Reduce dependency on informal money lenders
- Encourage self-employment and job creation
- Support business expansion and working capital needs
Types of Loans Under Pradhan Mantri Mudra Yojana
PMMY loans are categorised into four segments based on the stage and funding requirement of the enterprise:
1️⃣ Shishu Loan
- Loan Amount: Up to ₹50,000
- Ideal for: Startups, first-time entrepreneurs, small vendors
- Purpose: Initial working capital, tools, inventory
2️⃣ Kishore Loan
- Loan Amount: ₹50,001 to ₹5 lakh
- Ideal for: Growing MSMEs
- Purpose: Business expansion, machinery purchase, working capital
3️⃣ Tarun Loan
- Loan Amount: ₹5 lakh to ₹10 lakh
- Ideal for: Well-established enterprises
- Purpose: Scale-up, modernization, capacity expansion
4️⃣ Tarun Plus (introduced later)
- Loan Amount: ₹10 lakh to ₹20 lakh
- Available for: Existing Tarun borrowers with good repayment history
Who is Eligible for Pradhan Mantri Mudra Yojana (PMMY) for Loan?
PMMY is designed for a wide range of MSMEs, including:
- Proprietorship firms
- Partnership firms
- Small manufacturing units
- Service enterprises
- Traders and shopkeepers
- Street vendors
- Artisans and craftsmen
- Women entrepreneurs
- SC/ST and minority entrepreneurs
Basic Eligibility Criteria:
- Indian citizen
- Non-farm, income-generating activity
- Business plan or income-generating proposal
- Udyam Registration (preferred, not always mandatory)
Key Features and Benefits for MSMEs
IWhy should an MSME choose a Mudra loan over traditional financing? Here are the primary advantages:
- No Collateral Required: Borrowers do not need to provide any security or third-party guarantee to avail of these loans.
- Flexible Repayment: Most loans offer a repayment period of up to 5 to 7 years, allowing businesses to manage cash flows effectively.
- Lower Interest Rates: Interest rates are competitive and vary based on the lending institution and the borrower’s credit profile.
- Zero Processing Fees for Shishu: To support the smallest of entrepreneurs, banks typically waive processing fees for loans under the Shishu category.
- Multi-Sector Coverage: PMMY covers non-farm activities across manufacturing, trading, and services, including allied agricultural activities like poultry and dairy.
How to Apply for Pradhan Mantri Mudra Yojana (PMMY) (Step-by-Step)
MSMEs can apply for Mudra loans through Public Sector Banks, Private Sector Banks, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), and NBFCs.
Online Application via JanSamarth Portal
- Visit the official JanSamarth.
- Choose “Business Activity Loan” and check your eligibility.
- Select the “Pradhan Mantri Mudra Yojana” scheme.
- Upload required documents (PAN, Aadhaar, Business Registration).
- Receive digital approval and choose your preferred lender.
Offline Application
- Visit the nearest branch of a partner bank.
- Submit a completed PMMY application form along with a Business Plan.
- Provide KYC documents and proof of business existence (GST, Udyam Registration, etc.).
Documents Required for Pradhan Mantri Mudra Yojana
Keep these documents ready to ensure a smooth application process:
- Identity Proof: Aadhaar Card, PAN Card, Voter ID, or Passport.
- Address Proof: Utility bills or Rent Agreement.
- Business Proof: Registration certificates, licenses, or Udyam Registration.
- Financials: Bank statements for the last 6–12 months.
- Quotation: For machinery or equipment purchases (for Kishor and Tarun categories).
The Pradhan Mantri Mudra Yojana is more than just a loan; it is a tool for financial empowerment. With the expanded limit of ₹20 Lakh under Tarun Plus, the scheme is now better equipped to support MSMEs that are ready to take the next big leap. Whether you are a street vendor, a small-scale manufacturer, or a service provider, PMMY offers the financial foundation you need to build a “Viksit Bharat.”
Frequently Asked Questions (FAQs) on Pradhan Mantri Mudra Yojana (PMMY)
1. What is Pradhan Mantri Mudra Yojana (PMMY)?
Pradhan Mantri Mudra Yojana (PMMY) is a Government of India scheme that provides collateral-free business loans to micro and small enterprises. The scheme supports entrepreneurs in starting, running, and expanding non-farm income-generating businesses.
2. What is the maximum loan amount under PMMY?
Under PMMY, eligible MSMEs can avail loans of:
- Up to ₹50,000 under Shishu
- Up to ₹5 lakh under Kishore
- Up to ₹10 lakh under Tarun
Additionally, select borrowers with good repayment history may qualify for Tarun Plus loans up to ₹20 lakh.
3. Is collateral required to get a Mudra loan?
No. Mudra loans are completely collateral-free. Borrowers are not required to provide any property, asset, or third-party guarantee.
4. Who can apply for PMMY loan?
Any Indian citizen involved in manufacturing, trading, or service activities can apply. This includes:
- Small shop owners and traders
- Service providers
- Street vendors
- Artisans and craftsmen
- Women entrepreneurs
- Startups and MSMEs
5. Is Udyam Registration compulsory for PMMY?
Udyam Registration is not mandatory, but it is highly recommended. MSMEs with Udyam Registration often experience faster processing and higher approval chances.
6. What documents are required for PMMY loan?
Commonly required documents include:
- Aadhaar and PAN
- Address proof
- Bank account statement
- Business proof (Udyam Registration, trade license, GST if available)
- Passport size photographs
Document requirements may vary depending on the lender.
7. What is the interest rate on PMMY loans?
Interest rates are set by banks and NBFCs as per RBI guidelines. Rates are generally lower than informal lending sources and vary based on loan amount, business profile, and repayment capacity.
8. What is the repayment period for Mudra loans?
The repayment tenure usually ranges from 3 to 5 years, depending on the lender and loan category. Flexible repayment options may be available.
9. Can startups and new businesses apply for PMMY?
Yes. First-time entrepreneurs and startups can apply, especially under the Shishu category, which is designed to support new businesses and self-employed individuals.
10. How can MSMEs apply for PMMY loan?
MSMEs can apply:
- By visiting the nearest bank or NBFC branch
- Through online application portals of participating banks
Applicants must submit a basic business proposal along with required documents.
11. Can PMMY loan be used for working capital?
Yes. PMMY loans can be used for working capital, purchasing raw materials, buying equipment, upgrading machinery, or expanding business operations.
12. How does PMMY benefit MSMEs?
PMMY helps MSMEs by:
- Providing easy access to formal credit
- Reducing dependence on moneylenders
- Supporting business growth without collateral