How to Get Mudra Loan by Central Government – Complete Guide (2025)

How to Get Mudra Loan by Central Government – Complete Guide (2025)

India’s small and micro businesses play a vital role in strengthening the economy by generating employment, contributing to exports, and fostering entrepreneurship. Recognizing the importance of these businesses, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY) in 2015 to provide easy access to finance without collateral. Popularly known as the Mudra Loan, this scheme supports small entrepreneurs and self-employed individuals in starting or expanding their businesses.

This article provides a complete step-by-step guide on how to get a Mudra Loan in 2025, eligibility criteria, categories of loans, benefits, official application links, repayment process, and state-wise applicability.

What is Mudra Loan?

Mudra Loan stands for Micro Units Development and Refinance Agency Loan, a financial initiative under the PMMY scheme. It is designed to provide credit support to:

• Small and micro businesses
• Street vendors and shopkeepers
• Service providers
• Small manufacturing units
• Entrepreneurs looking to start new ventures

The loan amount ranges from ₹50,000 to ₹10 lakh and is offered without the need for collateral security, making it one of the most accessible credit facilities for small-scale entrepreneurs.

Objectives of the Mudra Loan

The core objectives behind Mudra Loan are:

1. Promote financial inclusion by offering loans to small and micro businesses excluded from mainstream banking.
2. Encourage entrepreneurship among youth and women.
3. Provide collateral-free loans to ensure equal opportunities for small businesses.
4. Support non-corporate, non-farm small enterprises (NCNFS) which form the backbone of India’s informal economy.
5. Generate self-employment and employment across India.

Categories of Mudra Loan

Mudra Loans are classified into three categories, based on the stage of the business and credit requirement:

1. Shishu Loan

• Loan Amount: Up to ₹50,000
• Target Group: Startups and new entrepreneurs who require small working capital.
• Ideal For: Street vendors, tailors, tea stalls, small repair shops.

2. Kishor Loan

• Loan Amount: ₹50,001 to ₹5 lakh
• Target Group: Entrepreneurs with an established business seeking to expand operations.
• Ideal For: Small manufacturers, traders, service providers.

3. Tarun Loan

• Loan Amount: ₹5 lakh to ₹10 lakh
• Target Group: Businesses that need higher funds for growth and scaling.
• Ideal For: Established enterprises, medium-sized manufacturing units, service centers.

Who Can Apply for a Mudra Loan?

Mudra Loans are available to a wide range of applicants. Eligible beneficiaries include:

• Individuals
• Proprietorship firms
• Partnership firms
• Small manufacturers
• Shopkeepers
• Artisans
• Traders
• Transport operators
• Service sector enterprises

Age Limit:

• Minimum: 18 years
• Maximum: 65 years

Key Criteria:

• The applicant should not have a history of loan default.
• The business activity should be non-farm, non-corporate, and income-generating.

Documents Required for Mudra Loan

When applying for a Mudra Loan, applicants must submit the following documents:

1. Application Form (available at banks or online)
2. Identity Proof – Aadhaar Card, PAN Card, Voter ID, Passport
3. Address Proof – Aadhaar Card, Utility Bill, Passport, Rent Agreement
4. Business Proof – Registration Certificate, Shop & Establishment Certificate, GST Registration (if applicable)
5. Bank Account Statement – Last 6 months
6. Passport-size photographs
7. Business Plan or Proposal – For new businesses

Features of Mudra Loan

1. Collateral-Free Loan – No need to mortgage property or provide a guarantor.
2. Low-Interest Rates – Generally ranges between 8% to 12% depending on the bank.
3. Flexible Repayment – 3 to 5 years with repayment in EMIs.
4. No Processing Fees for Shishu category loans.
5. Available Across India through public sector banks, private banks, RRBs, cooperative banks, NBFCs, and MFIs.

Steps to Apply for a Mudra Loan

Here’s the step-by-step process to apply for a Mudra Loan in 2025:

Step 1: Identify Loan Requirement

• Decide whether you need a Shishu, Kishor, or Tarun Loan depending on your requirement.

Step 2: Prepare a Business Plan

• Banks require a clear business plan including expected income, expenses, and repayment capability.

Step 3: Approach the Bank

• Visit any Public Sector Bank, Private Bank, Cooperative Bank, or NBFC that offers Mudra Loans.

Step 4: Fill Application Form

• Fill in the Mudra Loan Application Form with business and personal details.

Step 5: Submit Documents

• Submit KYC, business proof, and other required documents.

Step 6: Loan Processing

• The bank will assess your documents, business plan, and credit history.

Step 7: Loan Approval and Disbursement

• Once approved, the loan amount is directly credited into your bank account.

Where to Apply for Mudra Loan?

You can apply for a Mudra Loan at:

• Public Sector Banks (PSBs) – SBI, Canara Bank, Bank of Baroda, Punjab National Bank, etc.
• Private Banks – HDFC Bank, ICICI Bank, Axis Bank, etc.
• Regional Rural Banks (RRBs)
• Cooperative Banks
• NBFCs and MFIs

Official Website for PMMY:

🔗 https://www.mudra.org.in
🔗 https://www.pmmy.gov.in

Benefits of Mudra Loan

1. Collateral-free funding for small businesses.
2. Encourages women entrepreneurs with special concessions.
3. Creates employment opportunities in rural and urban areas.
4. Boosts small manufacturing, trading, and service sectors.
5. Financial independence for individuals who lack formal credit access.

Mudra Card

Successful applicants are issued a RuPay Mudra Card, which works like a debit card. Entrepreneurs can:

• Withdraw money as per requirement.
• Use it for business-related expenses.
• Maintain flexibility in working capital usage.

Subsidy and Interest Benefits

• The Mudra Loan itself does not have a direct subsidy.
• However, interest concessions are provided for women entrepreneurs under schemes like Mahila Mudra Loan.
• Banks may also provide relaxation in processing fees for Shishu loans.

Common Uses of Mudra Loan

• Setting up shops, stalls, or small businesses.
• Expanding existing businesses (buying equipment, machinery, or inventory).
• Transport vehicles for goods/passengers.
• Service sector activities like salons, repair shops, coaching centers.
• Cottage industries, handicrafts, and small manufacturing.

Challenges in Mudra Loan

1. Some banks demand detailed paperwork, making it difficult for small entrepreneurs.
2. Loan approval depends on credit history and repayment capacity.
3. Lack of awareness among rural entrepreneurs.
4. Delays in disbursement in some banks due to internal checks.

State-Wise Mudra Loan Availability

Mudra Loans are available across all states and union territories. In states like Telangana, Andhra Pradesh, and Karnataka, thousands of entrepreneurs have already benefited under PMMY.

Tips to Increase Chances of Approval

• Maintain a good CIBIL score.
• Keep a clear business plan with cost and revenue projections.
• Submit all documents properly.
• Approach the bank where you already hold an account.
• Apply under the right category – Shishu, Kishor, or Tarun.

Success Stories of Mudra Loan

1. A vegetable vendor in Telangana upgraded her small stall into a proper grocery shop using a Shishu loan.
2. A tailor in Andhra Pradesh purchased new sewing machines and started employing 3 workers.
3. A mechanic in Karnataka expanded his repair shop into a service center with a Kishor loan.

These real-life examples highlight the power of the Mudra Loan in changing lives.

Repayment of Mudra Loan

• The loan repayment tenure is 3 to 5 years.
• Borrowers can repay in monthly EMIs.
• Early repayment is allowed without heavy penalties in most banks.

Digital Application for Mudra Loan

In 2025, most banks have enabled online application facilities for Mudra Loans. Applicants can:

1. Visit the bank’s website.
2. Fill in the Mudra Loan application form online.
3. Upload scanned documents.
4. Track application status digitally.

✅ Official Websites to Apply:

Loan 5

The Mudra Loan Scheme (PMMY) has become a lifeline for millions of small entrepreneurs across India. With its collateral-free nature, low interest rates, and wide availability, it empowers individuals to start or grow their businesses without financial stress.

For 2025, entrepreneurs in Telangana, Andhra Pradesh, Karnataka, and across India can easily apply through public and private sector banks and take advantage of this scheme.

If you are planning to start a new business or expand an existing one, the Mudra Loan is one of the most reliable and accessible financial tools offered by the Central Government.