MUDRA loans are provided by banks to support microenterprises in the non-corporate, non-farm sector that need credit of up to Rs. 10 lakh. To help small businesses address financial challenges, the government launched the Pradhan Mantri Mudra Yojana on 8 April 2015. The interest rates for MUDRA loans begin at 9.30% per annum, with repayment terms ranging from 1 to 7 years.
Explore the Pradhan Mantri Mudra loan interest rate to make informed financial decisions for your business.
MUDRA loan details
- Interest Rate: Starting at 9.30% per annum
- Loan Amount: Up to Rs. 10 lakh
- Loan Tenure: Up to 7 years
- Processing Fee: Varies by lender.
Pradhan Mantri Mudra Yojana loan interest rates and limits
Shishu Mudra Yojana
You can avail of a Mudra loan under this phase if you are yet to establish your business or are in a nascent stage. The scheme offers a sanction of up to Rs. 50,000 for a tenure of 5 years. The following businesses are eligible for a Shishu Mudra loan:
- Self-proprietors and partnership firms
- Firms in the service sector
- Micro enterprises and manufacturing firms
- Vendors, truck owners, and repairing shops
- Businesses providing food service
The Mudra Shishu loan interest rate ranges from 1% to 12% per annum. The RBI has directed 'commercial financial institutions' providing Mudra refinance to keep the interest rate at MCLR/ base rate.
The scheme also caps interest rates for RRBs and SCBs extending the loan at 3.5% over the Mudra refinance rate. For NBFCs, the cap stands at 6% for Mudra refinancing.
Kishore Mudra Yojana
This loan is tailor-made to help you sustain your business. The scheme offers a sanction that ranges from Rs. 50,000 to Rs. 5 lakh. The interest rate ranges from 8.60% and is based on the scheme's guidelines and your credit history. You have to repay the loan along with the interest within the tenure offered by the lender.
Tarun Mudra Yojana
You can avail of this loan variant when you wish to expand your business. Under this phase, you can access a sanction from Rs. 5 lakh to Rs. 10 lakh. The lender determines the PMMY interest rate based on the guidelines and your credit history. The interest rates range from 11.15% to 20%, and the lender decides the repayment tenure.
Additional read: MSME registration procedure
Features of Pradhan Mantri Mudra Yojana (PMMY) Loans
Here’s a lowdown of some of the features of PMMY Loans:
Interest rate: Depends on the lender and the applicant’s profile and business requirements.
Collateral-free loans: No need for a security deposit.
Loan categories: Shishu, Kishore, and Tarun.
Loan amount: No minimum limit; maximum of up to Rs. 10 lakh.
Repayment tenure: From 12 months to 5 years, with extensions in certain cases.
Processing fee: Varies from zero to a small amount.
Foreclosure charges: None.
Concessional interest rates: Offered to women entrepreneurs.
Factors affecting Mudra loan interest rates
Mudra loan interest rates in India are influenced by factors such as credit risk, loan amount, repayment period, business type, market conditions, lender policies, government initiatives, borrower's profile, and collateral. The interest rates on MUDRA loans are not fixed and can vary depending on individual circumstances. Several factors that may influence the interest rate include:
- Type of Business
- Borrower's Creditworthiness
- Borrower's Age
- Loan Amount
- Collateral Value
- Loan Tenure
- Current Government Policies
- Market Conditions
- Lending Bank’s Policies.
Tips to get Mudra loans at affordable interest rates
- Maintain good credit score: A higher credit score enhances credibility, potentially leading to lower interest rates.
- Choose the right Mudra category: Evaluate your business needs and opt for the appropriate Shishu, Kishore, or Tarun category, each with different loan limits and interest structures.
- Detailed business plan: Present a comprehensive and well-researched business plan to demonstrate viability and boost lender confidence.
- Shorter repayment period: Opt for a shorter tenure if feasible, as this may result in a lower interest rate.
- Explore government subsidies: Leverage available government schemes and subsidies that may contribute to reduced interest rates.
- Establish a strong financial profile: Showcase financial stability, business experience, and a positive track record to enhance your eligibility for favourable rates.
- Compare lenders: Research and compare interest rates offered by different financial institutions to identify the most competitive options.
- Ensure collateral-free eligibility: Confirm eligibility for collateral-free Mudra loans, as this can positively impact interest rates.
- Stay informed on government policies: Stay updated on evolving government policies and initiatives that may influence Mudra loan interest rates.
Mudra Yojana schemes
MUDRA Yojana offers a range of schemes customised to specific needs. These include the following.
- Credit for micro-enterprise: This scheme focuses on increasing the inclusion of the general population into the business sector. Here, you can access a loan of up to Rs. 1 lakh with microfinance institutions.
- Women enterprise programme: Also known as Mahila Udyami Yojana, this scheme offers loans at affordable Mudra interest rates with a concession of up to 0.25%.
- Refinance scheme for banks: This scheme refinances loans extended by banks to MSMEs in the manufacturing and service sector. Refinance is only available if the scheduled commercial banks lend loans at their base rate. Rural, regional, and cooperative banks must limit their interest rate margin at 3.5% over their refinance rate.
- Mudra Card: This debit card is related to the Mudra loan and helps beneficiaries access working capital, serving as a means to create a credit history for the user. You can use it to make cash withdrawals from ATMs and payments via POS devices.
- Equipment finance scheme: This scheme aims to offer the financial impetus required by microenterprises to expand operations and acquire quality equipment. This way, micro-businesses can increase their production and make their ventures more sustainable as well.
Documents required to apply for Mudra loan
To apply for a Mudra loan, you need to submit the following documents:
- Application form for Mudra loan
- Identity proof, which includes Aadhaar card, Pan card, Voter ID card, or passport copy
- Address proof, which includes Aadhaar card, electricity bill, telephone bill, or other utility bills
- Business plan or project report, which outlines the details of the proposed business or expansion plan
- Quotation of machinery or equipment, which provides an idea of the costs involved in purchasing the required machinery or equipment
- Bank account statement, which shows the financial transactions of the existing business (if applicable)
- Proof of continuation (a copy of an office electricity bill, sales tax certificate, trade license, etc., for existing businesses)
- Income tax return (for the previous year) or sales tax returns (for the previous year) (if applicable).
Mudra loan eligibility
The eligibility criteria of Mudra loans are extremely simple. You can apply for a loan under the scheme if you are an Indian citizen and belong to the:
- Non-farm small/ microenterprise segment
- Non-corporate small business segment
From whom can you avail loans under Mudra Scheme
Loans under the Pradhan Mantri Mudra Yojana (PMMY) are available through eligible Member Lending Institutions (MLIs), such as:
- Public sector banks
- Private sector banks
- State cooperative banks
- Regional rural banks
- Microfinance institutions (MFIs)
- Non-banking financial companies (NBFCs)
- Small finance banks (SFBs)
- Other financial intermediaries approved by Mudra Ltd. as member institutions.
You can also apply if you are a part of a business or as an individual operating as a
- Shopkeeper
- Food-service unit
- Small manufacturing unit
- Trade/ manufacturing sector unit
- Fruit and vegetable vendor
- Service sector unit
- Truck operator
- Repair shop
- Machine operator
- Artisan and more
In addition to the above, you should
- Have a good credit history.
- Have not defaulted on a loan.
- Have the required skills or experience to start, continue, or expand a business.
Additional read: PMEGP loan process and eligibility
You can also apply for a Bajaj Finserv Business Loan and get up to Rs. 80 lakh. This is a collateral-free loan, so you simply need to submit basic documents to apply.
