Shishu Mudra Loan - Features, Benefits, & Steps to Apply

Explore Shishu Mudra loan online for small business loans. Check the features, documents required, application process and benefits of Mudra Shishu Loan.
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2 min read
08 April 2025

The Shishu Mudra Loan is a key financial initiative under the Pradhan Mantri Mudra Yojana (PMMY). It was designed to empower small businesses and budding entrepreneurs in India. Offering loans of up to ₹50,000 without collateral, this scheme caters to micro-businesses, startups, and individuals seeking financial assistance to kickstart or expand their ventures. The ease of application, flexible repayment options, and minimal documentation make it an attractive financing solution for those from economically disadvantaged backgrounds.

Keep reading to explore more about the features, eligibility criteria, documentation requirements, and benefits of the Shishu Mudra Loan. Whether you're an entrepreneur looking for initial funding or a small business seeking to expand, this article will offer essential insights into leveraging the Shishu Mudra Loan for your financial needs.

What is Shishu Mudra Loan?

The Shishu category under the MUDRA (Micro Units Development and Refinance Agency) Loan scheme is specifically designed to cater to micro-businesses and entrepreneurs who require a small amount of financial assistance to kickstart their ventures. This scheme offers loans of up to Rs. 50,000 without the requirement for collateral, making it accessible to a wide range of aspiring entrepreneurs, especially those from marginalised or economically disadvantaged backgrounds. Entrepreneurs interested in additional financial support might also explore E Mudra Loan for quick funding options.

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Shishu Mudra Loan features

Here are key features and details about the Shishu Mudra Loan:

  • Loan amount: Shishu Mudra Loans are meant for borrowers who need a modest amount of funds to start or expand their micro-enterprises. The loan amount under the Shishu category can go up to Rs. 50,000.
  • Eligibility criteria: The eligibility criteria for Shishu Mudra Loans are generally relaxed, targeting small and new businesses. Individuals, small entrepreneurs, and micro-businesses in need of financial support to start or grow their ventures can apply.
  • Application process: The application process for Shishu Mudra Loans is designed to be simple and accessible. Entrepreneurs can approach participating banks, financial institutions, and microfinance institutions to apply for these loans.
  • Interest rates: The interest rates for Shishu Mudra Loans are usually reasonable and affordable. These rates may vary among different lending institutions, and they are often determined based on the guidelines set by the Mudra scheme. You can learn more about the pradhan mantri mudra loan interest rate to gauge the lending rates for the Shishu category.
  • Repayment period: The repayment period for Shishu Mudra Loans is typically flexible. It allows borrowers to repay the loan amount over a reasonable duration, ensuring that the repayment terms are manageable for small businesses.

If you are looking for more tailored schemes for small businesses, the nabard scheme could provide additional support for your venture.

Documents & eligibility required for Shishu Mudra Loan

Documents and eligibility criteria for the Shishu Mudra Loan scheme vary slightly depending on the lending institution, but typically include:

Eligibility:

  1. Must be an Indian citizen.
  2. Age requirement varies but is usually between 18 to 65 years.
  3. Must be engaged in a viable business activity such as manufacturing, trading, services, or agriculture.
  4. The business should fall under the micro-enterprise category.

Documents:

  1. Identity proof (Aadhar card, PAN card, passport, voter ID, etc.).
  2. Address proof (Aadhar card, utility bills, rent agreement, etc.).
  3. Proof of business ownership or existence (trade license, GST registration, etc.).
  4. Business plan or project report detailing the purpose of the loan and its expected outcomes.
  5. Bank account statements for the past six months.
  6. Income tax returns or financial statements for self-employed individuals.
  7. Any other documents as required by the lending institution.

Purpose of the Shishu Mudra loan

Shishu Mudra Loans can be utilised for various purposes related to the establishment or growth of micro-enterprises. This may include working capital requirements, purchasing of equipment or machinery, inventory maintenance, or other business-related needs.
The Pradhan Mantri Mudra Yojana, including the Shishu category, is backed by the Government of India. It reflects the government's commitment to fostering entrepreneurship, supporting small businesses, and promoting economic growth at the grassroots level. Additionally, small businesses can explore the pmfme scheme for more specific benefits for micro enterprises.

Role of Shishu Mudra Loan

The Shishu Mudra Loan plays a foundational role in supporting early-stage micro-enterprises and aspiring entrepreneurs across India. As the entry-level category under the mudra loan scheme, it offers financial assistance of up to ₹50,000 to individuals looking to start or strengthen small businesses.

This loan is especially beneficial for street vendors, artisans, small traders, and service providers who often lack access to formal credit. By offering funds without the need for collateral, the Shishu Mudra Loan enables these individuals to invest in tools, inventory, or infrastructure needed to operate and grow their businesses.

Its simplified application process, affordable interest rates, and manageable repayment terms encourage financial independence and reduce reliance on informal borrowing. By empowering grassroots entrepreneurship, the Shishu Mudra Loan contributes directly to income generation, job creation, and inclusive economic development. If you are looking for larger-scale financing, you can also explore the mudra loan for greater loan options.

Role of Mudra

MUDRA does not directly disburse loans to entrepreneurs. Instead, it acts as a refinancing agency, providing financial support to banks and financial institutions that, in turn, offer loans to micro-businesses and entrepreneurs.

The Shishu Mudra Loan, as part of the Mudra scheme, stands as a beacon of support for aspiring entrepreneurs and micro-businesses in India. Tailored for those in the early stages of their ventures, this initiative embodies the government's commitment to fostering economic growth at the grassroots level. By providing accessible and affordable financial assistance, the Shishu Mudra Loan empowers individuals to turn their business dreams into reality. Its simplicity in application, reasonable interest rates, and flexible repayment terms make it a valuable tool in promoting entrepreneurship and contributing to the inclusive development of the nation's economy. If you are looking for larger-scale financing, you can also explore the mudra loan for greater loan options.

Benefits of online Shishu MUDRA loan

The special benefits of online Shishu MUDRA loan:

  • No need for customers to visit a branch.
  • Elimination of physical application submissions.
  • KYC verification is bypassed; only KYC-compliant customers are eligible.
  • No manual appraisal or sanction process by the branch.
  • Documentation is handled digitally, including e-stamping and e-signing.
  • No manual account opening or disbursement required.
  • Instant sanction and disbursement without any branch intervention.

These digital features make the online process quicker and easier, making it a good choice for entrepreneurs who want a smooth application experience. Also, if you are looking for more support for your business, you may want to check out the Startup India Seed Fund Scheme, which provides financial help to early-stage startups.

How to apply for Shishu Mudra Loan online?

Follow these simple steps to apply for a Shishu Mudra Loan online:

Step 1: Visit the official website of a PMMY-authorised financial institution and download the loan application form. Fill it out carefully, upload the required documents, and submit them online. Upon successful submission, you will receive a reference ID or number.

Step 2: A representative from the financial institution will get in touch to guide you through the next steps. Keep your reference ID handy to ensure a smooth follow-up.

Step 3: After your application form and documents are verified, the loan amount will be directly credited to your bank account.

Shishu Mudra Loan offline application process

Follow these simple steps to apply for a Shishu Mudra Loan offline:

Step 1: Visit the nearest branch of a PMMY-authorised financial institution. Fill out the application form, attach all the necessary documents, and submit them to the branch.

Step 2: Complete any additional formalities or verifications as required by the financial institution.

Step 3: After successful verification of the application form and submitted documents, the loan amount will be credited directly to your bank account.

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Frequently asked questions

What is the maximum amount of Shishu Mudra loan?

The maximum amount of Shishu Mudra loan is Rs. 50,000 for new startups and micro-businesses. Under the Shishu category of the Mudra scheme, you can avail a loan of up to Rs. 50,000 for your working capital needs. If you are a new entrepreneur or a micro-business owner, you can get a Shishu Mudra loan of a maximum of Rs. 50,000 to fund your business operations.

What is the interest rate for Shishu Mudra loan?

The interest rate for Shishu Mudra loan is usually repo + spread (4.40%) p.a. The interest rate for Shishu Mudra loan may vary depending on the financial institute offering the loan.

What is the minimum margin for a Shishu Mudra loan?

There is no margin required for Shishu Mudra loan as it is a collateral-free loan. You do not need to pay any margin for Shishu Mudra loan as it is a zero-margin loan scheme.

Can we apply for MUDRA loan online?

Yes, the Ministry of Finance has established an online portal, mudra.org.in, where applicants can apply for MUDRA loans online. The portal provides complete details about the scheme, the application process, and the required documents. Applicants can fill out the online form and submit it along with the necessary documents for loan approval.

What is the interest on a Rs. 50,000 Mudra loan?

The interest charged on a MUDRA loan of Rs. 50,000 depends on the bank or financial institution that is providing the loan. The interest rate can vary between 8% to 20%. It is recommended to compare the interest rates offered by different lenders before applying for a MUDRA loan.

How can I apply for an online Shishu Mudra Loan?

To apply for the Online Shishu Mudra Loan, you can visit the official website of the bank offering the loan. The application process is entirely online, allowing you to fill out the application form digitally. You’ll need to provide necessary details about your business, financial requirements, and personal information. Once submitted, the application will be reviewed, and eligible applicants will receive instant sanction and disbursement without the need for physical documentation or branch visits.

Who is eligible for a Shishu loan?

Eligibility for a Shishu loan primarily targets micro and small businesses, including sole proprietorships and partnerships. The applicant must have a viable business plan and should be engaged in manufacturing, trading, or service sectors. Generally, individuals who are KYC compliant and have a clear credit history are more likely to be approved. The loan amount is typically meant for businesses requiring up to ₹50,000, ensuring it meets the needs of early-stage enterprises looking for financial support.

Can I take two Mudra loans?

Yes, you can take two Mudra loans from different banks, but it's essential to ensure that you meet the eligibility criteria set by each bank. When applying for a second loan, disclose your existing Mudra loan to the new lender, as they will consider your total debt obligations. This ensures that your repayment capacity is evaluated accurately. Always discuss your financial needs with both lenders to find the best options available for your requirements.

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