Pradhan Mantri Mudra Yojana: Benefits, Eligibility and Process to Apply

MSMEs (Micro, Small, and Medium Enterprises) employ around 25 crore Indians across the nation. Currently, there are almost 5.93 crore MSMEs registered in India, but most of them suffer from poor credit facilities for expanding their businesses. To tackle this issue, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY) scheme in April 2015. Let’s break down this scheme in further detail, and describe the step-by-step ways to apply.

What is Pradhan Mantri Mudra Yojana?

The Pradhan Mantri Mudra Yojana is a premium credit scheme first started by the Indian government as an initiative to financially aid India’s micro and small entrepreneurs. Under this scheme, all the revenue-generating micro-enterprises can take loans up to ₹20 lakhs. These loans can be taken from various commercial and government entities such as:

• Commercial banks
• Regional rural banks (RRBs)
• Cooperative Banks
• Small Finance Banks
• MFCIs
• NBFCs

Read also the benefits of Pradhan Mantri Fasal Bima Yojana and how to apply for it.

What Does MUDRA Stand For?

MUDRA stands for Micro Units Development and Refinance Agency, which was established by the Central government as a refinancing body to fund the creditors who provide loans under PMMY. These creditors are usually commercial banks and Member Lending Institutions for financing small-scale businesses. Below is a compact list of all the member lending institutions:

• Public sector banks
• Private sector banks
• Rural regional banks
• Small Finance Banks
• Cooperative banks operated by the State
• Micro Finance Institutions
• Non-Banking Finance Companies
• Financial intermediary as approved and listed by MUDRA Ltd.

What is the interest rate for the PMMY Scheme?

Many people still do not have a clear answer to this question. The reason for this is that the rate of interest is decided and revised by the Member Lending Institutions as per RBI-regulated guidelines. Banks are authorized to charge interest rates independently, although the charge is kept at nominal by governmental orders.

Types of Pradhan Mantri Mudra Yojana Loan

There are majorly three different classifications of the loan based on the stages of a business:

Note that most of the banks do not charge any processing fee for granting loans under the Shishu category. However, many banks charge a processing fee if you apply for loans under Kishore and Tarun yojana. When you search for Pradhan Mantri Mudra Yojana online apply, always check the processing fee mentioned.

What are the Benefits of the PMMY Scheme?

There are multiple benefits that the PMMY scheme offers to micro-enterprises, newbie entrepreneurs, startups with better potential, and growing small businesses.

No Collateral Loans

For loans up to ₹10 lakhs, banks do not charge any minimum collateral deposit. The Reserve Bank of India has mandated banks to make credits till the Tarun category is collateral-free for every micro and small enterprise. This is indeed a financial opportunity for small and micro businesses as they can take the credit without staking any business or personal asset.

Read also the top successful startup companies in 2025.

Flexible Interest Rates

In this scheme, the interest rates are not fixed, and they vary across banks. A standard interest rate for the scheme would be around 9% - 12%, which can change depending on the bank. For example, the rate of interest charged by the State Bank of India for Pradhan Mantri Mudra Yojana loan is 12.5% p.a.

No Processing Charges

Most of the banks do not impose a processing fee till you are taking credit under Shishu loans. This is highly beneficial as loan processing fees can be often hefty for micro businesses who have just launched their business. In addition to that, the processing fees for Kishore and Tarun categories are also minimal. This lowers the upfront cost burden on MSME business owners.

Flexible Repayment Tenure

The repayment term is quite flexible, given that there is a low rate of interest as business entrepreneurs do not have to repay immediately. For Kishore loans, the repayment term is 5 years while for the Tarun scheme, business owners get a total of 7 years to repay the loan.

Upliftment of Marginalized Segments

The best benefit of the PMMY scheme is that it offers loans to the weaker minorities, such as SC/ST entrepreneurs and other backward classes. This creates financial inclusion for both the entrepreneurs from the minority section, as well as enhances social welfare on a larger scale.

Meant for the General Mass

One of the most important features of taking a loan to apply for Pradhan Mantri Mudra Yojana online is that anyone who is willing to start their own business can avail of the loan. They can be a fruit vendor, a local shopkeeper, a small artisan, or the owner of a small repair business.

What is the Purpose of the PMMY Scheme?

The main purposes of the loan are:

• Supply necessary working capital to small-scale business owners
• Enable micro-entrepreneurs to purchase raw materials
• Expanding business in team size as well as building new space
• Purchase transport vehicle or cargo
• Purchasing machinery and equipment
• Recruit more workers for expansion
• Agri-allied activities that generate income
• Establishing online stores or digital payment systems This flagship program was started by the Indian government to disburse credit among entrepreneurs who cannot progress due to poor credit financing. Gradually, the benefits of the PMMY scheme have expanded to a wide range of businesses across the nation.

Read also how to apply for Ayushman Bharat Card and its importance.

Who Should Enroll Under PMMY Loan Scheme?

The common businesses that benefit from PMMY include a large variety of business owners such as:

• Local Kirana shops (grocery stores)
• Truck operators
• Service sector businesses
• Beauty parlors and salons
• Street food vendors
• Repair shops
• Artisans
• Truck operators

For multiple small entrepreneurs, the Pradhan Mantri Mudra Loan Yojana has been the first step toward formal credit business expansion.

Who is Eligible for Pradhan Mantri Mudra Yojana?

Below is a list of all the types of businesses as well as entrepreneurs who are fit to apply for loans under this scheme.

Basic Eligibility Criteria

The eligibility criteria for PMMY are inclusive, as it tries to always fund the financially backward and constrained class of Indian society. Here is a list of the basic eligibility criteria to apply for Pradhan Mantri Mudra Loan Yojana loan:

• Must be a citizen of India, with valid identity proof
• Should be an individual business owner
• Should own a small business or have a partnership firm
• The business is a public company
• The business is a private limited company
• The business owner is not a defaulter to any private or public bank
• The CIBIL score of the business owner should be satisfactory
• The business owner needs to showcase their expertise and business plan
• The business owner must possess expertise in his business

Who Should Apply For PMMY Scheme?

The types of businesses that should consider Pradhan Mantri Mudra Yojana online apply are: MSME and SME business owners

• Startups led and managed by women
• Youth with innovative business ideas
• Street vendors who already own a mini business and want to scale it
• Entrepreneurs from marginalized groups like SC/ST and OBC

In 2024, the total number of entrepreneurs applying for the scheme increased by 59.70% as per the annual reports of the MUDRA committee. More and more business owners have been applying for the scheme, as India is turning into a self-employment ground for many aspiring entrepreneurs. Let’s now list all the required documents for applying under the PMMY scheme.

Main Documents Required to Apply for PMMY Scheme

Note down these documents that are compulsory to apply for the scheme benefits:

For businesses that need to apply for loans under the Kishore, Tarun, and Tarun Plus, additional documents may have to be submitted. Here is the list:

• Projected balance sheet of one year (for the year of loan application)
• Statement of Accounts (for the last six months)
• Income tax return receipts
• Sales tax return receipts
• Detailed record of sales achieved during the loan application period
• Asset and Liability Statement duly signed by the borrower and business proprietor/director

You can fill out the Pradhan Mantri Mudra Yojana application form once you have these documents. Also note that you will have to provide the signature of the business owner and signature of all the partners in case of a partnership business.

What is the Repayment Tenure of the PMMY Scheme?

You can repay the loan within 5 - 7 years, but this depends on the lending bank. For example, if you apply for loans under the Kishore scheme, you will get a total of 5 years for repaying it. And in the case you have borrowed under the Tarun scheme, you can repay it in 7 years.

For small business owners, repayment is a major concern during the early stages of growth. The benefit of availing a loan under PMMY is that it offers a flexible repayment option that businesses can easily afford.

Read also the main functions and types of insurance.

How to Apply for Pradhan Mantri Mudra Yojana?

You can apply offline as well as online for the scheme. The application process is explained step-by-step below.

Offline Application Procedure

• Step 1: Go to any government or private bank as nearly all the banks offer the facility of PMMY scheme-based loan credit (e.g., SBI, PNB, HDFC, ICICI)
• Step 2: Request the authorized banking manager to provide the PMMY application form
• Step 3: Hand over the filled-in form with all documents required Once you submit, wait for a couple of days and then receive the update regarding loan approval. It may take a week to a month based on the waiting list and the processing time of the loan by the respective bank.

Online Application Process

• Step 1: This is how to do Pradhan Mantri Mudra Yojana online apply:
• Step 2: Visit the website of your bank
• Step 3: Search MUDRA loan in the loan option of your bank
• Step 4: You can find an application form for a loan online
• Step 5: Complete the Pradhan Mantri Mudra Yojana application form Include documents like a scanned copy of proof of identity (Aadhaar Card/PAN Card) Submit and wait for verification.

Conclusion

The Pradhan Mantri Mudra Yojana is a new vision to make entrepreneurship a new normal in India. In 2024, the number of entrepreneurs applying for the loan grew by an impressive amount as stated by the annual reports of MUDRA. The scheme has meant to be the first step for many business owners, as it has helped countless small businesses to escalate and improve their business operations. Even if you are a small artisan, or own a roadside stall or a food truck, the PMMY scheme can help to scale your business without any collateral deposit and falling into a debt trap.

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