Mudra loan: what the Pradhan Mantri MUDRA Yojana offers and how it works

Mudra full form and who runs the Mudra loan scheme

MUDRA stands for Micro Units Development & Refinance Agency Ltd. It is a Government of India institution set up to develop and refinance micro enterprises (Mudra FAQ). The scheme it supports is the Pradhan Mantri MUDRA Yojana, or PMMY.

The point most people miss: MUDRA does not lend to you. It is a refinancing institution. It funds the lenders, and the lenders give the loan (Mudra performance data). Those lenders are:

• public and private sector banks;
• regional rural banks and small finance banks;
• NBFCs (non-banking financial companies, lenders regulated by RBI that are not banks);
• microfinance institutions (MFIs).

So a "Mudra loan" is a loan from one of these lenders that falls within PMMY's rules. The lender assesses you, sets the rate and decides.

Mudra loan limits: Shishu, Kishor, Tarun and Tarun Plus

PMMY has four categories, set by the loan amount.

Tarun Plus is new. It was announced in the Union Budget 2024-25 and took effect on 24-Oct-2024 (PIB press release, 08-Apr-2025). Pages that still show a ₹10,00,000 ceiling are out of date. The Shishu, Kishor, Tarun and Tarun Plus guide explains which category fits your need and how to move up.

Who can get a Mudra loan

In short, a small business with an income-earning plan:

• Any Indian citizen with a business plan for a non-farm, income-generating activity: manufacturing, processing, trading or services, needing up to ₹20,00,000 (Mudra FAQ).
• Allied farm activities qualify, such as fish farming, bee keeping and poultry. Crop loans and land improvement do not (Mudra loan categories).
• Business use only. A Mudra loan is not for consumption or personal needs (Bank of Maharashtra).
• The non-corporate small business sector is the scheme's focus (PIB press release).

The Mudra loan eligibility guide covers age, CIBIL, new businesses and business structures.

Collateral, guarantee, interest and fees

The Mudra interest rate and subsidy guide shows how lenders price these loans. You can test a repayment with the Mudra loan EMI calculator.

How the CGFMU guarantee behind Mudra works

Mudra loans are not covered by CGTMSE. Their guarantee comes from CGFMU, a separate fund the government set up in 2016 and NCGTC manages (PIB press release, NCGTC CGFMU FAQ).

CGFMU covers a lender's pool of Mudra loans rather than each loan on its own. For loans sanctioned from 2020-21, the lender bears the first 3% of losses. CGFMU then pays 75% of the amount in default, with total payouts capped at 15% of the lender's covered pool (NCGTC CGFMU FAQ).

For you, two points matter. The lender may pass the guarantee fee on to you (NCGTC CGFMU FAQ). And the guarantee protects the lender, not you: after a claim, the lender keeps recovering the debt (NCGTC CGFMU FAQ). Mudra vs CGTMSE sets the two guarantees side by side.

Where to apply for a Mudra loan

You have three routes. All of them end with a lender's decision.

1. A lender's branch. Any bank, small finance bank, NBFC or MFI that offers Mudra loans (Mudra performance data).
2. JanSamarth. The government's portal for credit-linked schemes lists PMMY under business activity loans. You answer a few questions, check eligibility and apply to a lender online (PIB press release, 05-Jun-2026).
3. Udyamimitra. Mudra's own site still names the Udyamimitra portal for online Mudra applications (Mudra performance data).

MUDRA appoints no agents or middlemen (Mudra). Anyone who asks for a fee to "get your Mudra loan approved" is not acting for the scheme. The how to apply guide has the steps, and the Mudra documents guide has the paperwork.

The Mudra Card for working capital

A Mudra loan does not have to be a lump sum. For working capital, a lender can issue a Mudra Card. It is a RuPay debit card linked to a cash credit or overdraft line (Mudra FAQ).

You draw cash at an ATM or a business correspondent, or pay at a card machine, up to your limit. When the business has spare cash, you pay it back in, which reduces the interest you pay (Mudra FAQ). It suits a business whose need for cash rises and falls through the month.

Mudra loan in numbers

The scheme is running. Mudra's own counter showed more than two crore loans sanctioned in the first half of FY2026-27 (Mudra).

What a Mudra loan does not do

• It is not a grant or a subsidy. It is a loan you repay with interest (Mudra FAQ).
• It is not for personal spending (Bank of Maharashtra).
• It is not for crop farming (Mudra loan categories).
• It does not reach above ₹20,00,000 (Mudra FAQ).
• It does not guarantee approval. A lender can refuse an eligible applicant on the viability of the business or the documents (NCGTC CGFMU FAQ).
• Its guarantee does not cancel your debt. If the loan goes bad, the lender still recovers from you (NCGTC CGFMU FAQ).

Your next step

A Mudra loan is decided on the same signals as any business loan: how long you have operated, what you earn, how you bank and how you have repaid. Run the free loan readiness check to see how a lender is likely to read your business before you apply. To compare Mudra with other options, see the government schemes guide and government-backed business loans.