PM Mudra Loan: How to Get Up to ₹10–20 Lakh Without Collateral (Shishu, Kishore, Tarun & Tarun Plus Schemes Explained)
Looking to start or expand your small business? Learn how to get a collateral-free loan up to ₹20 Lakh under the Pradhan Mantri Mudra Yojana (PMMY). Complete breakdown of Shishu, Kishore, Tarun, and Tarun Plus categories, eligibility, interest rates, and online application steps.
GOVERNMENT LOANS
Jane desai
8/19/20264 min read
Introduction
Securing capital without pledging property or gold is one of the biggest hurdles facing small business owners, micro-entrepreneurs, and self-employed professionals across India. To bridge this credit gap, the Government of India established the Pradhan Mantri MUDRA Yojana (PMMY) through Micro Units Development and Refinance Agency (MUDRA).
With the government expanding the maximum borrowing ceiling under the Tarun Plus category as announced in the PIB Notification on PMMY Limit Enhancement, eligible entrepreneurs can now access up to ₹20 Lakh in 100% collateral-free credit.
Here is a detailed guide to how PMMY works, the four loan categories, eligibility conditions, required documents, and how to apply online and offline.
What is the PM Mudra Loan Scheme?
The Pradhan Mantri Mudra Yojana (PMMY) is a flagship government scheme launched to extend affordable formal credit to non-corporate, non-farm micro and small enterprises.
Key Highlights:
100% Collateral-Free: No third-party guarantor or asset mortgage is required. Loans are backed by the Credit Guarantee Fund for Micro Units (CGFMU).
Multiple Lending Institutions: Disbursed by Scheduled Commercial Banks (like SBI, PNB, Bank of Baroda), Regional Rural Banks (RRBs), Small Finance Banks, and Non-Banking Financial Companies (NBFCs).
Versatile Credit Use: Funds can be used for working capital limits, equipment purchase, plant modernization, transport vehicles, or setting up new retail shops.
The 4 PM Mudra Loan Categories Explained
The scheme structures credit limits according to the development stage and financial requirements of the business:
1. Shishu (Loans up to ₹50,000)
Target Audience: First-time entrepreneurs, street vendors, home-based businesses, and small artisan units.
Processing Fee: Nil (Waived by most banks).
Margin Money: Nil for loans up to ₹25,000 (minimal margin thereafter).
2. Kishore (Loans from ₹50,001 to ₹5 Lakh)
Target Audience: Operational small enterprises that need funds to buy raw materials, upgrade inventory, or purchase small commercial machinery.
Margin Money: Usually 10% to 15% depending on lender norms.
3. Tarun (Loans from ₹5 Lakh to ₹10 Lakh)
Target Audience: Established businesses, manufacturing workshops, and commercial service centers scaling up their operations.
Margin Money: Approximately 15% to 20% promoter contribution.
4. Tarun Plus (Loans from ₹10 Lakh to ₹20 Lakh)
Target Audience: High-performing entrepreneurs who have previously availed of a loan under the Tarun category and successfully repaid it with a clean banking record.
Benefit: Enables scalable enterprises to access higher working capital and term loans without moving out of the priority collateral-free umbrella.
Scheme Comparison at a Glance
Detailed banking terms and margin requirements can be reviewed on the Canara Bank PMMY Loan Page and Bank of Baroda Mudra Portal.
Who is Eligible for a PM Mudra Loan?
According to the myScheme Government Portal, any Indian citizen with an active or viable business plan in a non-farm, income-generating activity can apply:
Eligible Business Types:
Manufacturing: Food processing, textile/garment making, furniture, light engineering, packaging units.
Trading & Retail: Kirana/grocery stores, apparel shops, pharmacies, electronic goods dealers, mobile recharge shops.
Services: Beauty salons, auto repair garages, dry cleaners, courier offices, logistics and transport operators.
Allied Agriculture: Dairy farming, poultry, pisciculture, agro-clinics, and beekeeping.
Legal Structures: Sole Proprietorships, Partnerships, LLPs, Private Limited Companies, and Self-Help Groups (SHGs).
Credit Track Record: Must not be a defaulter with any financial institution and should maintain a healthy CIBIL profile.
Step-by-Step Guide: How to Apply for a Mudra Loan Online
Applying online through the centralized government portal speeds up loan processing and provides access to digital in-principle sanctions.
1. Register on JanSamarth → 2. Verify KYC (Aadhaar/PAN) → 3. Enter Business Financial Details → 4. Receive Digital Loan Sanction
Visit the JanSamarth Portal: Go to the JanSamarth Official Business Loan Section and register using your mobile number and email.
Check Eligibility: Select "Business Activity Loan", choose your business category (manufacturing, trading, or services), enter your estimated project cost, and calculate eligibility.
Complete Digital KYC: Verify identity via Aadhaar OTP and validate your PAN details through real-time data integration.
Enter Financial Information: Provide GST details (if registered), 12-month bank statements, and current sales turnover figures.
Select Preferred Bank & Branch: Choose your preferred participating bank (such as SBI SME Loans or other commercial lenders) to generate a digital In-Principle Sanction Letter.
Disbursement: The chosen bank branch inspects the documents and disburses the sanctioned amount directly to your account or vendor invoices.
For an alternative multi-lender comparison, check the Paisabazaar Mudra Online Application Guide.
Documents Required Checklist
Keep these essential documents ready before beginning your application:
Identity Proof: Aadhaar Card, PAN Card, Voter ID, Passport, or Driving License.
Address Proof: Electricity bill, telephone bill, or property tax receipt.
Business Proof: Udyam Registration Certificate, Trade License, GST Registration, or Partnership Deed.
Financial Records:
Bank statements for the last 6 to 12 months.
Income Tax Returns (ITR) for the last 2 years (required for Kishore, Tarun, and Tarun Plus).
Projected balance sheet and sales estimates for the upcoming year.
Project Quotations: Proforma invoice or vendor quotation for machinery, commercial vehicles, or equipment to be purchased with the loan.
What is the MUDRA Card?
When you are sanctioned a working capital limit under PMMY, banks issue a MUDRA Card (a specialized RuPay debit card). It allows you to:
Withdraw working capital cash from any ATM as needed.
Make digital payments directly to raw material suppliers.
Manage interest costs effectively, as interest is charged only on the utilized amount, rather than the entire sanctioned limit.
Frequently Asked Questions (FAQs)
1. Can I get a Mudra Loan to start a brand-new business?
Yes. First-time entrepreneurs can apply under the Shishu or Kishore category by presenting a clear, viable business plan and cost estimates.
2. Is there any government subsidy on Mudra loans?
Mudra loans themselves do not carry a direct capital subsidy; however, they provide 100% collateral-free terms and lower interest rates. If you require a capital subsidy, consider combining your application with the PMEGP scheme.
3. How do I qualify for the ₹20 Lakh Tarun Plus loan?
To qualify for the enhanced ₹20 Lakh limit under Tarun Plus, you must have successfully availed of and repaid a previous loan under the Tarun category (₹5–10 Lakh) without any default.
4. What is the average interest rate on PM Mudra Loans?
Interest rates are linked to the lender’s Marginal Cost of Funds Based Lending Rate (MCLR) or Repo-Linked Lending Rate (RLLR), typically ranging between 8.50% and 12.00% p.a. depending on the category and credit assessment.