Document
70% Taxpayers Miss
Saving Taxes!
Plan now to save more taxes!
Enter details to receive communications from ClearTax

error-message

+91

error-message

error-message

Mudra Yojana: Loan Limits, Interest Rates, Objectives, Eligibility

By Mayashree Acharya

|

Updated on: Feb 6th, 2025

|

4 min read

Budget 2025 Updates:

  • Revision of classification of MSMEs to include more businesses and companies under the purview of MSMEs.
  • Micro-enterprises on the Udyam portal will get credit cards with a Rs. 5 lakh limit; 10 lakh cards will be issued in the first year.
  • A new Rs. 10,000 crore Fund of Funds will be launched with an expanded scope.
  • A scheme for 5 lakh women and SC/ST first-time entrepreneurs will offer term loans up to ₹2 crore over five years, along with online capacity building.

Small businesses often struggle to get bank loans due to lack of security and funds for interest payments. Supporting their growth boosts the economy.

Mudra Yojana, launched on April 8, 2015, under Jan Dhan Yojana, provides micro-units with financial aid through MUDRA Bank (Micro Units Development and Refinance Agency).

Budget 2025 Update: 

MUDRA loans will be provided for homestays to facilitate employment-led growth in tourism.

Objective of Mudra Yojana

The inception of Mudra Yojana was done keeping in mind several objectives to be fulfilled during the implementation of this yojana. The most prominent of these are:

  • For laying down policy guidelines for financing small/ micro enterprises.
  • Getting all the Microfinance Institutions and related entities registered and then regulating the same.
  • For helping the small businesses develop and grow further.
  • Assisting lower income groups in building and expanding their business.
  • To assist in creating easy access to finance for unbanked and help in lowering their cost of finance.
  • To provide SC/ST lending preference.
  • For regulating all Microfinance Institutions that are dealing with trading, manufacturing, and service.

Loan Limits and Interest Rates under Mudra scheme

As per the choices for financing available under this scheme, the loan limits and interest rates vary for accommodating for the growth phase of the respective business availing such loan. The applicable limits and rates are as follows:

  • Shishu – Loans up to a limit of Rs.50,000. The interest rate would depend on the bank, as per the guidelines of the schemes and keeping in view the applicant’s credit history. Loan repayment period is dependent on the option of the bank
  • Kishore – Loans from Rs.50,000 up to Rs.5,00,00. The interest rate would depend on the bank, as per the guidelines of the schemes and keeping in view the applicant’s credit history. Loan repayment period is dependent on the option of the bank.
  • Tarun – Loans from Rs.5,00,000 up to Rs.10,00,000. The interest rate would depend on the bank, as per the guidelines of the schemes and keeping in view the applicant’s credit history. Loan repayment period is dependent on the option of the bank.

A total of 178 financial institutions, including public and private sector banks, NBFCs, MFIs, and cooperative banks, are disbursing Mudra Yojana loans. Currently, 60% of loans are issued under the ‘Shishu’ scheme, while 40% fall under ‘Kishore’ and ‘Tarun’ schemes.

What can the loans taken under Mudra Yojana be used for?

The loans under this scheme could be availed for the purposes listed below:

  • Commercial vehicle loan.
  • Transport vehicle loan.
  • Working capital loan.
  • Loan for plant and machinery.
  • Loans for agri-allied non-farm income generating activities.
  • Business loans for traders and shopkeepers.

Eligibility of the Borrower

Mudra loans under PMMY are available for non-farm income-generating businesses in trading, manufacturing, and services with credit needs below ₹10 lakh. These loans are offered by Scheduled Commercial Banks, Small Finance Banks, Regional Rural Banks, NBFCs, MFIs, and Urban Co-operative Banks.

Eligible borrowers can apply through these institutions or online via the Udyamimitra portal. The application must be submitted along with the required documents.

  • Proof of identity
  • Identity proof/address proof of the business (relevant certificates & licenses)
  • Category proof, if any
  • Statement of accounts for the last six months
  • Income tax returns along with last two years balance sheet
  • Proof business existence, such as Memorandum of Association or Partnership Deed

Apart from the documents mentioned above, applicants’ banks might ask for other documents as required. The Banks should not charge any processing fee and aren’t supposed to request any collateral. The loan repayment period is extended to 5 years. However, it is made clear that any applicant shouldn’t be a defaulter to any financial institution.

Business Sectors and Services Covered under Mudra Yojana

The following is an illustrative list of business activities and services that are eligible for obtaining Mudra loans:

  • Entrepreneurs who purchase transport vehicles for transportation of goods and passengers such as auto-rickshaws, three-wheelers, small goods transport vehicles, taxis, e-rickshaws, etc.
  • Tractors, Power Tillers, Tractor Trolleys, two-wheelers used only for commercial purposes are also eligible for obtaining Mudra Loans.
  • Entrepreneurs running salons, gymnasium, beauty parlours, tailoring shops, boutiques, dry cleaning, Medicine Shops, cycle and motorcycle repair shops, Courier Agents, DTP and Photocopying Facilities, etc. can obtain loans under Mudra Yojana.
  • Entrepreneurs carrying the activities such as achaar making, papad making, sweet shops, jam/jelly making, small service food stalls and day to day catering or canteen services, ice-making and ice cream units, cold storages, bread and bun making, biscuit, etc. can obtain loans under Mudra Yojana.
  • Entrepreneurs who carry the activities of handloom, khadi activity, power loom, traditional dyeing and printing, traditional embroidery and handwork, apparel design, computerized embroidery, cotton ginning, stitching and other textile non-garment products such as vehicle accessories, bags, furnishing accessories, etc. are eligible for Mudra Loans.
  • The ‘Activities allied to agriculture, e.g. beekeeping, poultry, livestock-rearing, aggregation agro-industries, fishery, dairy, food & agro-processing, agri-clinics and agribusiness centres, etc. and services supporting these are eligible for Mudra Loans.

Changes in Lending Target Under the Mudra Yojana

In Budget 2016-17, the finance minister set a Mudra Yojana lending target of ₹1.22 lakh crore to support MSMEs. This target was exceeded by a large margin. Seeing its success, the government doubled the target to ₹2.44 lakh crore.

Emphasis on Specific Segments

The Finance Minister said that though the target for lending is scaled up, the key targets would be women, backward classes, minorities, Dalits and Tribals who have been usually not provided the adequate opportunity of getting finances for their businesses.

Mudra Loans Interest Rates

BankInterest RateLoan AmountTenure
State Bank of IndiaAs per bank guidelinesMaximum Rs.10 lakh1 to 5 years
UCO Banks8.85% p.a. onwardsMaximum Rs.10 lakhAt the discretion of the bank
Bank of Baroda9.65% onwardsMaximum Rs.10 lakh1 to 5 years
Union Bank of India7.30% p.a. onwardsMaximum Rs.10 lakh1 to 7 years
inline CTA
Get an expert at affordable price
For ITR, GST returns, Company Registration, Trademark Registration, GST Registration
Help and support
close
Loading Chat ...
Chatbot LogoChatbot Button
About the Author
author-img

Mayashree Acharya

Senior Content Writer
social icons

I am an advocate by profession and have a keen interest in writing. I write articles in various categories, from legal, business, personal finance, and investments to government schemes. I put words in a simplified manner and write easy-to-understand articles. Read more

Clear Logo
Follow us on
FacebookTwitterLinkedInGitHubInstagram
Have a query?
Support
Company
About us
Contact us
Careers
Media & Press
User reviews
Engineering blog
Clear Library
FinTech glossary
ClearTax Chronicles
GST Product Guides
Trust & Safety
Cleartax(Saudi Arabia)

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption