Collateral plays an important role when applying for a business loan. It serves as a security blanket for lenders (Banks & NBFcs) and a way to access funds for borrowers. According to an IAMAI report, only 30% of the credit demand of India’s small businesses is met. This is why the Government of India introduced Pradhan Mantri MUDRA Yojana (PMMY), which offers collateral-free business loans.
Under the PMMY Yojana, you can apply for business loans of ₹20 lakh without providing security or collateral. In this blog, we will understand what PMMY is, MUDRA loan eligibility, subsidy, bank list, and the application process.
Launched on 8th April 2015, Pradhan Mantri MUDRA Yojana (PMMY) is a flagship scheme that offers collateral-free loans to micro and small businesses. MUDRA stands for Micro Units Development and Refinance Agency. The key objective of the scheme is to offer financial assistance to entrepreneurs who run small businesses and microenterprises.
Under the scheme, you can access loans from banks, Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs). The MUDRA Yojana subsidy, however, excludes farm income-generating businesses. The loans are collateral-free, which means they are approved fast.
PMMY loans are classified based on the phase and requirements of the business. Here are the four main categories of PMMY loan schemes you can avail:
The category offers loans to startups, street vendors, small shopkeepers, home-based entrepreneurs, and service providers who are starting from scratch. It allows the businesses to finance initial expenses such as raw material purchase, stock, basic equipment, or a shop/stall.
This category is ideal for manufacturing businesses that require funds to grow. It provides funds to purchase equipment, machinery, hire employees, manage working capital, or scale current operations.
It is ideal for businesses with stable business operations and expansion in the business plan. As a business owner, you can use the funds to purchase machinery, set up new units, enter into new markets, or undertake production on a large scale.
It is ideal for businesses that have expanded extensively and now need more funding to scale their business operations and expand further. It provides businesses with additional financial support to scale their production. However, it is only available to businesses that have availed and successfully repaid loans under the Tarun category.
| PMMY Category | Loan Amount |
| Shishu | Up to ₹50,000 |
| Kishore | ₹50,000 – ₹5 lakh |
| Tarun | ₹5 lakh – ₹10 lakh |
| TarunPlus | ₹10 lakh – ₹20 lakh |
Here is the MUDRA loan eligibility criteria you must meet in order to qualify for the loan:
Any shop owner, vendor, small producer, craftsman, food processing unit owner, repair shop owner, transport business owner, or service business owner can apply. Businesses related to agriculture (such as farming) are not eligible, but agriculture support-related businesses (such as equipment, services, or food processing) can apply for a MUDRA loan online.
Here are the documents that you must gather and submit when applying for a MUDRA Yojana subsidy:
Shishu
Kishore, Tarun, and TarunPlus
You can apply for a Mudra loan under PMMY both online and offline.
1. Applying at NBFCs and Banks
2. Apply Online for Mudra loan
Here are the key benefits of MUDRA Yojana that make business financing more accessible and seamless:
As a business owner, you know that there is always a need to get seamless access to funds, whether for managing working capital or expanding. However, a lack of collateral always gets in the way of small businesses. PMMY not only offers financing but also provides confidence to hundreds of thousands of small enterprises to grow.
Take your business forward with DMI Finance’s collateral-free business loans. When you apply for a business loan, you get access to benefits like seamless approvals, terms without hidden costs, and flexible repayment terms tailored for your growth.
1. What is the maximum amount I can get under PMMY?
Under the TarunPlus category of PPMY Yojana, you can apply for a business loan of up to ₹20 lakh. However, you are eligible for the TarunPlus category if you have taken and successfully repaid the loan under the Tarun loan category.
2. Do I need collateral to get a MUDRA loan?
No, PMMY offers unsecured loans, which means you are not required to provide any property, asset, or security.
3. How do I check if I am eligible?
You are eligible for MUDRA loan if you are aged between 18 to 65 years and are running or starting a small non-farm business.
4. Is there any subsidy in MUDRA loans?
There is no direct Mudra Yojana subsidy, but loans can be covered under credit guarantee schemes.
5. Can students apply for MUDRA loans?
Yes, you can apply for an MUDRA loan as a student if you are above 18 years old.
6. Which banks provide MUDRA loans?
Almost all major banks and NBFCs offer business loans under PPMY. Here is an MUDRA loan bank list of all lending partners.
7. How can I apply for a MUDRA loan online?
You can apply for a Mudra loan online through the official websites of participating banks and NBFCs.
8. What is the interest rate of MUDRA loans?
It depends on the bank and loan category, but it is usually lower than traditional business loans.
9. Can MUDRA loans be used for personal expenses?
No, business loans under PMMY are approved only for business purposes, like managing cash flow, buying machinery, or hiring employees.
10. How long does it take to get approval for MUDRA loans?
The time may vary, but many applications are processed within a few days if the documents are complete.
