Mudra Loan: Eligibility, Amount and How to Apply (2026)

Many small businesses in India stall not for want of ideas but for want of a little capital: stock to fill the shelves, a machine to raise output, or working funds to bridge the gap between buying and selling. The Mudra loan, given under the Pradhan Mantri Mudra Yojana, exists to help exactly these micro and small enterprises get that funding. This guide explains what a Mudra loan is, the three categories of Shishu, Kishor and Tarun and the amounts they cover, who can apply, the documents you will need, where to go, and what the money can be used for. The details of any government scheme can change, so treat this as a general guide and confirm the current terms with your lender before you apply.

What a Mudra loan is

Mudra stands for Micro Units Development and Refinance Agency. Under the Pradhan Mantri Mudra Yojana, loans are offered to non-corporate, non-farm small and micro enterprises through a wide network of lenders. You do not borrow from a single office. Instead you approach a bank, a small finance bank, a microfinance institution or another participating lender, which gives the loan under the scheme. The idea is to bring small business owners who were earlier left out of formal credit into the banking system, so they can borrow at fair terms instead of relying on informal moneylenders. The loans are aimed at activities that generate income, which is an important point: this is business funding, not a personal loan.

The three categories: Shishu, Kishor and Tarun

Mudra loans are grouped into three stages, named to match a business as it grows. You apply for the one that fits your need and your stage:

• Shishu: the smallest loans, meant for someone just starting out or needing a modest amount to begin an activity.
• Kishor: a middle band, for a business that has started and needs more to buy stock, add equipment or grow.
• Tarun: the largest band, for an established small business that is expanding and can absorb and repay a bigger loan.

You do not have to pass through the stages in order. A business with a clear plan and the ability to repay can apply directly for the category that matches its need. The lender assesses each application on its merits, so the stronger your plan and records, the better your case.

The categories at a glance

The scheme sets broad limits for each category. The exact ceiling and terms can be revised over time and vary by lender, so use the ranges below as a general picture and confirm the current figures when you apply:

Interest rates are set by each lender within the scheme's framework, so they are not the same everywhere. It is worth asking two or three lenders about their rate and repayment terms before you settle, the same way you would compare prices from suppliers.

Who is eligible

Eligibility is broad by design. In general, any Indian citizen running or planning a small non-farm, non-corporate income-generating activity can approach a lender for a Mudra loan. That covers a wide range of small enterprises:

• Traders and shopkeepers: kirana stores, retail outlets and small wholesalers needing stock or working capital.
• Manufacturers and artisans: small units, workshops and craftspeople buying material or equipment.
• Service providers: repair shops, salons, tailors, small transport operators and similar businesses.
• Allied activities: certain non-farm activities linked to agriculture, as defined under the scheme.

The final decision rests with the lender, who looks at your business plan, your ability to repay and their own credit rules. No lender guarantees approval, and you should be cautious of anyone who promises a certain Mudra loan for a fee. A clear plan, clean documents and an honest picture of your business give you the best chance.

Documents you will typically need

The paperwork for a Mudra loan is lighter than for a large commercial loan, especially for smaller amounts, but you should still prepare it properly. Lenders commonly ask for:

• Identity proof: a government identity document as accepted by the lender.
• Address proof: for both you and your business premises.
• Business proof: registration, a licence or other evidence that the activity exists or is planned.
• Photographs: recent passport-size photos as required.
• Activity and cost details: a description of what you will do with the loan and a rough estimate of the cost, such as quotations for equipment or stock.
• Bank statements: usually asked for larger amounts to show how your money moves.

Requirements differ from one lender to another, so the single most useful step is to phone or visit the lender first and ask for their exact checklist. Turning up with the complete set the first time speeds everything up.

Where and how to apply

You apply for a Mudra loan through a participating lender, not a central office. The practical routes are:

• Your bank branch: approach a bank, small finance bank or the branch where you already have an account, since an existing relationship helps.
• Microfinance institutions and NBFCs: many participate in the scheme and often handle smaller loans well.
• The official online route: the government runs an online portal for small business loan applications, where you can start an application and be connected to lenders. Use only the official portal and avoid unofficial sites.

Whichever route you pick, prepare a short, honest note on your business: what you do, what the loan is for, how much you need, and how you will repay it from your expected earnings. Lenders lend to a plan they can believe, and being clear about repayment is often what turns a maybe into a yes.

What the loan can and cannot fund

A Mudra loan is for business purposes that generate income. Typical uses include buying stock, purchasing tools or machinery, meeting day-to-day working capital, and setting up or growing a small trading, service or manufacturing unit. It is not meant for personal spending, buying a home, or clearing unrelated personal debts. Sticking to the stated business use is not just a rule to follow. It also makes your repayment story credible, because the loan funds something that earns, and that earning is what pays the loan back. Lenders and future borrowing both go easier when the money did what you said it would.

Interest, repayment and what to watch

Because Mudra loans are given through many different lenders, the interest rate is not a single fixed number. Each lender sets its rate within the scheme's framework, so the same category of loan can cost differently at two banks. This is why it pays to ask more than one lender before you sign. When you compare, look past the headline rate at a few other things that decide the real cost and comfort of the loan:

• Processing and other fees: ask what is charged upfront, so you are not surprised at disbursal.
• Repayment period: a longer term means smaller instalments but more total interest, so match it to how fast the loan will earn its keep.
• Instalment size: be honest about whether your monthly cash flow can carry it in a slow month, not just a busy one.
• Prepayment terms: check whether you can repay early without a penalty if business goes well.

A loan that looks affordable on a good month can strain you in a lean one, so plan the repayment around your quietest season, not your best. Borrowing a little less than the maximum on offer often keeps the instalment comfortable and leaves room to breathe.

Preparing your business to borrow well

The businesses that borrow well are usually the ones that keep clean records, and this is within reach of any small owner today. When you can show a lender your sales, your stock and your outstanding customer balances in order, you look like a safer bet than someone who keeps everything in their head. Recording your bills and tracking who owes you money also tells you honestly how much you can afford to repay each month, which stops you from borrowing more than the business can carry. Good records help twice over: they strengthen the application and they keep you in control of the repayment. Keeping GST-ready bills is part of this, and our guide to GST billing software explains how to produce them without extra effort.

The bottom line

A Mudra loan under the Pradhan Mantri Mudra Yojana is a route for small and micro businesses to get funding through banks and other lenders, grouped into the Shishu, Kishor and Tarun categories by size. Eligibility is broad, the paperwork is manageable, and the money is meant for income-generating business use. There is no guaranteed approval, so a clear plan and clean records matter. Keep your billing and customer records in order so you can show a lender exactly where you stand and manage repayment with confidence. Get the mobile app to keep your bills, stock and balances in one place from your phone.