Mudra Loan: categories, eligibility and how it actually works
A Mudra loan is a collateral-free business loan of up to ₹20 lakh for a non-corporate, non-farm micro enterprise, classified under the Pradhan Mantri Mudra Yojana. It runs in four categories: Shishu up to ₹50,000, Kishore above ₹50,000 to ₹5 lakh, Tarun above ₹5 lakh to ₹10 lakh, and Tarun Plus above ₹10 lakh to ₹20 lakh for borrowers who have already repaid a Tarun loan cleanly. Public sector banks typically price it between 8.5% and 12% per annum.
Two things worth being clear about
- There is no such thing as guaranteed approval. The credit guarantee under this scheme protects the lender against a portion of a default. It is not approval for the borrower, and a default still lands on your credit record and is still recovered from you.
- The loan does not come from the government. MUDRA Ltd. refinances lending institutions and the loan is guaranteed under CGFMU. The loan itself comes from a bank, NBFC or MFI, and the sanction decision is that institution's alone.
The 4 categories
The category follows from the amount, not the other way round. Asking for a figure your documentation does not support is a common reason a file is returned.
| Category | Amount | Who it suits |
|---|---|---|
| Shishu | Up to ₹50,000 | A business that is trading but small - a street vendor, a tailoring unit, a small kirana, a single auto. This is also the only tier with a genuine online route, through SBI e-Mudra. |
| Kishore | Above ₹50,000 to ₹5 lakh | An established micro enterprise buying stock, equipment or a small vehicle. This is where the file starts to look like a real business loan - current account, filed returns, and a branch visit. |
| Tarun | Above ₹5 lakh to ₹10 lakh | A micro enterprise with a few years of trading history, expanding capacity or premises. Documentation expectations here are close to a conventional business loan. |
| Tarun Plus | Above ₹10 lakh to ₹20 lakh | Only for a borrower who has already taken a Tarun loan and repaid it cleanly. It is a graduation tier, not an entry point, and a great deal of published content still misses that it exists at all. |
What it costs per month
Pre-set to 8.5%, the reference starting rate for public sector bank lending under this scheme. There is no scheme-set rate - change it to the rate you have actually been quoted to see your real instalment, total interest and full repayment schedule.
Monthly EMI
₹10,258
₹5 Lakh at 8.50% for 5 years
Interest is 23% of the amount borrowed over this tenure.
Year-by-year repayment schedule
How each year splits between interest and principal. Early years are mostly interest, which is why prepaying early saves so much more than prepaying late.
| Year | Principal paid | Interest paid | Balance |
|---|---|---|---|
| 1 | ₹83,815 | ₹39,285 | ₹4,16,185 |
| 2 | ₹91,223 | ₹31,876 | ₹3,24,962 |
| 3 | ₹99,286 | ₹23,813 | ₹2,25,676 |
| 4 | ₹1,08,062 | ₹15,037 | ₹1,17,614 |
| 5 | ₹1,17,614 | ₹5,485 | ₹0 |
This calculator returns arithmetic on the figures you enter. It is not an offer, does not check your eligibility, and cannot predict the rate a lender will sanction. Loans Got Easy is an authorised Direct Selling Agent - we do not sanction, approve or disburse loans.
It is not a government loan, and that distinction matters
PMMY is a refinance and credit-guarantee framework, not a lender. MUDRA Ltd. refinances banks, NBFCs and microfinance institutions, and the loan is guaranteed under the Credit Guarantee Fund for Micro Units. What you actually receive is a business loan from a bank or NBFC that is classified under the scheme. Nobody at a government office approves it. This is worth being clear about because the most common disappointment we see is an applicant who believed the scheme entitled them to the money and treated the bank's assessment as a formality. The branch runs the same credit checks it runs on any business loan.
The four categories and what each one really expects
Shishu, up to ₹50,000, is the entry tier and the only one with a genuine online route through SBI e-Mudra. Kishore, to ₹5 lakh, is where the file starts to resemble a conventional business loan - a current account, filed returns, and a branch visit rather than a web form. Tarun, to ₹10 lakh, expects a few years of trading history and documentation close to what any business loan demands. Tarun Plus, to ₹20 lakh, is a graduation tier: it is available only to a borrower who has already taken a Tarun loan and repaid it without blemish. A large amount of published content still states that Mudra caps at ₹10 lakh, which has not been true since the Tarun Plus ceiling came in.
Collateral-free does not mean risk-free
The CGFMU guarantee is often misread. It protects the lender against a portion of a default, which is why no security is taken. It is not approval, and it is not protection for the borrower - a default still lands on your credit record and is still recovered from you.
What eligible activity actually covers
Manufacturing, services and trading including retail, plus allied agricultural activities - dairy, poultry, beekeeping, fisheries and similar. Crop farming itself is outside the scheme, as is anything banned by law or speculative in nature. The allied-agriculture inclusion is worth knowing in Telangana and Andhra Pradesh specifically, because dairy and poultry are significant in both states and a lot of applicants read 'non-farm' as excluding them entirely. It does not.
Why files come back
In practice the rejections we see are rarely about the business being unviable. They are about the file. Document mismatch is the single most common cause - an address on Aadhaar that does not match the rental agreement or the stated business address. Close behind it: the branch is not convinced the business is actually trading. Field verification carries more weight than applicants expect, and a unit with no signage, no stock and nobody present on the day of the visit fails there regardless of what the paperwork says. Then bank statements that do not corroborate the stated turnover, no Udyam registration, and applying for Kishore or Tarun on a savings account when the branch expects a current account.
Frequently Asked Questions
₹20 lakh, under the Tarun Plus category. That tier is only open to borrowers who have already taken a Tarun loan and repaid it cleanly. For a first-time Mudra borrower the practical ceiling is ₹10 lakh under Tarun. Much of the content still online says the scheme caps at ₹10 lakh, which is out of date.
More on Mudra Loan
Shishu Mudra Loan: Up to ₹50,000
Kishore Mudra Loan: Above ₹50,000 to ₹5 lakh
Tarun Mudra Loan: Above ₹5 lakh to ₹10 lakh
Tarun Plus Mudra Loan: Above ₹10 lakh to ₹20 lakh
Mudra Loan Eligibility: what actually decides your application
Mudra Loan Documents: the checklist, and what actually gets files returned
How to Apply for a Mudra Loan: the three routes and which one fits
Mudra Loan Interest Rate: why there is no single number
Mudra Loan for Women: eligibility, concessions and home-based businesses
Mudra Loan in Telangana and Andhra Pradesh: which banks, and what branches ask
SBI e-Mudra ₹50,000: who qualifies for the online route
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Loans Got Easy is a loan advisory and Direct Selling Agent. We help prepare and place the file. We do not sanction, approve or disburse, and we cannot influence a scheme outcome - that decision belongs to the lending institution.