A Guide to Pradhan Mantri Mudra Loan Interest rates

Mudra loans are offered by the Pradhan Mantri Mudra Yojana (PMMY). Micro-Units Development and Refinance Agency is referred to as Mudra. Banks provide Mudra loans to non-corporate, non-farm sector microenterprises that generate income and have credit needs under Rs. 10 lakh.

Under this program, borrowers may apply for business loans between Rs. 50,000 and Rs. 10 lakh. The Mudra loan payback period spans from one year to seven years, with interest rates starting at 7.30% p.a.

An Introduction to Mudra Loan

According to a 2018 analysis by The Economic Times, India had over 51 million MSME units that contributed to roughly 37% of the nation's GDP and 43% of its exports. 

Despite the important role that small firms play in economic growth, MSMEs have to deal with a number of difficulties, including a lack of funding for working capital and raw materials, obsolete technology, and a labor shortage.

The Pradhan Mantri Mudra Yojana was introduced by the government on April 8, 2015, to assist small enterprises with financial issues. Mudra provides business loans with payback tenures ranging from 1 to 5 years that are targeted at three different stages of a company's growth. The amount of funding is determined by the type of loan that is available, and it is charged at the Pradhan Mantri Mudra Yojana interest rate that is currently in effect.

Mudra Loan Interest Rates by Various Banks

Mudra loan interest banks offered by various banks are mentioned in the table below:

Bank Name

Interest Rates

Tenure (in years)


Linked to MCLR

1 to 5

UCO Bank

Starts at 8.85% p.a. 

At the bank's sole discretion

Union Bank of India

Starts at 7.30% p.a.

At the bank's sole discretion


Linked to bank’s base rate

1 to 5

Bank of Baroda

9.65% p.a.

At the bank's sole discretion

Indian Oversees bank

According to bank’s guidelines

At the bank's sole discretion


According to bank’s guidelines

At the bank's sole discretion

Central Bank

According to bank’s guidelines

At the bank's sole discretion

Bank of India

Linked to MCLR

1 to 7

Canara Bank

According to bank’s guidelines

Up to 7 years

Allahabad Bank

According to bank’s guidelines

1 to 5

Vijaya Bank

9.65% p.a.

At the bank's sole discretion

Bank of Maharashtra

9.25% p.a.

At the bank's sole discretion

Types of Mudra Loan

There are 3 types of Mudra loans: 

1. Shishu Mudra Loan

If your company has not yet been established or is in its infancy, you may be eligible for a Mudra loan during this phase. The program gives a 5-year term with a sanction of up to Rs. 50,000. Businesses that qualify for a Shishu Mudra loan include:

The annual interest rate for Mudra Shishu loans ranges from 1% to 12%. The interest rate must remain at the MCLR/base rate, according to a directive from the RBI to "commercial financial institutions" offering Mudra refinancing. 

The maximum interest rate that RRBs and SCBs may charge borrowers is 3.5% more than the Mudra refinancing rate.

The ceiling for NBFCs for Mudra refinancing is set at 6%. The government has also disclosed a 2% interest rate reduction incentive for quick Shishu Mudra loan payers. The 3-month moratorium is followed by a 12-month extension of the subsidy, which ends on May 31, 2020.

2. Kishore Mudra Loan

This type of loan is specifically designed to support your business. The sanctioned amount under the plan is adjustable between Rs. 50,000 and Rs. 5 lakh, depending on the lending institution's Mudra interest rate. 

The interest rate for the Kishore Mudra Yojana is determined by the terms of the program and your credit history, and it may range from 8.60% to 11.15% or more. Within the duration provided by the lender, you must repay the loan along with the Mudra loan interest.

3. Tarun Mudra Loan

When you want to grow your firm, you can choose this option. You can obtain a sanction in this phase ranging from Rs. 5 lakh to Rs. 10 lakh at the lending institution's determined PM Mudra loan interest rate. 

The guidelines and your credit history are used by the lender to calculate the PMMY interest rate. The lender determines the payback term and sets the interest rates, which range from 11.15% to 20%.

Schemes under Mudra loan

A variety of programs designed to meet certain needs are available under MUDRA Yojana. The following are some of them:

1. Women's business program: This program, also known as the Mahila Udyami Yojana, provides loans at reasonable Mudra interest rates with a discount of up to 0.25%.

2. Credit for micro-enterprises: This program provides loans to sectors like food production, textiles, and land transportation in an effort to expand the general public's participation in the economic sector. Here, you can use microfinance organizations to get a loan of up to Rs. 1 lakh.

3. Mudra Card: This debit card, which is linked to the Mudra loan and gives beneficiaries access to operating capital while building their credit histories, is called the Mudra Card. It can be used to make POS device payments as well as cash withdrawals from ATMs.

4. Bank refinancing scheme: This program refinances loans made by banks to MSMEs in the manufacturing and service sectors totaling up to Rs. 10 lakh. Only when the scheduled commercial banks lend money at their base rate is refinancing possible. Additionally, Mudra Yojana loan interest rate margins for rural, regional, and cooperative banks must not exceed 3.5% over refinancing rates.

5. Equipment funding scheme: This program aims to give small businesses the financial boost they need to grow and buy high-quality equipment. In this approach, microbusinesses can boost their output while also improving the sustainability of their operations.

Loan Amount for Various Types Under Mudra Yojna. 

The loan amount offered under various types of Mudra loans depends on the type of the loan. Take a look at the following table for details: 

Type of loan

Loan Amount


Up to Rs.50,000


Rs.50,000 to Rs.5 lakh


Rs.5 lakh to Rs.10 lakh

Mudra Loan Eligibility

The requirements for Mudra loans eligibility are very straightforward. If you are an Indian citizen and a member of the following groups, you may apply for a loan under this program:

Indian residents who need funds up to Rs. 10 lakh and have their own company plans for the manufacturing, trading, or service industries can apply for a Mudra loan. 

Banks in the public and commercial sectors, local rural banks, small financing banks, and microfinance organizations all offer it (MFIs).

Additionally, the following criteria also apply:

Documents Required for Mudra Loan 

You will need the following documents to apply for Mudra loan:

Mudra Loan Related FAQs

Ans: Mudra loans are unsecured because no collateral is necessary to obtain one. Because each organization determines its own risk factor and sets rates accordingly, interest rates differ from institution to institution.

Ans: A Mudra loan's processing period varies depending on the financier. The amount of time required for you to get the loan disbursement will depend on the financial institution you choose. Businesses can request an advance of up to Rs. 10 lakh without putting up any collateral by having the required paperwork on hand.

Ans: The application forms are available online at the Mudra website or from any of the intermediaries.

Ans: The initial category of Shishu Loans requires the completion and submission of a one-page application form. Applicants must complete a 3-page application form for the Kishor and Tarun loan categories.

Ans: The intermediary lending institution determines the terms and conditions of repayment in accordance with its rules while taking the business's cash flow into account.

Ans: Yes, the program has been running nationwide since April 8, 2015.

Ans: When the advance amount exceeds Rs. 2 lakh, an ITR, or income tax return, is one of the crucial documents needed to be eligible for a Mudra loan. A candidate will also require additional financial records, such as anticipated balance sheets for the next two years and balance sheets for the previous three years that have been audited by a CA.

Ans: Yes, Mudra loans are offered to new companies and startups. The commercial endeavors need only be related to the manufacturing, non-agricultural, or trading sectors. A prospective applicant must submit the business plan with the application form in order to be considered for the loan. Thus, it aids aspiring business owners in realizing their goals.

Ans: The Mudra loan program is government-funded, so having a high CIBIL score is not a necessity. As a result, both individuals and non-individuals who match the requirements of the scheme's eligibility requirements—which do not need applicants to have a minimum CIBIL score—can apply for this loan. However, having a good CIBIL score will help you negotiate better loan terms with lenders.

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