PM Mudra Yojana 2026 — Complete Guide for Small Business Owners
A tea stall owner in Bhopal wants ₹40,000 to buy a better machine. A small tailoring unit in Indore needs ₹3 lakh to buy new equipment. A namkeen manufacturer in Ratlam wants ₹8 lakh to expand production.
All three have one thing in common — they need business funding, they have no property to pledge as collateral, and they are too small for a regular bank loan.
This is exactly who the PM Mudra Yojana was built for.
Launched in 2015 under the tagline "Fund the Unfunded," the Pradhan Mantri Mudra Yojana (PMMY) has become India's most widely used small business scheme. Since its launch, over 57 crore loans worth ₹40 lakh crore have been sanctioned — and 67% of these loans went to women borrowers.
In this guide, you will find everything you need to know to apply in 2026 — including the updated ₹20 lakh limit that most guides still have wrong.
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What is PM Mudra Yojana?
PM Mudra Yojana is a government scheme that provides collateral-free business loans to non-corporate, non-farm small and micro-enterprises.
The key word is collateral-free. You do not need to pledge any property, fixed deposit, or provide a third-party guarantor. The government provides credit guarantee backing through CGTMSE, which covers the lender's risk on your behalf.
The scheme is implemented through banks, NBFCs (Non-Banking Financial Companies), and Microfinance Institutions (MFIs) — which means you can apply at nearly any bank branch in India.
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4 Loan Categories — Shishu, Kishor, Tarun, and Tarun Plus
One of the most common mistakes people make is applying for the wrong category. Here is a clear breakdown:
Shishu — Up to ₹50,000
For brand-new businesses and first-time entrepreneurs who are just starting out. Street vendors, small food stalls, home-based businesses, and artisans typically fall here. Processing fees are nil, and CIBIL score is not mandatory for this category.
Kishor — ₹50,001 to ₹5 Lakh
For businesses that have moved past the startup stage and need funds for expansion or stabilisation. The business should already be running and generating some income.
Tarun — ₹5 Lakh to ₹10 Lakh
For established micro-enterprises looking to scale operations, invest in equipment, or increase working capital. Banks will do a basic credit assessment before approval.
Tarun Plus — ₹10 Lakh to ₹20 Lakh (NEW — Budget 2024-25)
This is the most important update. Many guides still show the maximum limit as ₹10 lakh. Since Budget 2024-25, a fourth category called Tarun Plus was introduced. It is available only to borrowers who have already successfully repaid a Tarun loan. The maximum limit under this category is ₹20 lakh.
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Who is Eligible?
The eligibility for PM Mudra Yojana is broad and includes:
- Any Indian citizen above 18 years of age
- Engaged in a non-farm, non-corporate business — manufacturing, trading, or services
- Small vendors, shopkeepers, artisans, food processors, garment makers, repair shops, transport operators, and more
- Agriculture-allied activities like poultry, dairy farming, fishery, beekeeping, and food processing are also eligible
- New businesses as well as existing businesses
The scheme is not available for crop loans or direct agricultural activities like irrigation or land improvement.
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Interest Rates
PM Mudra Yojana does not fix a single government interest rate. The rate is decided by each bank based on RBI guidelines and the borrower's credit profile.
Typical rates in 2026:
- SBI: approximately 12.15% per annum
- UCO Bank: starting from 8.85% per annum
- Union Bank of India: between 10.30% and 11.75%
- Most banks range from 8.85% to 12% depending on the loan category and borrower profile
Since rates vary, it is worth comparing two or three banks before you finalise your application.
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Documents Required
The documents for Mudra loan are straightforward:
- Completed Mudra loan application form with passport-size photographs
- Identity proof: Aadhaar, PAN card, Voter ID, or Driving Licence
- Address proof: utility bill, Aadhaar, or any government-issued document
- Bank statement for the last 12 months
- Business registration proof (if registered)
- Quotation of machinery or equipment to be purchased (for Tarun and above)
- For Kishor and Tarun: basic business plan or project note explaining loan purpose
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The MUDRA Card — A Practical Feature Many People Miss
Along with the loan, you receive a MUDRA Card — a RuPay debit card linked to your working capital loan account. Instead of taking the entire loan amount upfront, you can draw funds as needed — like a credit line. This is particularly useful for working capital purposes where cash requirements fluctuate day to day.
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How to Apply
Online:
Visit the Udyami Mitra portal at udyamimitra.in or the Jan Samarth portal at jansamarth.in. Both accept Mudra loan applications digitally.
Offline:
Walk into any bank branch — public sector, private sector, or regional rural bank — and ask for a Mudra loan application form. This is the most common route for first-time applicants.
Step-by-step process:
- Choose your category (Shishu, Kishor, Tarun, or Tarun Plus)
- Visit the bank or apply online
- Fill the Mudra application form with business details, loan purpose, and amount
- Submit documents
- Bank authenticates your documents, checks your credit profile, and evaluates your business plan
- On approval, loan is disbursed to your account and MUDRA Card is issued
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Important Things to Know Before You Apply
One — Mudra loan is not a guaranteed approval. It is a scheme under which banks lend. The bank still does its credit assessment. A good repayment history and a clear purpose for the loan significantly improve your chances.
Two — Beware of agents. Apply only through official channels at udyamimitra.in, jansamarth.in, or directly at bank branches. No agent can guarantee a Mudra loan, and you should not pay any fees to an agent for application.
Three — Repayment tenure ranges from 3 months to 7 years depending on the lender and loan category. There are no foreclosure charges.
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Summary — Quick Reference
- Maximum loan: ₹20 lakh (Tarun Plus, for existing Tarun loan repayers)
- First-time maximum: ₹10 lakh (Tarun category)
- Collateral: completely free
- Who can apply: any non-farm small business, 18 years and above
- Apply at: udyamimitra.in or any bank branch
- Interest rate: 8.85% to 12% depending on bank and category
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*Disclaimer: Loan eligibility, interest rates, and disbursement terms vary by bank and are subject to RBI guidelines. Always verify current terms with your bank before applying.*
Need help preparing a project note or business plan for your Mudra loan application? Contact Pragati Saathi Private Limited, Bhopal — www.pragatisaathi.in
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