PM Mudra loan explained: Shishu, Kishore, Tarun and Tarun Plus limits, rates and EMI

A Mudra loan is a business loan of up to ₹20 lakh for a non-farm, income-generating micro enterprise, given by a bank, regional rural bank, small finance bank, co-operative bank, NBFC or microfinance institution under the Pradhan Mantri Mudra Yojana (PMMY). It comes 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, only for borrowers who have taken and fully repaid a Tarun loan). Mudra is not a subsidy and not interest-free: the lender sets the interest rate under RBI rules, and the loan is backed by a government guarantee fund so that lenders need not ask for collateral.

This guide belongs to the MSME business loan interest rates overview. Amounts are illustrative.

The four categories at a glance

Tarun Plus was announced in the July 2024 Union Budget and introduced in October 2024. Mudra loans are covered by the Credit Guarantee Fund for Micro Units (CGFMU), managed by NCGTC.

Who can get a Mudra loan

• Individuals, proprietorships, partnerships and other non-corporate small businesses engaged in manufacturing, trading or services, and activities allied to agriculture such as dairy, poultry and fisheries, but not crop loans.
• The activity must be income-generating. Loans for consumption or personal needs do not qualify.
• The borrower should not be a defaulter with any bank or financial institution.
• Lenders will assess your project, repayment capacity and credit history like any other loan. Being eligible for Mudra does not mean a loan must be sanctioned.

Since the micro enterprise limit was raised in 2025 (investment up to ₹2.5 crore, turnover up to ₹10 crore), more units are micro, but Mudra's loan-size cap of ₹20 lakh is what matters for this scheme. See Udyam registration and the MSME definition.

How interest and charges work

• Rate. Each lender sets its own rate. Banks typically link Mudra loans to their external benchmark lending rate plus a spread; NBFCs and MFIs charge more because their cost of funds is higher. Ask for the rate on a reducing-balance basis and the APR in the Key Fact Statement.
• Processing fee. Many banks waive or limit processing fees on Shishu loans; check the lender's schedule of charges for Kishore and Tarun.
• Collateral. Mudra loans are designed to be collateral-free, and RBI's rules additionally bar banks from taking collateral on loans to micro and small enterprises up to ₹20 lakh sanctioned or renewed from 1 April 2026. See CGTMSE and the collateral rule.
• Form. It can be a term loan, an overdraft or a cash credit limit. Some banks issue a Mudra card, a debit card that lets you draw on a working capital limit.

Worked example: EMI on Kishore and Tarun loans

All rates are illustrative, not offers.

On the Tarun loan, the first month's interest is ₹8,00,000 × 10% ÷ 12 = ₹6,667, so only about ₹10,331 of the first EMI reduces principal. In year 1 total interest is about ₹74,157 and the balance falls to about ₹6,70,186.

Can the business afford it? If the Tarun loan buys a machine that adds ₹30,000 of net monthly cash flow, the EMI of ₹16,998 is covered about 1.76 times. If it adds only ₹18,000, there is no margin for a slow month. The DSCR guide shows how lenders test this.

How to apply

1. Prepare a simple project note: what you will buy, the cost, how much you put in, and expected monthly sales and costs.
2. Keep KYC (Aadhaar, PAN), business proof (Udyam certificate, GST registration if applicable, shop licence), quotations and bank statements ready.
3. Apply at a bank branch, through the lender's own website or app, or through the government JanSamarth portal, which lists credit-linked schemes and participating lenders.
4. Read the sanction letter and KFS before signing; check whether the loan is term loan, overdraft or both.

Mudra myths and warning signs

• "Mudra loans are interest-free" — false. Interest is charged.
• "Pay ₹5,000 to an agent to get your Mudra loan approved" — Mudra has no agents. MUDRA itself does not lend directly to borrowers; it refinances lenders. Fake websites and calls using the Mudra name are a known fraud pattern.
• "Mudra loans never need to be repaid" — false. Default is reported to credit bureaus and the lender will recover.
• "You must have a big business" — false. Shishu is meant for very small and new units.

If someone asks for money to arrange a loan, report it at the national cyber crime portal or helpline 1930. See digital lending fraud.

Frequently asked questions

Is there a subsidy on Mudra loans?

PMMY itself does not give an interest subsidy. Some state government schemes and other central schemes (such as PMEGP, a credit-linked subsidy scheme run through KVIC) are separate. Do not assume a subsidy unless a scheme document says so.

Can I get Tarun Plus directly?

No. Tarun Plus is for entrepreneurs who have availed and successfully repaid a previous Tarun loan.

Does a Mudra loan affect my credit score?

Yes. It is reported to credit bureaus like any other loan. Timely repayment builds the record you need for larger loans later; see credit reports.

Can a company take a Mudra loan?

Mudra is aimed at non-corporate micro enterprises; whether a lender will treat a small company as eligible depends on its scheme guidelines. Ask the lender.

Sources

• MUDRA — scheme categories, eligible activities and FAQs
• JanSamarth — government portal for credit-linked schemes
• NCGTC — Credit Guarantee Fund for Micro Units
• Reserve Bank of India — MSME lending directions
• National Cyber Crime Reporting Portal — report loan fraud