Mudra Loan 2026: Eligibility, Loan Limits, Documents and How to Apply
A Mudra loan helps eligible small business owners in India arrange funds for equipment, stock and business expansion. It is available under the Pradhan Mantri Mudra Yojana, commonly called PMMY.
The scheme includes loans up to ₹20 lakh, but this higher limit has a specific condition. It is available under Tarun Plus for eligible entrepreneurs who have successfully repaid an earlier Tarun loan.
Here is what you should understand before applying.
What Is a Mudra Loan?
A Mudra loan is business finance offered under PMMY through participating banks and other lending institutions.
It supports income-generating activities in manufacturing, trading and services. Certain activities allied to agriculture, including dairy, poultry and beekeeping, are also covered.
Funding can meet equipment purchases and working capital requirements. Working capital means money used for everyday business needs, such as purchasing stock.
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Mudra Loan Categories and Limits
Mudra loans have four categories:
| Category | Loan amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishore | Above ₹50,000 and up to ₹5 lakh |
| Tarun | Above ₹5 lakh and up to ₹10 lakh |
| Tarun Plus | Above ₹10 lakh and up to ₹20 lakh |
Tarun Plus requires successful repayment of a previous Tarun loan. A first-time applicant should not assume that the ₹20 lakh limit is available to them.
These limits are not promises of approval. The lender assesses your application and decides the amount it can offer.
Who Can Apply for a Mudra Loan?
PMMY supports eligible small and micro businesses. Business activities may include shops, tailoring services, repair businesses and small manufacturing units.
The lender will assess your business activity, funding requirement and ability to repay. Exact requirements can differ between institutions.
Before applying, prepare clear answers to these questions:
- What does your business do?
- How much money do you need?
- How will you use the funds?
- How will the business repay the loan?
A realistic business plan helps explain your requirement. Request an amount based on actual expenses rather than the maximum category limit.
Mudra Loan Interest Rate and Repayment
There is no single interest rate for every Mudra loan. Rates and repayment terms depend on the lending institution and its assessment.
For example, SBI publishes its own benchmark-linked rate, repayment conditions and borrower contribution requirements for its PMMY product. These should not be treated as terms applicable to every lender.
Before accepting an offer, ask for:
- The exact interest rate.
- Monthly repayments and loan tenure.
- Processing fees and other applicable charges.
- Total repayment amount.
- Any contribution you must make towards the project.
Our guide on negotiating a personal loan interest rate explains useful comparison principles. Confirm Mudra business loan conditions separately with your lender.
Documents Required for a Mudra Loan
Ask your chosen lender for its final checklist. Depending on the application, documents may include:
- Identity and address proof.
- PAN and recent photographs, where required.
- Bank statements.
- Business registration or licence, where applicable.
- A business plan or project report.
- Equipment quotations or purchase details.
- Financial statements or tax returns, where applicable.
For Tarun Plus, also ask what evidence is needed to confirm successful repayment of the earlier Tarun loan.
Requirements depend on the lender and proposal, so obtain the checklist before submitting your application.
How to Apply for a Mudra Loan
Follow these steps:
- Contact a participating lender: Approach a bank or other institution offering PMMY loans.
- Explain your requirement: Describe your business and how you will use the money.
- Confirm eligibility: Ask which category suits your application.
- Prepare documents: Collect the lender’s requested paperwork.
- Submit the application: Provide accurate personal and business information.
- Complete verification: Respond to requests for additional details.
- Review the offer: Check the written terms before accepting.
Use the lender’s official website if it offers an online application facility. Keep your application reference number for follow-up.
Before signing, read our loan sanction letter checklist to understand the approved amount, interest rate, charges and conditions.
Is Collateral Required?
PMMY provides collateral-free credit. However, this does not remove repayment obligations or the lender’s assessment.
Ask the lender to explain any security over assets purchased using the loan and any contribution required from you. Collateral-free lending does not necessarily mean every project expense will be financed.
Frequently Asked Questions
Can everyone get a ₹20 lakh Mudra loan?
No. Tarun Plus requires successful repayment of a previous Tarun loan. The lender must also approve the application.
Is a Mudra loan interest-free?
Do not assume so. Confirm the interest rate and charges in your lender’s written offer.
Is approval guaranteed?
No. Applying does not guarantee approval or the amount requested.
Can I use a Mudra loan for personal expenses?
Mudra loans fund eligible business activities. They should not be treated as general personal loans for weddings, holidays or household spending.
Is a Mudra loan a government grant?
No. It is a loan that must be repaid according to the agreed terms.
Before You Apply
Calculate your actual business needs and compare written offers. Choose repayments your business can manage during slower months. Confirm current eligibility, documents and charges directly with the lender before applying.
