Mudra Loan (Shishu, Kishor, Tarun): A Complete Guide for Small Entrepreneurs
India’s micro and small business ecosystem has been growing rapidly, and to support this growth, the Government of India introduced the Pradhan Mantri Mudra Yojana (PMMY) in 2015. This scheme enables budding entrepreneurs and small business owners to access collateral-free loans up to ₹10 lakh through banks, NBFCs, and microfinance institutions. These loans are widely known as MUDRA Loans.
The Mudra scheme is ideal for shopkeepers, artisans, service providers, small traders, local businesses, and even early-stage startups. Its simplicity—minimal paperwork, affordable interest rates, and flexible repayment options—makes it one of India’s most preferred loan schemes for small entrepreneurs.
In this guide, we explain the three Mudra loan categories—Shishu, Kishor, and Tarun, along with eligibility, documents, interest rates, benefits, and how to apply.
What Is a Mudra Loan?
A Mudra Loan is financial assistance given under PMMY for micro and small enterprises engaged in non-farm income-generating activities. These loans can be used for:
- Working capital
- Expanding business operations
- Buying machinery or tools
- Purchasing stock
- Starting a new business
Depending on the stage of your business, you can apply for one of three Mudra loan categories.
1. Shishu Mudra Loan (Up to ₹50,000):
The Shishu category is designed for very small businesses or first-time entrepreneurs who need minimal capital to start operations.
Who Can Apply?
- Street vendors
- Tea/fruit/vegetable sellers
- Home-based businesses
- Tailors, beauticians, carpenters
- Small repair shops
Micro startups
Loan Details:
- Amount: Up to ₹50,000
- Interest Rate: Typically 8%–12% (varies by bank)
Key Features:
- No collateral
- Very simple documentation
- Quick approval and disbursal
- Ideal for tiny or home-run businesses
2. Kishor Mudra Loan (₹50,000 to ₹5 lakh):
The Kishor category supports growing businesses that need more funds for expansion, equipment purchase, or working capital.
Who Can Apply?
- DTP centres and coaching classes
- Small manufacturing units
- Transport operators
- Boutiques and salons
- Retail traders
Loan Details:
- Amount: ₹50,000 to ₹5 lakh
- Interest Rate: 10%–14%
Key Features:
- Suitable for semi-established businesses
- Helps in business expansion and inventory purchase
- Slightly more documentation compared to Shishu loans
3. Tarun Mudra Loan (₹5 lakh to ₹10 lakh):
The Tarun category is meant for established micro or small businesses ready for larger expansion.
Who Can Apply?
- Food processing units
- Small-scale industries
- Service centres
- Automotive workshops
- Franchise businesses
- Growing startups
Loan Details:
- Amount: ₹5 lakh to ₹10 lakh
- Interest Rate: Generally 11%–16%
Key Features:
- Higher loan amount
- Ideal for scaling operations
- Helps in machinery purchase, infrastructure improvements, and business expansion
Eligibility Criteria for Mudra Loans:
To apply, you must:
- Be an Indian citizen
- Be running or planning a non-farm business
- Require funding up to ₹10 lakh
- Be between 18 to 65 years of age
Eligible Businesses:
- Proprietorship firms
- Partnership firms
- Small manufacturers
- Retail traders
- Service providers
- Transport operators
- Startups
Documents Required for Mudra Loan:
Documentation is simple and varies by category.
Basic Documents:
- Aadhaar Card
- PAN Card
- Address proof
- Business registration (if available)
Financial Documents (for Kishor & Tarun):
- Bank statements (last 6–12 months)
- ITR (if available)
- GST details (if applicable)
Business-Related Documents:
- Business plan
- Supplier quotations for machinery/equipment
- Proof of business premises
Benefits of Mudra Loans:
- Collateral-Free Loans: No security or mortgage is required.
- Affordable Interest Rates: Lower rates make repayment manageable.
- Flexible Repayment Tenure: 3 to 5 years, with possible moratorium benefits.
- Fast Processing & Easy Documentation: Ideal for micro and small entrepreneurs.
- Supports All Micro Businesses: Suitable for shops, manufacturing units, service providers, and online businesses.
- Special Benefits for Women Entrepreneurs: Many banks offer interest concessions for women-led businesses.
How to Apply for a Mudra Loan?
Offline Application Process:
- Visit any nearby bank, NBFC, or microfinance institution.
- Request the Mudra Loan form (Shishu/Kishor/Tarun).
- Submit documents: Aadhaar, PAN, photos, business details, bank statements.
- The bank evaluates your application.
- Sanction and disbursal are done directly to your bank account.
Online Application Process:
You can apply through the Mudra portal or bank websites that offer online Mudra loan facilities.
The process typically involves:
- Filling the application form
- Uploading documents
- Bank verification
- Loan approval and disbursal
Which Mudra Loan Should You Choose?
Choose Shishu if:
- You’re starting a very small business
- You need up to ₹50,000
- You want minimal paperwork
✔ Choose Kishor if:
- Your business is running but needs more funds
- You require up to ₹5 lakh
- You want to purchase equipment or expand
✔ Choose Tarun if:
- Your business is established
- You want to scale significantly
- You need up to ₹10 lakh
Common Misconceptions About Mudra Loans:
❌ “Mudra Loan gives free money.”
→ No, it is a loan—repayment is required.
❌ “Anyone can get it without documents.”
→ Basic documents are mandatory, especially for higher loan amounts.
❌ “It is only for shopkeepers.”
→ Mudra loans support hundreds of business categories, including service providers and startups.
Tips for Faster Mudra Loan Approval:
- Maintain a clean bank statement
- Prepare a simple business plan
- Submit all required documents
- Apply through your existing bank
- Keep a good CIBIL score (650+)
Conclusion:
The Mudra Loan scheme is a powerful initiative for small entrepreneurs who dream of starting or expanding their business. With collateral-free funding, flexible repayment options, and supportive loan categories—Shishu, Kishor, and Tarun—PMMY helps entrepreneurs grow with confidence.
Whether you need ₹20,000 to start a home business or ₹10 lakh to scale an existing enterprise, Mudra Loans can be your gateway to growth, stability, and financial independence.
Disclaimer: This content is for educational purposes only and should not be considered financial, legal, or investment advice.
