Mar 19, 2022 • 5 min read

A Beginner's Guide to Mudra Loans

Are you hearing the term “Mudra Loan” for the first time? Let’s start this blog with a little backstory to make things simpler. Indian Prime Minister launched the Pradhan Mantri Mudra Yojana (PMMY) back in 2015 to generate large-scale employment in this country. In addition to that, it aimed to cater to the funding requirement of multiple micro, non-corporate, and non-farm enterprises.

So, What is Mudra? 

MUDRA- Micro Units Development & Refinance Agency Limited started with the promise to offer a loan of up to 10 lakhs to eligible enterprises. This refinancing institution functions with Cooperative Banks, Commercial Banks, MFI, RRBS, NBFC, and so on. 

The eligible loan borrowers can approach those banks and apply for loans under the MUDRA scheme. Besides the banks, many online credit-giving platforms also provide a seamless loan application procedure.

What are the Key Objectives of MUDRA Yojana?

This scheme was initiated to achieve multiple goals. The most important ones are given below: 

  • To help small businesses flourish and develop 

  • To help all the micro-finance institutions register and regulate their business operations 

  • To lay down financing guidelines for the start-up owners and small enterprises 

  • Initiating the regulation of all the micro-finance institutions that deal with service, manufacturing, and trading.

  • To offer the SC/ST cast with loan preferences 

  • Allowing the unbanked enterprises with easy access to finance.

The idea is quite simple - to boost the entrepreneurial spirit of India’s young generation and their initiatives will create more jobs and employment opportunities. By ensuring the Mudra Loans, the government is providing the initial capital required to kickstart the operations. 

After the start-ups are completely set up, they can easily pay back the loan and focus on sustaining their budding businesses. It is a way of Government helping out the micro-enterprises from the state of despair. The idea is undoubtedly flawless. 

What Are the Building Blocks of MUDRA? 

At first, it was framed as a possessed subsidiary of SIDBI with a paid-up capital of Rs. 750 crores and an approved capital of Rs. 1000 crores. The key obligation of the MUDRA loan is to bring out the growth by refinancing micro undertakngs.

The PM MUDRA Yojana aims to collaborate loaning foundations at the micro-level at the state, regional, and provincial levels. The growth it aims to bring to Micro Finance can design an economic development in the upcomng years. This scheme will further meet the goals of budgetary proficiency, arrangement of loans, financial literacy, increased employment, and much more. Most importantly, it will provide social help to the bottom-most layer of the society to create the lifestyle they want. 

What is the Core Mission behind MUDRA?

The Pradhan Mantri MUDRA loan aims to pave a way for making an innovative, and comprehensive value-added entrepreneurial culture that is sustainable enough to initiate money-related progress and security in the country. 

The Classes of the MUDRA Loans

There are three classes of loan facilities falling under the Pradhan Mantri MUDRA Loan:

1. Sishu Loan

This loan aims to help entrepreneurs who want to start a business or are in the process of building one up. The maximum range of loans is RS.50000. Mainly the Mudra Sishu loan provides finance for equipment and machinery. You need to obtain legitimate business quotations and supplier subtleties to get this loan.

2. Kishor Loan

This class of loans is focused on the entrepreneurs who are hop Rs. 500001 to Rs. 5 Lakhs. You need to show your current accounting report for the last two years, your wages or sales revenues, an assessed balance sheet for the current year, and a financial balance that proclaims the bank account statement. 

3. Tarun Loan The Tarun MUDRA loan aims to help the business visionaries who have set themselves up in the business but are looking for additional development. Under this scheme, you can claim for an amount ranging from Rs. 5000001 to Rs. 10 lakhs. 

The Key Parameters of Availing this Loan are: 

  • Salary and sales revenues 

  • Accounting report of last two years 

  • A financial balance that proclaims that the bank account statement is correct

  • Financial and technical stability of the venture 

  • Address and Identity proof 

  • Cast certificate if required


Though there are some arguments that the MUDRA loans could further add up to the bad loan problems in India, what do you think of this scheme? Let us know in the comment section!