Pradhan Mantri MUDRA Yojana (PMMY): Comprehensive Guide

Key Takeaway: The Pradhan Mantri MUDRA Yojana offers collateral-free loans up to ₹10 lakhs for non-farm micro-enterprises, structured into three tiers—Shishu, Kishor, and Tarun—to fuel entrepreneurship and financial inclusion across India.

1. Scheme Overview

Launched on 8 April 2015, PMMY provides institutional credit to non-corporate, non-farm micro and small enterprises. Funds are disbursed through Member Lending Institutions (Scheduled Commercial Banks, RRBs, NBFCs, MFIs, Cooperative Banks) to support income-generating activities in manufacturing, trading, and services up to ₹10 lakhs per borrower.

2. Loan Categories

PMMY classifies loans into three categories based on funding requirements:

• Shishu: Loans up to ₹50,000

• Kishor: Loans above ₹50,000 up to ₹5 lakhs

• Tarun: Loans above ₹5 lakhs up to ₹10 lakhs

3. Eligibility Criteria

• Indian citizen

• Engaged in a non-farm income-generating activity (manufacturing, processing, trade, services)

• Business credit demand under ₹10 lakhs

• No minimum turnover requirement, but strong business plan improves approval chances

4. Acceptable Activities

PMMY covers a wide spectrum of sectors, including:

• Transport (auto rickshaws, goods vehicles)

• Food processing (papad, jams, cold storage)

• Textile products (handloom, embroidery)

• Service enterprises (salons, repair shops, DTP)

• Allied agriculture (poultry, beekeeping, agri-clinics)

5. Interest Rates & Tenure

• Base Rate: Set by individual lenders; typically linked to MCLR or EBLR

• Range: Generally 8.85% p.a. onwards; public sector banks charge around 12.15% p.a. for tenures up to 7 years (SBI example)

• Tenure: 1 to 7 years, depending on loan category and lender policy

6. Documents Required

Common Documents for All Categories

• Proof of Identity: Aadhaar, PAN, Voter ID, Driving Licence, Passport

• Proof of Address: Aadhaar, utility bills, Voter ID, Passport, lease/rent agreement

• Business Proof: Registration certificates, establishment certificate, Udyog Aadhaar Memorandum

• Income Proof: Bank statements (last 6 months), IT returns or income certificates

• Passport-size photographs (2 copies)

• Caste certificate for reserved categories (if applicable)

Additional Documents for Kishor & Tarun

• Partnership deed or Memorandum & Articles of Association (for entities)

• Last two years’ unaudited balance sheets and tax returns (for loans ≥ ₹2 lakhs)

• Projected balance sheets for the loan tenure

• Quotations for machinery or equipment to be purchased

• Statement of accounts from existing banker (last six months)

7. Application Process

1. Prepare Documents: Gather identity, address, business, and financial documents.

2. Select Lender: Choose from scheduled banks, RRBs, NBFCs, or MFIs.

3. Submit Application: Complete the PMMY loan application form available on lender’s website or branch.

4. Loan Appraisal: Lender verifies documents, assesses business viability, and conducts due diligence.

5. Sanction & Disbursal: Upon approval, funds are released directly to borrower’s bank account.

8. Benefits & Impact

• Collateral-Free Credit: Removes barriers for micro-entrepreneurs lacking asset backing.

• Job Creation: Fuels small-scale enterprises, contributing to local employment.

• Financial Inclusion: Integrates informal sector into formal banking system.

• Economic Growth: Micro enterprises supported under PMMY form a backbone of India’s economy, employing nearly 10 crore people.

Pradhan Mantri MUDRA Yojana continues to transform India’s entrepreneurial landscape by enabling grassroots innovators to access timely, affordable credit without collateral, driving self-employment and inclusive growth.