Can salaried individuals also avail loans under the PM Mudra Yojana? What documents are required? Answers to all your questions.

The government has decided to extend the PM Mudra Yojana until 2031. In this context, we explain who can avail of collateral-free loans under this scheme, the applicable terms and conditions, and the simple process to apply.

The central government has decided to extend the Pradhan Mantri Mudra Yojana (PM Mudra Yojana) until 2031 and increase the loan limit to ₹20 lakh. Furthermore, the bank guarantee fee has been reduced from 1% to 0.75%. We will consult with experts to understand how this reduction in the guarantee fee benefits the general public. We will also explore who is eligible for these loans—can a salaried individual or an unemployed person apply? Is a CIBIL score required? We will provide answers to all these questions. Let’s look at the details...

According to senior banking and economy analyst Satish Singh, this is a significant step toward facilitating collateral-free lending. A 25% reduction in the guarantee fee will lower costs for banks, provide support to small business owners, and potentially give new momentum to the economy. Under the new framework, this guarantee scheme covers MUDRA loans of up to ₹20 lakh, overdraft facilities of up to ₹10,000 in Pradhan Mantri Jan Dhan accounts, and loans ranging from ₹10 lakh to ₹20 lakh for self-help groups.

How can one obtain funding of up to ₹20 lakh through the PM Mudra Yojana?

You cannot secure a fund of ₹20 lakh immediately to start a brand-new business. If you are launching a new venture, you must begin under the 'Shishu' category. The scheme is structured into four loan categories based on the stage of business development.

Shishu: Up to ₹50,000. This is intended for new or nascent businesses; no credit history is required.
Kishore: From ₹50,001 to ₹5 lakh. This is for those already running a business who wish to expand their operations further.
Tarun: From ₹5,00,001 to ₹10 lakh. This is for significant expansion of larger businesses.
Tarun Plus (up to ₹20 lakh): This new ₹20 lakh limit is available exclusively to entrepreneurs who have previously availed of a loan under the 'Tarun' category (up to ₹10 lakh) and have successfully repaid it.

Who can benefit from the PM Mudra Yojana?

The scheme primarily benefits street vendors, small shopkeepers, artisans, and individuals running home-based businesses. Additionally, those involved in sectors allied to agriculture—such as dairy, poultry farming, fisheries, and beekeeping—can also avail of its benefits. However, farmers engaged in crop cultivation do not fall under the scope of this scheme.

Greater benefits for women under Mudra loans

Women receive a significant advantage under Mudra loans in the form of lower interest rates. Typically, banks offer a concession of 0.25% (one-quarter of a percent) on interest rates to women entrepreneurs. For instance, if a male applicant is offered a loan at an 8.50% interest rate, a female applicant with a similar profile could secure the loan at an interest rate of 8.25%.

Where should one register?

Online Portal

The most convenient method is to register and apply online via the government’s 'Udyamimitra' portal.

Alternatively, you can visit your nearest bank branch to fill out the application form. For larger loan amounts, it is also mandatory to complete 'Udyam' registration via the MSME portal.

Where can the funds be obtained from? Public Sector Banks (e.g., SBI, PNB)
Private Sector Banks (e.g., HDFC, ICICI)
Regional Rural Banks (e.g., Madhyanchal Gramin Bank)
Small Finance Banks (e.g., AU Small Finance Bank)
Microfinance Institutions (MFIs) and NBFCs
5 Essential Points for Obtaining a MUDRA Loan

Create a Plan

First, decide on the type of business you intend to start and determine the amount of capital required. Obtain a quotation for the machinery or goods you plan to purchase.

Prepare Your Documentation

Compile your Aadhaar card, PAN card, bank passbook, photographs, and any valid business registration certificates into a single file.

Visit the Portal or the Bank

Enter your details on the 'JanSamarth' portal to check your eligibility for various loans. Once approved through the portal, your application is forwarded to a nearby bank. Alternatively, you may visit a bank directly.

Bank Verification

The bank manager will review your application form, credit score (CIBIL), and business proposal. For 'Shishu' loans (up to ₹50,000), the CIBIL score is not a critical factor; however, for larger loan amounts, banks typically require a score of 650 or higher.

Funding

Upon successful verification, the bank will approve the loan. The funds are either credited directly to your business bank account or provided via a MUDRA card (similar to a debit card), allowing you to withdraw funds as needed.

Can an employed individual obtain a MUDRA loan?

If an employed individual wishes to start a part-time business—such as running a shop in the evening, opening a bakery, or establishing a small manufacturing unit—to generate additional income, they are eligible to apply for a MUDRA loan. The bank will ensure that the loan amount is used exclusively for business purposes.

Can an unemployed individual obtain a MUDRA loan?

An unemployed youth with a business idea can apply for a loan of up to ₹50,000 under the 'Shishu' category. This is the category through which one begins when starting a new business. Banks do not require any prior business history or credit score (CIBIL) for this; all that is needed is a solid business plan.

What is a Mudra loan?

'Mudra' stands for 'Micro Units Development and Refinance Agency'. It was launched by the government in 2015 and is intended for small and medium-sized business owners who are unable to secure loans from traditional banks. This includes small-scale entrepreneurs, such as those running ice cream or vegetable carts, or even rickshaw pullers. A CIBIL (credit) score is not required. A key feature of the Mudra loan is that there is no need to provide collateral—such as land or gold—to obtain it. Furthermore, there are no processing fees. You can apply for this loan by visiting any bank branch, such as those of SBI, PNB, or Canara Bank. To be eligible, your business must operate within the non-agricultural sector; businesses related to agriculture are not eligible for this loan.