Can Salaried Individuals Also Avail Loans Under the PM Mudra Yojana? Answers to All Your Questions

The government has decided to continue 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. Additionally, the bank guarantee fee has been reduced from 1% to 0.75%. We will consult with experts to understand how this reduction in the bank guarantee fee will benefit the general public. We will also explore who is eligible for these loans—can salaried individuals apply? Are the unemployed eligible? Is a CIBIL score required to obtain a loan? We will provide answers to all these questions. Let’s look at the details...

What is the benefit of reducing the bank guarantee fee from 1% to 0.75%?

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 secure funding of up to ₹20 lakh through the PM Mudra Yojana?

You cannot obtain a ₹20 lakh fund 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 very early-stage businesses; no credit history is required.
Kishore: From ₹50,001 to ₹5 lakh. This is for individuals already running a business who wish to expand their operations further.
Tarun: From ₹5,00,001 to ₹10 lakh. This is for the significant expansion of larger businesses.
Tarun Plus (up to ₹20 lakh): This new limit of ₹20 lakh 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 engaged 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

The most significant advantage for women under the Mudra loan scheme relates to 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 receives a loan at an interest rate of 8.50%, a female applicant with a similar profile could secure the loan at an interest rate of 8.25%.

Where should one register?

The easiest method is to visit the government’s 'Udyamimitra' portal to complete the registration and application process online.

Alternatively, you can visit your nearest bank branch to fill out the application form. For larger loan amounts, it is also mandatory to register your enterprise 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 Key Points for Obtaining a MUDRA Loan

Create a Plan

First, decide on the type of business you intend to start and 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 determine your eligibility for specific 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 concept. For 'Shishu' loans (up to ₹50,000), the CIBIL score is less critical; however, for larger loan amounts, banks typically require a score above 650.

Funding

If everything is found to be in order, 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-scale 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 entry-level category for starting a new business. Banks do not require any prior business history or a credit score (CIBIL) for this; the only requirement is that your business plan must be sound.

What is a Mudra loan?

'Mudra' stands for Micro Units Development and Refinance Agency. The government launched this initiative in 2015, specifically for small and medium-scale entrepreneurs who were previously unable to secure bank loans. This includes small-scale operators—such as those running ice cream carts, vegetable stalls, or even rickshaw pullers. A credit score (CIBIL) is not required. A key feature of the Mudra loan is that no collateral—such as land or gold—is needed to secure it. Furthermore, there are no processing fees. You can apply for this loan at various banks, including SBI, PNB, or Canara Bank. To be eligible, your business must be in the non-agricultural sector; the loan is not available for agricultural or farming-related businesses.