India has a huge number of differently scaled operations on the basis of its operations and income. With government initiatives like “Make in India” and “Startup India”, the number of these businesses is increasing extensively. The success of these businesses is extremely important for the nation as it can contribute greatly to the GDP of the country.

Like the aforementioned initiatives, the MUDRA  loan is also a government initiative that is supporting the small-scaled companies by aiding them with the required money. The initial cost of setting up a business is high. From the period of business launch to gain breakeven also requires a constant inflow of money, as till that period of time the company is still running negative/on a loss. This is the biggest reason why many of these businesses come to a standstill and get stuck due to a shortage of funding.

With the introduction of Micro Units Development and Refine Agency or Mudra under the Pradhan Mantri Yojana, the government aims at aiding such small-scale industries with the aid of money. The government with this objective is taking the role of re-financier. It shall provide support to the finance institutions of the government that is in the business of lending. 


The research team tells that more than 90% of the Non-Corporate Small Business Sector (NCBS) is lacking in financial support and formal sources of finance. The goal of the MUDRA is to set up a statutory enactment that caters to the needs of the NCSBS segment or the informal sector of businesses and to bring them into the mainstream industries. MUDRA provides refinancing to support its intermediaries viz-a-viz Banks, NBFCs, and Micro Finance Institutions who are in the business of lending for activities that generate income in the nonfarm sector in manufacturing, trading, processing, and service sector which will in turn help finance the beneficiaries like suppliers.

The eligibility and offerings of mudra are explained in the table below.

Loan Amount

Maximum loan amount: INR 10 Lakh


  • Loan of up to INR 50,000 if categorized as Shishu
  • Loan from INR 50,001 to INR 5 Lakh if categorized under Kishore
  • Loan from INR5,00,001 to INR 10 Lakh of categorized under Tarun

Processing fee

None for Shishu and Kishore, 0.5% of the loan amount for Tarun

Eligibility Criteria

New and existing NCSBS

Repayment period

Within 3 to 5 years


  1. Shishu: This category is given to the entrepreneurs whose business is in its nascent stages or to those who are looking to start one business. Borrowers have to provide the details of the supplier of machinery.
  2. Kishore: This category is given to the businesses that are looking for additional funds to expand their level of operations.
  3. Tarun: It is given to the businesses who wish to further grow or develop and meet the eligibility of the existing guidelines. 

Any urban or rural, handicapped or disabled, as long as they are an Indian citizen is eligible to avail the benefit of the MUDRA loan for income-generating activity. The loan proposal should be for the growth/development of the existing Micro business or for the setup of a business. These businesses should belong to the manufacturing, processing, trading, or service sectors.

MUDRA is the Last Mile Financier. This means that it is a refinancing agency that will enable them to reach out to the informal sector and NCSBS. The rationale behind MUDRA is to help out and bring this sector to the mainstream sector and hence bringing down the cost of funding for the ultimate borrower. Hence the MUDRA loan interest rates are deregulated and the bank’s MUDRA has been advised by the government to charge reasonable rates of interest within the overall guidelines laid out by the RBI.

There are no agents, facilitators, or any type of middlemen associated with MUDRA for availing of the loans.

E Mudra loan is an online scheme of MUDRA initiative under the Pradhan Mantri Yojana and is led by SBI. Under sbi e mudra, one can apply for a MUDRA loan via the online portal of the e mudra by the State Bank of India. It is a convenient and hassle-free process that allows the borrowers to get MUDRA benefits without the need to visit the bank branch and the amount is directly credited to the existing bank account of the borrower. However, you can also apply for e mudra at any SBI branch.

The e-mudra loan by SBI charges the standard MSME loan rate prevailing in the market and it fluctuates according to the market. Currently, this rate is 11.50 %


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