The Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, has disbursed over ₹27 lakh crore to more than 40 crore small business accounts since inception. For small traders, artisans, shopkeepers, and micro-enterprises in Tamil Nadu, MUDRA loans remain one of the most accessible sources of collateral-free business finance.
Understanding how the three categories work (Shishu, Kishore, and Tarun) can help you identify the right product and maximise your chances of approval.
The Three Categories of MUDRA Loans
| Category | Loan Amount | Who It Is For |
|---|---|---|
| Shishu | Up to ₹50,000 | Startups, very early stage businesses, first-time borrowers |
| Kishore | ₹50,001 to ₹5 lakh | Established micro businesses needing capital for expansion |
| Tarun | ₹5,00,001 to ₹20 lakh | Established small businesses with a track record |
Note: Budget 2024 increased the Tarun category limit from ₹10 lakh to ₹20 lakh for existing borrowers with a good track record. That is a big jump for small businesses that outgrew the old limit.
Who Can Apply for a MUDRA Loan?
MUDRA loans are available to:
- Individuals running non-agricultural micro or small businesses
- Proprietary firms, partnership firms, and small companies
- Artisans, weavers, food vendors, small traders, and shopkeepers
- Professionals in services like electricians, plumbers, and tailors
- Women entrepreneurs (often eligible for preferential rates)
- SC/ST and minority community applicants (eligible for priority processing in many banks)
The business must be in manufacturing, trading, or services. Agriculture (crop production) is specifically excluded, though allied activities like dairy, poultry, and bee-keeping are covered.
MUDRA Loan Interest Rates in 2026
MUDRA loans are disbursed by banks, NBFCs, and MFIs, and each sets its own interest rate within RBI guidelines. Typical rates:
- Public sector banks (SBI, Indian Bank, Canara Bank): 8.5% – 12% per annum
- Private banks (HDFC, ICICI, Axis): 10% – 14% per annum
- NBFCs and MFIs: 12% – 22% per annum
Apply at public sector banks for the lowest rates. In Tamil Nadu, Indian Bank and Indian Overseas Bank have a strong presence and active MUDRA lending programs.
Collateral Requirement
MUDRA loans are collateral-free. You do not need to pledge property, gold, or any asset as security. The Credit Guarantee Fund for Micro Units (CGFMU) provides a guarantee to the lender, enabling them to lend without requiring collateral from you.
Documents Required for MUDRA Loan Application
Identity and address proof (any one each):
Aadhaar card, PAN card, Voter ID, Driving Licence, Passport
Business proof:
Business registration certificate / shop licence / GST registration / Udyam registration certificate
Financial documents (for Kishore and Tarun):
- Last 2 years' ITR or income certificate
- 6 months' bank statements
- Business financial statements (P&L, balance sheet) if available
Project report:
For Kishore and Tarun, a basic business plan describing the nature of the business, funding requirement, and expected revenue is helpful. Banks may insist on a formal project report for Tarun loans.
Caste certificate:
If applying under SC/ST or minority category for priority processing
How to Apply for MUDRA Loan in Tamil Nadu
Option 1: Apply at Your Bank Branch (Recommended for Kishore/Tarun)
Walk into any PSU bank branch (SBI, Indian Bank, Indian Overseas Bank, Canara Bank, Union Bank) with your documents and ask for a MUDRA loan application. The bank officer will guide you through the process. This works best for Kishore and Tarun categories where a relationship with the branch manager matters.
Option 2: Apply Online via Udyamimitra Portal
Visit www.udyamimitra.in, create a profile with your Aadhaar and business details, and submit a loan application online. Multiple lenders can see your application and you may receive calls from banks to proceed further. This is efficient for Shishu loans and Kishore loans up to ₹2 lakh.
Option 3: Apply Through Jan Samarth Portal
The government's Jan Samarth portal (jansamarth.in) allows end-to-end digital application for multiple government loan schemes including MUDRA. Your Aadhaar and PAN are pre-verified digitally and you can check loan status in real time.
Common Reasons for MUDRA Loan Rejection
- Low CIBIL score, below 650: check and improve it before applying
- No business proof or Udyam registration
- No bank account in the name of the business
- Applying for Tarun without a track record (lenders prefer borrowers who used Shishu and Kishore first)
- Insufficient cash flow evidence in bank statements
Use our business loan ROI calculator to estimate your monthly repayment for any MUDRA loan amount before applying.
Frequently Asked Questions
Is MUDRA loan the same as PM SVANidhi (street vendor loan)?
No. PM SVANidhi is a separate scheme specifically for urban street vendors, providing loans of ₹10,000 to ₹50,000. MUDRA loans are broader in scope, covering all non-agricultural micro and small businesses. Some vendors may be eligible for both schemes.
Can I apply for a MUDRA loan if I already have another business loan?
Yes, having an existing business loan does not automatically disqualify you. However, the bank will assess your total debt repayment obligations (FOIR) to ensure you can service both loans. A clean repayment record on the existing loan will strengthen your application.
Is there a subsidy on MUDRA loans?
Standard MUDRA loans under PMMY do not carry an interest subsidy. However, certain targeted schemes, such as loans to women entrepreneurs under specific state programs or SC/ST borrowers under NSFDC schemes, may carry interest subsidies. Ask your bank specifically about any applicable subsidy schemes at the time of application.
How long does it take to get a MUDRA loan sanctioned?
Shishu loans (up to ₹50,000) from public sector banks can be sanctioned in 7–15 working days if documentation is complete. Kishore and Tarun loans typically take 15–30 working days. Private banks and NBFCs can sometimes process faster (7–10 days) but at higher interest rates.
