Source: MUDRA
You have a business idea and Rs 11.71 lakh in hand. Should you put it all in? Many people prefer to keep part of their savings as a safety net and borrow the rest. A Mudra loan is one way to do that, and many ex-Agniveers ask about it. This guide explains the loan types, the limits, and how to apply without falling for middlemen.
What Mudra is
The Pradhan Mantri Mudra Yojana (PMMY) gives the Mudra loan. It started on 8 April 2015. It supports small and micro businesses that are not in farming and are not companies. The official MUDRA website says MUDRA does not lend directly. Loans come from banks, NBFCs and micro-finance institutions. Loans are collateral-free, which means you do not have to pledge property. They are covered by the Credit Guarantee Fund for Micro Units (CGFMU).
The four Mudra loan categories
| Category | Loan size | Who it suits |
| Shishu | Up to Rs 50,000 | A very new or tiny business |
| Kishore | Rs 50,001 to Rs 5 lakh | A business that is growing |
| Tarun | Rs 5,00,001 to Rs 10 lakh | An established business |
| Tarun Plus | Rs 10 lakh to Rs 20 lakh | Only if you repaid an earlier Tarun loan |
Tarun Plus was announced in the Union Budget 2024-25 and, as reported by Business Standard, notified on 25 October 2024. A first-time borrower cannot start at Tarun Plus. You must first take a Tarun loan and repay it well.
A simple example
Say your plan needs Rs 8 lakh for a small workshop and you take a Mudra loan for part of it. You could use Rs 4 lakh of your own money and ask for a Kishore loan of Rs 4 lakh. You keep the rest, about Rs 7.7 lakh, for your emergency fund and living costs. Your own money in the business also shows the lender that you are serious.
The MUDRA Card
Some approved loans come with a MUDRA Card, a RuPay card linked to a working-capital limit. It lets you draw money as needed, so you pay interest only on what you use. Ask your bank if this option is offered for your loan.
How to apply for a Mudra loan, step by step
- Write a short plan: what you will sell, your costs, and your expected income.
- Collect your ID, address proof, bank statements and business details.
- Visit a bank, NBFC or micro-finance branch, or apply online at the Udyamimitra portal.
- Ask for the Mudra loan category that matches your amount.
- Compare the Mudra loan interest rate and fees across two or three lenders before you sign.
Mudra loan rates and repayment
Each lender sets its own interest rate and repayment period. Rates change over time and depend on your profile and the loan size. So do not trust any single number you see online. Ask the lender for the exact rate in writing and check the total cost of the loan.
Watch out for middlemen
The MUDRA website says it has no agents or middlemen, and it warns borrowers to stay away from people who claim to be facilitators. Do not pay anyone to “get” you a Mudra loan. The Mudra loan application itself is free of agents.
A word on skill loans
If your plan needs a course first, look at the Model Skill Loan Scheme. It gives credit for skill courses that lead to a recognised certificate. The scheme started in 2015 with loans of Rs 5,000 to Rs 1.5 lakh. It was revamped in July 2024 with a higher limit of Rs 7.5 lakh, and it now covers more lenders and more courses. See the Skill India overview for the background. Limits, rates and courses can change, so ask your bank for the current terms.
Before you borrow, check these
- Do you need a loan at all, or can your own savings cover it?
- Will the monthly repayment fit inside your expected income, even in a slow month?
- Is the lender a bank, NBFC or MFI that you can verify?
- Have you read the repayment period and the total cost?
Other support for Agniveers
In June 2022 the Finance Ministry asked banks to look at credit for skills, education and self-employment for Agniveers, using schemes such as Mudra and Stand-Up India. Banks decide such loans case by case. Always ask the bank what is on offer when you apply.
If you are still deciding on the idea itself, read our guide on starting a small business after Agniveer, and compare your options in Seva Nidhi: start a business or save it.
Frequently Asked Questions
Q1: What are the Mudra loan categories and limits?
A1: Shishu up to Rs 50,000, Kishore Rs 50,001 to Rs 5 lakh, Tarun Rs 5,00,001 to Rs 10 lakh, and Tarun Plus Rs 10 lakh to Rs 20 lakh.
Q2: Do I need collateral for a Mudra loan?
A2: No. Mudra loans are collateral-free and covered by the CGFMU credit guarantee.
Q3: Can a first-time borrower get Tarun Plus?
A3: No. Tarun Plus is for people who took a Tarun loan and repaid it.
Q4: Does MUDRA lend directly?
A4: No. Loans come from banks, NBFCs and micro-finance institutions.
Q5: How do I apply for a Mudra loan as an ex-Agniveer?
A5: Go to a bank, NBFC or MFI branch, or apply online on the Udyamimitra portal.
Q6: What interest rate will I pay on a Mudra loan?
A6: It is set by each lender and changes with time. Ask for the exact rate in writing before you sign.
Q7: Should I pay an agent to get my Mudra loan?
A7: No. MUDRA says it has no agents or middlemen, so avoid anyone who asks for a fee.
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Related Reading
- For the first steps of a venture, read starting a small business after Agniveer: practical first steps.
- For more details on deciding between saving and spending, see Seva Nidhi vs starting a business: how to decide.
- If you are also looking at a government scheme with a subsidy, a good next read is the PMEGP scheme for self-employment after Agniveer.
- For more details, visit our Agniveer Info transition hub page.
