Startups, Funding and Valuation
Mudra Loan: Categories, Eligibility and Project Report
A Mudra loan is a loan for a small, income-generating, non-farm business under the Pradhan Mantri Mudra Yojana (PMMY). It is given by banks, small finance banks, NBFCs and microfinance institutions, and is generally available without collateral. For the larger categories, the lender will usually ask for a project report: a document that shows what the business is, what it will cost, how the money will be used, and how the loan will be repaid.
This article explains the loan categories, who can apply, and what a project report for a Mudra loan should contain, so that the proposal can be assessed without repeated queries from the branch.
Loan categories
| Category | Loan amount | Typical use |
|---|---|---|
| Shishu | Up to ₹50,000 | Starting a very small unit, tools, initial stock |
| Kishore | Above ₹50,000 and up to ₹5 lakh | Expanding an existing small unit, equipment, working capital |
| Tarun | Above ₹5 lakh and up to ₹10 lakh | Established units needing larger term loan or working capital |
| Tarun Plus | Above ₹10 lakh and up to ₹20 lakh | Borrowers who have availed and repaid a Tarun loan |
Loans under the scheme are covered by the Credit Guarantee Fund for Micro Units, which is why lenders do not usually insist on collateral. The lender still decides whether to sanction, based on the viability of the proposal and the applicant’s credit record.
Who can apply
- Individuals, sole proprietorships, partnership firms, LLPs and companies engaged in manufacturing, trading or services
- Activities allied to agriculture such as dairy, poultry, fisheries and food processing; pure crop loans are outside the scheme
- New units as well as existing units seeking expansion
The application can be made at a bank branch or online through the lending bank’s own portal. In Kerala, public sector banks, Kerala Gramin Bank and many private sector banks and small finance banks lend under the scheme.
What the project report should contain
- Applicant profile: name, constitution, address, experience in the line of business, and KYC details
- Business description: the product or service, the market, customers, suppliers and location
- Registrations: Udyam registration and, where applicable, GST, shop and establishment registration, FSSAI or local body licence
- Cost of the project: machinery and equipment with quotations, premises cost or rent deposit, furniture, pre-operative expenses and working capital
- Means of finance: the loan sought and the applicant’s own contribution (margin)
- Projected financials: sales, costs, profit and loss and cash flow for at least the loan period
- Repayment: a repayment schedule, the debt service coverage ratio (DSCR) and the break-even point
- Supporting documents: quotations, rent agreement, past bank statements and income tax returns for an existing unit
The assumptions are what the branch examines most closely: the price and volume of sales, raw material cost and the number of working days. Figures that cannot be explained should not be used. A smaller loan that is clearly viable is usually sanctioned faster than a larger one built on optimistic numbers.
Common reasons for delay or rejection
- Quotations missing, outdated or not matching the cost shown in the report
- Projected sales that bear no relation to the size of the unit or the local market
- A poor credit score or existing overdue loans
- Registrations or licences not in place for the activity proposed
- Repayment schedule that leaves too little cash for the business to run
For larger self-employment proposals by returned NRIs in Kerala, see the NDPREM project report. Udyam registration is explained in the Udyam registration guide.
Frequently asked questions
Is a project report compulsory for a Mudra loan?
For a Shishu loan, a simple business plan is often enough. For Kishore, Tarun and Tarun Plus loans, most lenders ask for a project report with projected financials.
Is any margin money required?
The scheme leaves margin to the lender’s policy. Many lenders do not insist on margin for Shishu loans but expect a contribution from the borrower for larger loans.
Is there a processing fee?
Lenders generally do not charge a processing fee on Shishu loans. For other categories, the fee, if any, depends on the lender.
ചുരുക്കം (Summary in Malayalam)
കാർഷികേതര ചെറുകിട സംരംഭങ്ങൾക്ക് പ്രധാനമന്ത്രി മുദ്ര യോജന പ്രകാരം ഈട് ഇല്ലാതെ ലഭിക്കുന്ന വായ്പയാണ് മുദ്ര ലോൺ. ശിശു (₹50,000 വരെ), കിഷോർ (₹5 ലക്ഷം വരെ), തരുൺ (₹10 ലക്ഷം വരെ), തരുൺ പ്ലസ് (₹20 ലക്ഷം വരെ) എന്നിങ്ങനെ നാല് വിഭാഗങ്ങളുണ്ട്. വലിയ വായ്പകൾക്ക് പ്രോജക്റ്റ് റിപ്പോർട്ട് വേണം: സംരംഭകന്റെ വിവരങ്ങൾ, ബിസിനസ്, പദ്ധതിച്ചെലവ്, ഫണ്ടിന്റെ ഉറവിടം, പ്രതീക്ഷിത വരുമാനവും ചെലവും, തിരിച്ചടവ് പട്ടിക, DSCR എന്നിവ. യാഥാർത്ഥ്യബോധമുള്ള കണക്കുകളാണ് വായ്പ വേഗത്തിൽ അനുവദിക്കാൻ സഹായിക്കുന്നത്.
This article gives a general overview of the Pradhan Mantri Mudra Yojana. Loan limits, eligibility and lender practice are revised from time to time; for accurate and current requirements, check with the lending bank or the official scheme portal. The article is not advice on any particular case.
Please note. This article is provided for general information and is not professional advice or a solicitation of work. The law is stated as understood on the date shown above and may have changed since.