What is Mudra Bank?

A Comprehensive Guide to PM Mudra Loan 2026: Empowering India’s Entrepreneurs

The landscape of Indian entrepreneurship is undergoing a massive transformation. At the heart of this revolution is the Pradhan Mantri MUDRA Yojana (PMMY). Designed to “fund the unfunded,” this initiative by the Government of India provides essential credit to micro-units that form the backbone of the nation’s economy.

Whether you are looking for a Mudra Bank loan, a startup seed fund, or capital to expand your small business, understanding the PM Mudra Loan is your first step toward financial independence.

What is Mudra Bank? A Catalyst for Micro-Units

The Micro Units Development and Refinance Agency (MUDRA) is a specialized financial institution and a wholly-owned subsidiary of SIDBI. Established in 2015, Mudra Bank does not lend directly to individuals. Instead, it acts as a refinancing body for:

• Public and Private Sector Banks
• Regional Rural Banks (RRBs)
• Microfinance Institutions (MFIs) and NBFCs

By providing capital to these lenders, Mudra ensures that even the smallest street-side vendor or home-based startup can access formal, collateral-free credit.

Understanding PM Mudra Loan Categories (Updated 2026)

To cater to different business lifecycles, the PMMY is divided into four distinct categories. In 2026, the government has significantly enhanced the limits to support larger growth.

Note: The Tarun Plus category is a new addition aimed at “emerging entrepreneurs” who need substantial capital to scale into the MSME sector.

Current Mudra Bank Interest Rates 2026

A common question is: “What is the Mudra Bank interest rate?” There is no fixed uniform rate across all banks. Instead, the rate is determined by the lending institution based on RBI guidelines and the borrower’s credit profile.

• Average Range: Typically between 8.50% to 12.00% per annum.
• No Collateral: The biggest advantage is that no security is required.
• Processing Fees: Nil for Shishu loans; nominal (0.50% or less) for Kishor, Tarun, and Tarun Plus.

Eligibility Criteria: Can You Apply?

The PM Mudra Loan is highly inclusive. You are eligible if you are an Indian citizen with a viable business plan in:

1. Manufacturing/Trading/Services: Small shops, repair centers, or artisans.
2. Agri-Allied Activities: Poultry, dairy, beekeeping, and fishery (non-farm income).
3. Transport: Purchasing a commercial vehicle (taxis, tractors, or e-rickshaws).

Key Requirements:

• Must not be a defaulter with any financial institution.
• Satisfactory credit track record (CIBIL score is considered but the lack of one isn’t always a disqualifier).
• Age: 18 to 65 years.

How to Apply for PM Mudra Loan Online (Step-by-Step)

Gone are the days of endless paperwork. You can now apply for an e-Mudra loan digitally.

1. Visit the Jan Samarth Portal: This is the official central gateway for all government-linked credit schemes.
2. Check Eligibility: Answer a few basic questions about your business type and required amount.
3. Select Mudra Loan: Choose the category (Shishu, Kishor, or Tarun).
4. Upload Documents: You will need your Aadhaar, PAN card, Business Proof (Udyam Registration), and Bank Statements.
5. Digital Approval: Get in-principle approval online and choose your preferred bank for disbursal.

The “Collateral-Free” Advantage

The magic of the Mudra scheme lies in the Credit Guarantee Fund for Micro Units (CGFMU). Since the government guarantees these loans, banks can lend without asking for your home or gold as security. This removes the primary barrier that prevents rural and micro-entrepreneurs from growing.

Challenges & Support

While some may find banks hesitant to disburse unsecured loans, the government’s Financial Inclusion Team is actively monitoring bank performance. If you face issues, you can report them through the official Mudra helpline or the Janpaksh portal.

Frequently Asked Questions