What is the PM Mudra Loan scheme and how much can you borrow without collateral?
Pradhan Mantri Mudra Yojana (PMMY) provides 100% collateral-free business loans to non-farm micro and small enterprises across manufacturing, trading, and services. Under the expanded framework, loan limits have been enhanced to ₹20 Lakh. Funding is divided into three tiers: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 Lakh), and Tarun / Tarun Plus (₹5 Lakh to ₹20 Lakh). Banks are legally prohibited from asking for land, property, or third-party guarantees.
1. The 3 Tiers of Mudra Loans: Shishu, Kishore & Tarun Plus
PMMY structures financial assistance based on the lifecycle maturity and funding requirements of the enterprise:
| Loan Category | Sanction Limit | Borrower Margin Money | Processing Fees | Target Beneficiaries |
|---|---|---|---|---|
| Shishu | Up to ₹50,000 | Nil (0%) | ₹0 (Waived) | Kirana shops, fruit vendors, repair units |
| Kishore | ₹50,001 to ₹5,00,000 | 10% to 15% | 0.50% or waived by PSBs | Expanding retail shops, boutique service units |
| Tarun | ₹5,00,001 to ₹10,00,000 | 15% | 0.50% + GST | Established micro-manufacturing units |
| Tarun Plus (New) | ₹10,00,001 to ₹20,00,000 | 15% to 20% | 0.50% + GST | Graduated borrowers with clean repayment track record |
2. The Legal Armor: Why Banks Cannot Demand Collateral
Many local bank managers illegally demand property papers or third-party guarantees from unsuspecting applicants. The legal framework provides absolute clarity:
Mudra loans are insured under the Credit Guarantee Fund for Micro Units (CGFMU) managed by the National Credit Guarantee Trustee Company (NCGTC). Under this sovereign scheme:
- The Government guarantees up to 75% of the default risk to the lending bank.
- In return, the RBI specifically mandates that banks shall not demand any collateral security (no residential plots, commercial premises, or fixed deposits).
- The primary asset purchased with the loan (e.g. machinery, inventory, stock) is the only hypothecated security.
3. Interest Rates & The Mudra RuPay Debit Card
Interest rates under PMMY are pegged to the lending institution's Repo Linked Lending Rate (RLLR) or Marginal Cost of Funds based Lending Rate (MCLR):
Public Sector Banks (SBI, PNB, Bank of Baroda, Canara Bank) charge interest rates typically starting from 8.50% to 10.50% per annum. Private commercial banks and NBFCs charge between 11% to 14% pa depending on commercial credit scoring.
For working capital requirements, the bank sanctions an Overdraft limit accessible via a physical Mudra RuPay Debit Card. You only pay interest on the exact amount drawn from the card, rather than servicing interest on the entire lump sum.
4. How to Apply Online via the Government Jan Samarth Portal
Navigate to jansamarth.in and select 'Business Activity Loan' under Government Schemes.
Enter business type, proposed investment, project quotation, and category (Shishu, Kishore, or Tarun).
Authenticate via Aadhaar OTP, verify PAN, and link your 19-digit Udyam Registration number.
Select from partner banks (SBI, BoB, etc.) to receive digital in-principle sanction within minutes.
5. Facing Unfair Bank Rejection? Here is How to Escalate
If a branch manager refuses to accept your Mudra application or demands collateral, do not argue orally. Follow this formal escalation hierarchy:
Demand a formal written rejection memorandum citing specific RBI guideline violations.
Every district has an appointed Lead District Manager representing the RBI who oversees PMMY targets.
File an escalated complaint on the Prime Minister's public grievance portal (pgportal.gov.in).
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6. Frequently Asked Questions (FAQs)
What is the new maximum loan limit under Pradhan Mantri Mudra Yojana (PMMY)?▼
The maximum limit has been increased from ₹10 Lakh to ₹20 Lakh under the new 'Tarun Plus' category. This enhanced ceiling is available to micro-entrepreneurs who have previously availed and successfully repaid loans under the Tarun category.
Do banks require collateral or a third-party guarantor for Mudra loans?▼
No. Under RBI and Government of India mandates, banks and NBFCs are strictly prohibited from demanding collateral security or third-party guarantors for any loan sanctioned under PMMY up to ₹20 Lakh. The credit risk is covered by the Credit Guarantee Fund for Micro Units (CGFMU).
What are the three categories of Mudra loans?▼
The three tiers are: (1) Shishu: Loans up to ₹50,000 for early-stage or tiny ventures, (2) Kishore: Loans from ₹50,001 up to ₹5,00,000 for developing businesses, and (3) Tarun: Loans from ₹5,00,001 up to ₹10,00,000 (and Tarun Plus up to ₹20,00,000) for established enterprises expanding operations.
Where can I apply for a Mudra loan online?▼
You can apply online through the official Government of India Jan Samarth portal (jansamarth.in) or Udyamimitra portal (udyamimitra.in). The portal digitally verifies your Aadhaar, PAN, and Udyam Registration, allowing multiple banks to evaluate your loan application simultaneously.
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