MUDRA Loan Scheme (PMMY)
MUDRA does not lend. Banks and NBFCs do. That fact shapes who recovers an overdue MUDRA loan.
Pradhan Mantri MUDRA Yojana (PMMY) is a Government of India scheme, launched on 8 April 2015, that helps small, non-farm businesses get loans: a tailor, a tea stall, a mobile repair shop, an auto driver. MUDRA stands for Micro Units Development and Refinance Agency.
The key fact most people get wrong: MUDRA itself does not give loans. Banks, NBFCs and microfinance institutions lend, and MUDRA refinances them. So when a MUDRA loan goes overdue, the borrower owes the bank or NBFC that lent the money, and that lender handles recovery.
You save ₹200 today
- Full 100-question mocks
- Recovery law coverage
- Module-wise practice
One payment, no subscription · Valid for 2 months
The Four MUDRA Categories
The names signal the stage of the business: Shishu (child), Kishor (adolescent), Tarun (young adult).
Shishu
Loan amount
Up to ₹50,000
Who it suits
A business just starting out
Kishor
Loan amount
Above ₹50,000 up to ₹5 lakh
Who it suits
A small business that is growing
Tarun
Loan amount
Above ₹5 lakh up to ₹10 lakh
Who it suits
An established micro unit expanding
Tarun Plus
Loan amount
Above ₹10 lakh up to ₹20 lakh
Who it suits
Only for borrowers who took and fully repaid a Tarun loan
| Category | Loan amount | Who it suits |
|---|---|---|
| Shishu | Up to ₹50,000 | A business just starting out |
| Kishor | Above ₹50,000 up to ₹5 lakh | A small business that is growing |
| Tarun | Above ₹5 lakh up to ₹10 lakh | An established micro unit expanding |
| Tarun Plus | Above ₹10 lakh up to ₹20 lakh | Only for borrowers who took and fully repaid a Tarun loan |
Main Features
- check_circleFor income-generating activities in manufacturing, processing, trading and services, and activities allied to agriculture such as dairy or poultry.
- check_circleBorrowers can be individuals, proprietorships, partnership firms, private limited companies or other entities, if the need is within ₹20 lakh.
- check_circleBanks have been mandated not to insist on collateral for loans up to ₹20 lakh to micro and small enterprises, according to MUDRA's FAQ.
- check_circleInterest rates are deregulated. Banks are told to charge reasonable rates within RBI guidelines.
- check_circleRepayment terms are set by the lender, based on the business's expected cash flow.
- check_circleWorking capital can come through a MUDRA Card, a RuPay debit card for drawing and repaying the working-capital part of the loan.
- check_circlePAN is not compulsory, but the lender's KYC rules apply.
MUDRA Uses No Agents
MUDRA states that it engages no agents or middlemen for MUDRA loans and warns borrowers to stay away from anyone posing as one. If you are collecting dues on a MUDRA loan, you work for the lending bank or NBFC, not for MUDRA. Say so clearly and carry your lender's authorisation.
Quick practice on banking basics. No signup.
When a MUDRA Loan Goes Overdue
No collateral does not mean no repayment. A MUDRA loan is a normal loan contract. The borrower must repay, the lender can report defaults to credit information companies, and the usual recovery rules and legal options apply.
Example: Salma took a ₹2 lakh Kishor loan for her tailoring unit. Orders fell and she has missed three EMIs. Because the loan has no collateral, talk matters more than legal routes. Find out whether orders are returning, explain the lender's options, and remind her that a clean repayment record is what opens the next stage of funding. Tarun Plus, for example, is open only to borrowers who repaid a Tarun loan.
MUDRA loans go to micro enterprises, which RBI counts as priority sector lending. This is one reason banks are pushed to lend under the scheme.
How the DRA Exam Tests This
Expect questions on the category limits ("Kishor loans cover ___"), on the launch (2015) and on what MUDRA does ("MUDRA is a ___ institution": refinancing). The common trap is choosing "MUDRA lends directly to micro entrepreneurs". It does not. Another trap is old limits: the scheme originally went up to ₹10 lakh, and Tarun Plus up to ₹20 lakh was added later.
FAQs
What are the MUDRA loan limits?expand_more
Shishu up to ₹50,000, Kishor above ₹50,000 up to ₹5 lakh, Tarun above ₹5 lakh up to ₹10 lakh, and Tarun Plus above ₹10 lakh up to ₹20 lakh for borrowers who repaid a Tarun loan.
Does MUDRA give loans directly?expand_more
No. MUDRA is a refinancing institution. Loans are given by banks, NBFCs and microfinance institutions, and MUDRA refinances them.
What happens if I don't repay a MUDRA loan?expand_more
It is treated like any other unpaid loan. The lender can follow up for recovery, report the default to credit information companies and use the legal routes available to it.
Is collateral needed for a MUDRA loan?expand_more
MUDRA's FAQ says banks are mandated not to insist on collateral for loans up to ₹20 lakh to micro and small enterprises.
Next steps
- Priority Sector Lendingarrow_forward
- CGTMSE Schemearrow_forward
- Types of Loansarrow_forward
- Syllabusarrow_forward
100 questions, 2 hours, scored instantly.