Pradhan Mantri Mudra Yojana (PMMY)

Pradhan Mantri Mudra Yojana (PMMY) is a flagship Government of India scheme launched on 8 April 2015 to provide institutional collateral-free credit to micro enterprises engaged in non-farm income-generating activities. The scheme is administered by the Department of Financial Services under the Ministry of Finance.

PMMY can support both term loan and working capital requirements for eligible activities. The scheme covers manufacturing, trading and service-sector activities, including activities allied to agriculture such as poultry, dairy and beekeeping.

Loan categories:

• Shishu: Loans up to ₹50,000.
• Kishore: Loans above ₹50,000 and up to ₹5 lakh.
• Tarun: Loans above ₹5 lakh and up to ₹10 lakh.
• Tarun Plus: Loans above ₹10 lakh and up to ₹20 lakh for entrepreneurs who have successfully repaid a previous Tarun-category loan. Tarun Plus became applicable with effect from 24 October 2024.

PMMY does not provide a fixed Government subsidy to the borrower. It is primarily a credit scheme. The main benefit is access to collateral-free institutional credit, while the interest rate is decided by the lending institution in accordance with applicable RBI guidelines and its own lending policy.

Collateral and guarantee:

• PMMY loans are available on a collateral-free basis.
• Credit guarantee support for eligible PMMY loans is provided through the Credit Guarantee Fund for Micro Units (CGFMU).
• The guarantee structure does not mean that every loan application is automatically approved. The lending institution still assesses the borrower, business viability, repayment capacity and applicable credit norms.

Interest rate and charges:

• There is no single uniform PMMY interest rate fixed for every borrower.
• The applicable interest rate is determined by the Member Lending Institution (MLI) based on its lending policy and applicable RBI guidelines.
• Banks may levy upfront or processing charges according to their internal guidelines.
• For Shishu loans up to ₹50,000, processing charges are waived by most banks as stated in the scheme information.

Eligible borrowers:

• Individuals.
• Proprietary concerns.
• Partnership firms.
• Private Limited Companies.
• Public Companies.
• Other eligible legal forms, subject to the lending institution and scheme requirements.

The borrower should not be a defaulter to any bank or financial institution and should have a satisfactory credit track record. Individual borrowers may also need the relevant skills, experience or knowledge required for the proposed activity. Educational qualification, wherever relevant, is assessed according to the nature of the business.

Eligible activities:

• Manufacturing activities.
• Trading activities.
• Service-sector activities.
• Non-farm income-generating micro enterprises.
• Activities allied to agriculture such as poultry, dairy and beekeeping.

PMMY can support a wide range of small businesses such as shops, repair units, food-service businesses, artisans, food processors, transport operators, machine operators, vendors and other eligible micro enterprises.

Application process:

• Visit the PM MUDRA official website and access the applicable online loan application route such as Udyamimitra or the relevant lending platform.
• Select Mudra Loan Apply Now.
• Choose the applicable applicant type such as new entrepreneur, existing entrepreneur or self-employed professional.
• Enter applicant details including name, email and mobile number and complete OTP verification.
• Fill in personal and professional details.
• Select a hand-holding agency if assistance is required for project preparation, or proceed to the loan application centre.
• Select the applicable loan category: Shishu, Kishore, Tarun or Tarun Plus.
• Enter business information including business name, activity and industry type.
• Provide owner details, existing banking or credit facilities, proposed credit facilities, estimates and preferred lender.
• Upload the required documents.
• Submit the application and retain the generated Application Number for future reference.

PMMY is also available through JanSamarth for eligible applicants and participating lending institutions.

Documents required:

• Identity proof such as Aadhaar Card, PAN Card, Voter ID, Driving Licence, Passport or another accepted Government-issued photo ID.
• Address proof of the applicant or relevant proprietor, partners or directors, as applicable.
• Recent passport-size photograph.
• Applicant signature.
• Business identity and address proof, such as relevant licences, registrations or other ownership and address documents.
• Machinery or equipment quotation where applicable.
• Details of the proposed machinery, supplier and cost where applicable.
• For higher-value or existing-business cases, bank statements, balance sheets, tax returns, projected financial statements and project reports may be required.
• Partnership deed, Memorandum and Articles of Association or other constitutional documents, depending on the legal structure.

Documentation can vary according to the lender, business structure, loan amount and whether the application is for a new or existing business.

Important points before applying:

• There is no Government-appointed agent or middleman for obtaining a PMMY loan. Applicants should avoid people claiming to be MUDRA or PMMY agents.
• Approval is not automatic merely because the applicant falls within an eligible category.
• The lending institution assesses business viability, repayment capacity, credit history, documentation and other applicable requirements.
• A previous Tarun loan must have been successfully repaid to qualify for Tarun Plus.
• PMMY should not be confused with a subsidy scheme. The principal benefit is collateral-free credit, not a direct subsidy payment.

As per the latest Department of Financial Services information, PMMY now provides collateral-free loans up to ₹20 lakh through the four categories, including Tarun Plus. The current official Ministry information also confirms that term loan as well as working capital requirements can be met under PMMY.