MUDRA Loans: Shishu, Kishor, Tarun and Tarun Plus
The four MUDRA categories and their limits, who qualifies, what the scheme covers, how to apply through a lender, and the realistic view of what to expect.
Verify before acting. Limits and scheme parameters change by notification. Check the official Mudra and PMMY resources, or ask a participating lender, for the current position. Figures verified against public sources in July 2026.
What MUDRA is
MUDRA loans are extended under the Pradhan Mantri MUDRA Yojana to non-corporate, non-farm small and micro enterprises for income-generating activity.
It is worth being clear about the target: this is a micro-enterprise scheme. It suits a shop, a small manufacturing unit, a services business, a trader, an artisan. It is not designed for a venture-backed technology startup, and founders looking for growth capital are usually better directed to CGSS or venture debt.
That said, for a small services business, a bootstrapped product company, or a founder starting something modest, it is a genuinely accessible route to capital.
The four categories
| Category | Loan amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishor | ₹50,001 to ₹5 lakh |
| Tarun | Up to ₹10 lakh |
| Tarun Plus | Up to ₹20 lakh |
Shishu is for enterprises at the earliest stage - starting up, or very small working capital needs.
Kishor is for businesses that have started and need capital to grow.
Tarun is for established micro-enterprises expanding.
Tarun Plus is the newer tier, introduced when the MUDRA ceiling was raised to ₹20 lakh. It is specifically for high-performing micro-enterprises with a clean repayment record on a previous Tarun loan. In other words, it rewards borrowing history - you cannot start at Tarun Plus.
That progression is the scheme's design logic: borrow small, repay well, become eligible for more. Which makes the first loan worth taking seriously even if the amount is modest, because it is the entry to the ladder.
Who qualifies
Eligible: proprietorships, partnership firms, small manufacturing units, service sector units, shopkeepers, traders, vendors, artisans, and similar micro and small business activity in the non-farm sector.
Purpose: the loan must be for an income-generating activity. Working capital, equipment purchase, business premises improvement, vehicle for business use.
Not eligible: corporate entities generally, agricultural activity as such (there are separate schemes), and any non-business purpose.
Practical requirements from lenders:
- Identity and address proof
- Business proof - registration, licence, or Udyam certificate
- Bank statements, typically six months
- A business plan or a clear statement of purpose, proportionate to the amount
- Quotations for any equipment being purchased
- Where the business is running, financial statements or tax returns
Applying
Through a lender, not a portal. MUDRA refinances and supports lending; the loan itself comes from a bank, NBFC, microfinance institution or regional rural bank.
The process:
- Identify participating lenders. Public sector banks are the most common route, and most branches handle MUDRA lending.
- Determine your category based on the amount you need.
- Prepare documentation.
- Apply at the branch, or through the online application facility where the lender offers one.
- The lender assesses and sanctions.
Practical advice on the process:
Go to the branch and ask specifically for MUDRA. Front-line staff are not always forthcoming about scheme lending, and the experience varies considerably between branches. Naming the scheme and the category helps.
Try more than one lender. Decisions differ. A decline at one branch is not a decline everywhere.
Have your Udyam registration. It is free, takes under an hour, and it substantiates that you are a genuine micro-enterprise. It also unlocks the MSME credit treatment that sits behind this kind of lending.
Keep the purpose concrete. "Working capital" is weak. "₹3 lakh to purchase two machines at ₹1.4 lakh each per attached quotations, expected to increase monthly output by X" is assessable.
Realistic expectations
It is worth being straightforward about the gap between scheme design and borrower experience.
On collateral. The scheme intends these loans to be collateral-free, backed by guarantee arrangements. In practice some borrowers report being asked for security or a guarantor, particularly at the higher end of the range. If you are asked for collateral on a small MUDRA loan, it is reasonable to ask which scheme provision requires it, and to try another lender.
On processing time. Varies widely by lender and branch. Plan for weeks rather than days.
On the amount sanctioned. Lenders size against serviceability and the documented purpose. Asking for ₹10 lakh with no financial history to support it typically results in a smaller sanction or a decline.
On interest rates. Set by the lender within regulatory norms rather than fixed by the scheme, so they vary. Compare between lenders - the spread can be meaningful.
Where MUDRA fits, and where it does not
It fits: a small business needing modest working capital or equipment, a bootstrapped founder starting a services business, a micro-enterprise on the growth ladder from Shishu to Tarun Plus.
It does not fit: a technology startup seeking growth capital. The amounts are too small and the scheme is not designed for it. Look instead at CGSS for collateral-free debt on DPIIT recognition, or at venture debt, or at scheme grants such as SISFS.
A note on the ladder. For a genuinely small business, the progression through the categories is the most useful feature of the scheme and the one most often overlooked. A ₹50,000 Shishu loan repaid cleanly establishes a credit record, which is the actual constraint most micro-enterprises face. The capital matters less than the history it creates.
The one-line summary
MUDRA lends to non-corporate micro and small enterprises in four tiers - Shishu to ₹50,000, Kishor to ₹5 lakh, Tarun to ₹10 lakh, and Tarun Plus to ₹20 lakh for those with a clean Tarun repayment record. Apply through a bank rather than a portal, hold your Udyam registration, keep the purpose concrete, and try more than one lender. It suits small businesses, not venture-scale startups.
Frequently asked questions
- What are the MUDRA loan categories and limits?
- Shishu covers loans up to ₹50,000. Kishor covers ₹50,001 to ₹5 lakh. Tarun covers up to ₹10 lakh. Tarun Plus is a newer tier allowing up to ₹20 lakh for enterprises with a clean repayment record on a previous Tarun loan.
- Is a MUDRA loan collateral-free?
- MUDRA loans under the scheme are intended to be extended without collateral, backed by guarantee arrangements. In practice, requirements can vary between lenders and branches, and some borrowers report being asked for security despite the scheme's intent.
- Who can apply for a MUDRA loan?
- Non-corporate, non-farm small and micro enterprises - proprietorships, partnerships, small manufacturing units, service businesses, shopkeepers, traders and artisans. It is aimed at micro-enterprise activity rather than at venture-backed startups.
