MUDRA stands for Micro Units Development and Refinance Agency Limited. It is an NBFC supporting the development of India’s micro enterprise sector. MUDRA offers refinance assistances to Banks, MFIs, and NBFCs for the purpose of lending to the micro units. MUDRA also offers refinance assistances to micro businesses under the Pradhan Mantri MUDRA Yojana (PMMY) scheme.

Pradhan Mantri MUDRA Yojana (PMMY) was launched on April 8, 2015 by the Indian Prime Minister Mr. Narendra Modi with a purpose to provide loans to the non-corporate, non-farm small and micro enterprises. The loans are extended through refinancing scheme through Commercial Banks, RRBs, Small Finance Banks, MFIs and NBFCs.

Vision behind MUDRA Loan

The vision behind MUDRA loan is to integrate financial and support services to serve those who are at the bottom of the pyramid and help them with comprehensive support for fiscal and social development. MUDRA loan visualizes a stronger Indian economy and promotes and guides entrepreneurs through different stages of development.

Purpose of MUDRA Loan

The primary purpose of MUDRA loan is to promote development in an inclusive and sustainable manner through support and promotion of partner institutions. It strives to create an ecosystem of growth for the micro-level enterprise segment.

Mudra loan could be acquired for varied purposes with the end desired outcome to generate income and create employment opportunities. The basic loans are approved in the categories listed below:

  1. Business loans for shopkeepers, traders, vendors, and other service sectors
  2. Working capital loan via MUDRA Cards
  3. Loans for micro units for equipment finance
  4. Commercial-purpose transport vehicle loans
  5. Loans for agricultural-allied non-farm income generating activities, such as apiculture, fish farming, and animal husbandry
  6. Loans for tractors, tillers, and commercial-purpose two wheelers

Listed below is an illustrative list of the activities that can be covered under MUDRA loans:

1) Transport Vehicle

The purchase of transport vehicles is eligible under MUDRA loans. Such transport vehicles should be carriers of transportation merchandizes and passengers. The vehicles under this category comprise of auto rickshaws, small goods transport vehicles, three-wheelers, e-rickshaws, and taxis. Moreover, farm utility vehicles which are used solely for commercial purpose such as tractors, tractor trolleys, power tillers are also eligible for assistance under PMMY. Lastly, two-wheelers used for commercial purpose also qualify for MUDRA loans.

2) Community, Social & Personal Service Activities

MUDRA loans are also given out for community, social, and personal service activities that would benefit the small-scale service providers. The vendors and services covered under it are salons, beauty parlours, gymnasium, boutiques, tailoring shops, dry cleaners, two-wheeler repair shops, DTP and photocopying facilities, medicine shops, and courier services.

3) Food Products Sector

The food product sector also benefits under the MUDRA loans. The PMMY scheme covers activities like papad making, pickle making, jam and jelly making, rural-level preservation of agricultural products, sweet shops, isolated food stalls, day-to-day catering and canteen services, cold chain vehicles, cold storages, ice-making facilities, ice-cream outlets, biscuit outlets, bakeries, and other food-producing outlets.

4) Textile Products Sector / Activity

The textile products sector benefits from assistances under MUDRA loans. The units covered under this sector include apparel design, chikan work, computerized embroidery, cotton ginning, handloom, khadi, knitting, powerloom, zari and zardozi work, traditional embroidery and hand work, traditional dyeing and printing, stitching, and manufacture ofr textile non garment products like bags, furnishing materials, and vehicle accessories.

5) Business loans for Traders and Shopkeepers

MUDRA loans are extended to traders and shopkeepers to help them start, run, or expand their shops, trades, businesses, service enterprises, and non-farm income generating activities. Here every individual borrower benefit from an amount up to 10 lakhs for the individual enterprise activity.

6) Equipment Finance Scheme for Micro Units

Buying and setting up of equipment are a big necessity for a micro unit to increase the productivity and enhance sales. MUDRA loans assist in this activity by giving out loans up to a value of Rs. 10 lakhs to purchase the essential machinery and equipment.

7) Activities allied to agriculture

MUDRA loan is a big help for ‘activities allied to agriculture’ by extending them the necessary financial support. Such activities comprise of fish farming, bee keeping, dairy, poultry, husbandry, grading, sorting, aggregation agro industries, agri-clinics and agribusiness centres, and food & agro-processing. These activities do not include crop loans and land improvement loans but are dependent on services that promote livelihood and generate income.

Achievements of MUDRA Loans

MUDRA loans have been sanctioned to a huge number of beneficiaries. In the financial year 2019-2020, a total of 62237981 PMMY loans were sanctioned, the actual amount sanctioned was Rs. 337465.13, while the total amount allotted was Rs. 329683.63.  

Offering /Types of Loans

MUDRA provides a bouquet of offerings targeted across various beneficiary segments. These offerings are

  1. Technology Enabler
  2. Refinance for Micro Units to Commercial Banks/ NBFCs/ RRBs/ SFBs/MFIs
  3. Credit Guarantee for MUDRA Loan
  4. Development of Promotional Support

MUDRA offers three categories of loan to promote entrepreneurship in India- Shishu, Kishore, and Tarun. These categories signify the stage of growth and the funding requirements of the entrepreneurs along with the reference point for next graduation phase. The focus is more on Shishu phase and least on Tarun phase to promote entrepreneurship in youth.

  • Shishu Loan: It is extended to small entrepreneurs to an amount up to Rs. 50,000
  • Kishore Loan: This loan is provided in the range of Rs. 50,000 and Rs. 5,00,000.
  • Tarun Loan: The loan is extended in the range of Rs. 5,00,000 and Rs. 10,00,000.

MUDRA is designed in a manner to fulfil the needs of diverse economic segments in a range of business activities. MUDRA supports the funding under two types:

  1. Micro Credit Scheme (MCS)
  2. Refinance Scheme for Banks/ NBFCs:

Micro Credit Scheme: It is primarily offered through Micro Finance Institutions (MFIs) and sanctions loans up to the amount of Rs. 1 lakh. The loans are awarded to numerous micro enterprises and small business activities. Here the delivery model could be through SHGs, JLGs, or even individuals, however, the loans are meted out by the MFIs to individual businesspersons for some particular income-generating micro enterprise or small business undertakings.

Refinance Scheme for Banks/NBFCs: Different banking sectors in India such as commercial banks, Regional Rural Banks, Small Finance Banks, and NBFCs are entitled to benefit from the refinance assistance of MUDRA for the purpose of financing micro enterprise undertakings. The amount under refinance is up to Rs. 10 lakhs and this sum is available for term loan and working capital loan. The loans can be availed under the three basic categories- Shishu, Kishore, and Tarun. There is a greater stress on promoting women entrepreneurs who benefit from added facilities under PMMY scheme such as reduced interest rates. Currently, the reduction extended under MUDRA amounts to 25bps in the interest rates to MFIs and NBFCs in their loan disbursements to women entrepreneurs.


There are different eligibility criteria for different institutions. They are listed as under:

  1. Scheduled Commercial Banks
 Level of NPANet ProfitCRARNet Worth
Public Sector BanksCap at 15%Should show profit for the last two years or have a minimum external rating of long-term instruments of A-(minus) from accredited credit rating agenciesAs stipulated by RBIAbove Rs. 250 Crore
Private Sector BanksCap at 10%Should show profit for the last two years or have a minimum external rating of long-term instruments of A-(minus) from accredited credit rating agenciesAs stipulated by RBIAbove Rs. 250 Crore
Foreign BanksCap at 10%Should show profit for the last two years or have a minimum external rating of long-term instruments of A-(minus) from accredited credit rating agenciesAs stipulated by RBIAbove Rs. 250 Crore
Regional Rural BanksCap at 3%Net profit for last two yearsAs stipulated by RBIAbove Rs. 50 Crore
  1. Small Finance Banks (SFBs)
1.Eligible InstitutionFinal license granted by Reserve Bank of India to perform in the capacity of Small Finance Bank.The SFB along with its earlier avatar or identity must have earned profit in the past two financial years.In the instance of loss, a need-based relaxation could be given if a minimum BBB+ rating has been maintained for long duration.
2.Benchmark for SanctionParameters Benchmark Norm Net-worth  > or = Rs. 100 Crore CRAR or = 15% Gross NPA  < or = 5% Net NPA < or = 3% DER # < 10: 1 External Rating Norm External minimum long-term rating of BBB+
  1. Microfinance Institutions (MFIs)
Sr. No.Eligibility Parameter                         Portfolio (AUM including off balance sheet)
Small (< Rs. 100 Crore)Medium (Rs. 100 Crore <= 500 Crore)Large (Rs. 500 Crore <)
a.Entity TypeRegistered Legal Entity such as NBFC-MFI, Society, and Trust that meets the parameters stipulated by RBI at regular intervals.
b.1. Profitable Track Record   2. Business Vintage1. Profitable track record (from verified audited finances) of last two years. In the instance of valid loss, at least one-year profit record.   2. Should possess a declaratory confirmation from Statutory Auditors to have completed three years as Micro-finance entity.
c.NOFNorth-eastern region- Rs. 2 Crore Other parts of India- Rs. 5 Crore
 No. of Existing BorrowersMinimum of 10,000 existing borrowersMinimum of 30,000 existing borrowersMinimum of 1 lakh existing borrowers.
 Capacity Assessment RatingShould have received minimum Capacity Assessment Grading of mfr5 of CRISIL or equivalent.Should have received minimum Capacity Assessment Grading of mfr4 of CRISIL or equivalent.
 MFI DensityMFI of 50% or more of portfolio in Bihar, Karnataka, Tamil Nadu, Odisha, and West Bengal and minimum MFI grading equal to CRISIL is Mfr4.
 Grading for exposure 25 Crore <MFI must undergo three grading with eligible investment grades according to the existing MUDRA guidelines with the latest grade >= mfr3
 Bank Loan Rating (BLR)The BLR must have minimum acceptable investment rating. The BLR rating is applicable for exposures above Rs. 5 Crores only.
 System and ProcessesMust possess suitable systems, procedures and processes like cash management, MIS, internal audit and accounting, and risk management.
 CRARNBFC-MFIs- As per existing RBI rubrics. Currently- 15%, Other MFIs- 15%
 Compliance to RBI rubricsTo comply with existing RBI rubrics.
 Recovery PerformanceRecovery performance or collection efficiency on a monthly basis must be more than or equal to 95%.
 Portfolio at Risk (PAR) > 90 daysPAR > 90 days below 3%
 Member of Credit BureausShould be member of existing credit bureau as mandated by RBI.
 Minimum Loan RequirementRs. 0.5 Crore
 Uploading of Data on MUDRA’s Online PortalPerformance data and NPA status must be uploaded at regular intervals on MUDRA’s online portal.
 Debt Equity Ratio7:1 for NBFC MFIs 10:1 for non-NBFC MFIs (Excluding BC Portfolio)
  1. Non-banking Finance Companies (NBFCs)
 Parameterfor Assets size >= Rs. 500 Crorefor Assets size < Rs. 500 Crore
 Type of NBFCThe different types of NBFCs are: Asset Finance Companies (AFC)Loan Companies (LC) also known as Investment and Credit Companies. Two-tier NBFCs providing loans and resources to support the NFIs
 Track RecordThe NBFC should be in business for a minimum of five years and earning profit for the last three financial years.   For financing of second-hand vehicles, the NBFC must be in business for three years and earning profit throughout the duration.
 Net Owned Funds and Asset SizeMinimum net-owned fund should be Rs. 20 Crore and minimum size of asset must be Rs. 500 Crore.Minimum net-owned fund should be Rs. 15 Crore and minimum size of asset must be Rs. 250 Crore.   A business of minimum Rs. 20 Crore should have undertaken in the last fiscal year.   The sanctioning committee could provide suitable relaxation based on minimum lending business criteria.
 External Rating NormsExternal long-duration rating range of BBB+ and above.   NBFCs having assets more than 500 Crore could enjoy a need-based relaxation by sanctioning committee for up to BBB-.External long-duration rating range of BB- and above.
 CRARMinimum 15% or according to RBI stipulation
 DER<= 7:1 (excluding off-balance sheet portfolio)
 NPA NormNBFC Rating Gross NPA Net NPA AAA <10% <5% AA <8% =<4% A <6% =<3% Below A =<5% <3% No Relaxation