Mudra Loan: Shishu, Kishore, Tarun, Tarun Plus- Which One Fits Your Business? (2026)

The Pradhan Mantri Mudra Yojana (PMMY) is the most widely used government-backed lending scheme for micro and small enterprises in India. Since its launch in 2015, Mudra loans have been sanctioned to crores of borrowers through banks, NBFCs, and MFIs. The scheme requires no collateral and is available through virtually every bank branch in the country.

This guide explains the four Mudra categories including the new Tarun Plus tier who qualifies, what the real interest rates look like, and how to apply efficiently.

The four tiers (post October 2024)

Shishu: up to 50,000 for businesses just starting or at the subsistence stage. Kishore: 50,001 to 5 lakh for
businesses that need expansion capital. Tarun: 5,00,001 to 10 lakh for businesses ready to scale. Tarun Plus: 10,00,001 to 20 lakh introduced via the 24 October 2024 notification (Budget 2024-25 announcement) for entrepreneurs who have availed and successfully repaid an earlier Tarun loan. Tarun Plus loans are guarantee-backed under the Credit Guarantee Fund for Micro Units (CGFMU). No collateral required at any tier. [1]

Eligibility

• Who can apply- Any Indian citizen with a non-farm income generating business activity manufacturing, trading, services, allied agriculture activities (dairy, poultry, beekeeping, fisheries covered under the expanded definition).
  
  
• Business types covered- Street vendors, artisans, shopkeepers, food stall operators, repair services, salons, tailoring units, transport operators, micro-manufacturers virtually any small business.
  
  
• Tarun Plus eligibility (additional criteria)- Available only to entrepreneurs who have previously availed a Tarun loan and have successfully repaid it. The lender verifies the prior Tarun loan closure record before sanctioning Tarun Plus.
  
  
• Not eligible- Pure crop cultivation activities (these are funded through KCC- Kisan Credit Card- and other agriculture-specific schemes).
  
  
• New and existing businesses- Both are eligible for Shishu, Kishore, and Tarun. Tarun Plus is by definition for entrepreneurs with a prior Tarun loan track record.

Interest Rates- What to Expect

Mudra loans do not have a fixed scheme-mandated interest rate each lending institution sets its own rate within RBI guidelines. Indicative ranges as of date of publication:

PSU banks typically offer the lowest Mudra rates. Tarun Plus is available only to borrowers with a clean repayment record on an earlier Tarun loan pricing tends to track the original Tarun rate or sit slightly below it because of the demonstrated track record. Compare across lenders the rate difference between the cheapest and most expensive lender for the same borrower can be 6-10 percentage points.

Documents Required

•  Identity proof- Aadhaar, PAN, voter ID, passport (any two).
  
  
• Address proof- Aadhaar, utility bill, rent agreement.
  
  
• Business proof- Udyam Registration (if registered), GST registration (if applicable), shop licence, or a self-declaration of business activity.
  
  
• Financial documents- Bank statements (6-12 months). For Kishore, Tarun, and Tarun Plus: last 2 years ITR, brief project plan or DPR.
  
  
• Tarun Plus specific- Statement of account / closure certificate of the prior Tarun loan, evidencing satisfactory repayment.
  
  
• Photographs- Passport-size photographs of all applicants.
  
  

How to Apply

• Visit any bank branch (PSU or private), NBFC, or MFI that is a registered Mudra lending institution.
  
  
• Alternatively, apply online through the Udyamimitra portal (udyamimitra.in) or individual bank websites.
  
  
•  Submit the application form with required documents.
  
  
•  For Shishu loans, approval is often within 7-15 days. For Kishore, Tarun, and Tarun Plus, expect 2-4 weeks with DPR review and (for Tarun Plus) verification of the prior Tarun loan record.
  
  

Common Mistakes

• Applying at a high-rate NBFC when PSU banks offer the same Mudra loan cheaper- Always check with SBI, BOB, or your nearest PSU bank first.
  
  
• Not having Udyam Registration- While not strictly mandatory for Shishu, having it speeds up processing and demonstrates legitimacy.
  
  
• Treating Mudra as free money- It is a loan, not a grant. You must repay with interest. Default will damage your CIBIL score and may also trigger CGFMU-related recovery action for guarantee-backed Tarun and Tarun Plus loans.
  
  
• Applying for Tarun or Tarun Plus without a DPR- Banks almost always require a project report for these tiers. Prepare one before applying.
  
  
• Not knowing about Tarun Plus- Many entrepreneurs who have successfully closed a Tarun loan still apply for incremental Mudra credit at the Tarun ceiling instead of stepping up to Tarun Plus. Tarun Plus exists specifically to reward repayment track record with a higher ceiling use it.

Frequently Asked Questions

Is Mudra loan a subsidy?

No. Mudra is a loan, not a subsidy. You repay the full amount with interest. PMEGP is the scheme that offers a subsidy component. The two are different and serve different purposes.

Can I get a Mudra loan without Udyam Registration?

For Shishu loans (up to 50,000), many banks process without formal Udyam Registration. For Kishore, Tarun, and Tarun Plus, Udyam Registration is practically expected. It is free and takes 10 minutes get it done.

Can I get a Mudra loan if I already have another loan?

Yes, provided your repayment track record on the existing loan is clean and your total EMI burden is within the bank’s FOIR limits.

What is Tarun Plus and how is it different from regular Tarun?

Tarun Plus is a new Mudra category introduced via notification dated 24 October 2024 (announced in Budget 2024-25). It allows entrepreneurs who have availed and successfully repaid an earlier Tarun loan to access a higher loan amount between 10 lakh and 20 lakh at the same Mudra-favourable terms. The intent is to reward proven repayment behaviour with a larger ceiling. Tarun Plus loans are guarantee-backed under CGFMU.

Can I apply for Tarun Plus directly without first taking a Tarun loan?

No. Tarun Plus is specifically for repeat Tarun borrowers. If you need 15 lakh and have no prior Tarun history, you would typically apply for a regular MSME loan (potentially CGTMSE-backed) instead.

How does Vittus Fintech help with Mudra loans?

Vittus Fintech (loanvittus.com) compares Mudra loan rates across RBI regulated banks and NBFCs for your specific tier including the Tarun Plus category for repeat borrowers generates a DPR for Kishore, Tarun, and Tarun Plus applications, and matches you with the lender offering the best terms. For Tarun Plus applicants, we also help validate prior Tarun loan closure records and CGFMU coverage eligibility. We operate as a Lending Service Provider (LSP) under RBI’s Digital Lending Guidelines.