Does Mudra Loan Scheme Apply to Farmers?

Activities allied to agriculture, e.g. pisciculture, beekeeping, poultry, livestock-rearing, grading, sorting, aggregation agro industries, diary, fishery, agri-clinics, and agribusiness centers, food & agro-processing, etc.(excluding crop loans, land improvements such as canal, irrigation, and wells) and services supporting these, which promote livelihood or are income generating shall be eligible for coverage under PMMY in 2016-17.

Agriculture has always been the backbone of India’s economy, providing livelihoods to a significant portion of the population. However, the sector often faces challenges, such as access to credit and modern technology. In an effort to uplift the agriculture sector, the Government of India introduced the Mudra Loan scheme.

The Pradhan Mantri Mudra Yojana, commonly known as Mudra, was launched in April 2015. The primary objective of this scheme is to provide financial assistance to small and micro-enterprises, including those in the agriculture sector. Mudra loans are categorized into three types, based on the amount of credit required.

Shishu: Loans up to ₹50,000

Kishore – above Rs. 50,000

Tarun – above Rs. 5 lakh and up to Rs. 10 lakh.

Borrowers can avail loan facility from any Member Lending Institution (MLIs) – Public Sector/Private Sector/Foreign/ Regional Rural/Small Finance Banks, NBFC-MFIs, NBFCs and MFIs. No processing fee for loans up to Rs. 50,000/- (Shishu category). Banks have been mandated by Reserve Bank of India (RBI) not to insist for collateral security in the case of loans up to Rs. 10 lakh extended to units in the Micro and Small Enterprises (MSE) sector

Mudra loan is extended for a variety of purposes which result in income generation and employment creation. The loans are extended mainly for

  • Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities
  • Working capital loan through MUDRA Cards
  • Equipment Finance for Micro Units
  • Transport Vehicle loans – for commercial use only
  • Loans for agri-allied non-farm income generating activities, e.g. pisciculture. bee keeping, poultry farming, etc.
  • Tractors, tillers as well as two wheelers used for commercial purposes only.

Benefits of MUDRA Loan


Whether you reside in rural or urban areas, you can utilise the banking and financial services under the PMMY scheme. Individuals from the remotest areas, where basic banking facilities are unavailable, can receive financial aid.

No lower limit on the business size

Small and micro businesses, along with startups, can achieve financial support.

Higher Loan Amounts

MUDRA Loans range up to INR 10,00,000; that way, you can also avail of smaller loan amounts for smaller businesses while having the freedom to access higher loan amounts if required.

No Collateral Needed

Unlike private business loans, you need not pledge collateral for availing MUDRA Loans.

Credit Guarantee

The Government has created the ‘Credit Guarantee Fund for Micro Units’ or CGFMU Funds to combat the issues associated with non-collateral requirement, thus providing a sense of comfort to lending institutions.

Initial funding to start a new business

Individuals who wish to create a second income with low-cost businesses can benefit from the scheme. Micro-credit scheme offers credits of up to INR 1 Lakh enabling you to start a new business on the side.

Affordable Interest Rates

The MUDRA schemes come with affordable interest rates to enable flexible and pocket friendly repayment of loans.

Extended Repayment Tenure

Borrowers can repay the loan comfortably in substantially longer repayment tenures lasting up to 7 years.

Promote local Indian businesses

The MUDRA Loan scheme allows the ‘Make In India’ campaign to offer investments opportunities for upcoming start-ups, thereby boosting India’s infrastructure.

Following is the list of documents you need to present when applying for a MUDRA Loan:

  • Duly filled Mudra Loan application form. 
  • Identity proof documents like Aadhaar/PAN/Driving License/Passport/Voter ID/Government issued photo ID of all applicants (in case of joint loans).
  • Residence proof documents like latest utility bill/ Aadhaar/Voter ID/Passports/bank account statement of all applicants (in case of joint loans).
  • Business ID and Address proof documents (Licenses/Registration Certificates/Deed Copy, etc.).
  • Latest photographs of the applicant/s.
  • Proof of minority, if any.
  • Proof of loan requirement, i.e., equipment quotations, vendor details, etc.

How to Apply for a Mudra Loan?

You can apply for a Mudra Loan both online and offline at nationalised and Private sector banks. You simply need to fill a form (available on the bank’s website or their nearest branch) and provide details about the applicable Mudra Loan category under which you need the loan, information about your business enterprise and the funds required under the loan. The bank verifies your loan application. Once it is verified, the bank credits the funds into your brand new Mudra Loan account, with which it also provides a Mudra Debit Card.

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