💰 What is a Micro Loan?

A micro loan is a small-value loan given to individuals or micro-businesses who usually don’t have collateral or strong credit history. These loans are mainly used to start or run small businesses.

🇮🇳 Micro Loans in India (Most Common Options)

1️⃣ Pradhan Mantri MUDRA Yojana (PMMY) – Most Popular

Government-backed scheme for small businesses.

🔹 Loan Categories

TypeLoan AmountShishuUp to ₹50,000Kishor₹50,001 – ₹5,00,000Tarun₹5,00,001 – ₹10,00,000

🔹 Key Features

• No collateral required

• Interest: ~8%–12% (depends on bank/NBFC)

• Tenure: Up to 5 years

• For shopkeepers, vendors, startups, self-employed

🔹 Where to Apply

• Nationalized & private banks

• Regional rural banks

• NBFCs & MFIs

• Online via bank websites or Jan Samarth portal

2️⃣ Microfinance Institutions (MFIs)

Ideal for very small borrowers, especially in rural or semi-urban areas.

🔹 Loan Amount

• ₹10,000 to ₹1,50,000

🔹 Characteristics

• Mostly group loans (SHG / JLG)

• Weekly or monthly repayment

• Slightly higher interest than banks

Examples:

• Ujjivan

• Bandhan

• CreditAccess Grameen

• Spandana

3️⃣ NBFC Micro Loans

Non-Banking Finance Companies offer quick micro loans.

🔹 Loan Amount

• ₹25,000 to ₹5,00,000

🔹 Features

• Faster approval

• Less paperwork

• Interest higher than banks

4️⃣ Digital App-Based Micro Loans (Caution ⚠️)

• Small instant loans (₹5,000–₹50,000)

• Very fast but high interest & penalties

• Use only RBI-registered apps

✅ Eligibility (General)

• Age: 18–65 years

• Indian citizen

• Small business / self-employed / vendor

• Aadhaar & PAN

• Basic income proof (or business proof)

📄 Documents Required

• Aadhaar Card

• PAN Card

• Bank account

• Passport photo

• Business details (shop, trade, service, etc.)

🧠 Best Use of Micro Loans

✔️ Small shop
✔️ Street vendor business
✔️ Tailoring, beauty parlour
✔️ Dairy, poultry
✔️ Repair services
✔️ Home-based business

⚠️ Important Tips

• Never pay upfront fees for loan approval

• Prefer banks or government schemes

• Check if lender is RBI registered

• Read interest & repayment terms carefully

📌 Recommendation

If you want a safe and low-interest micro loan, go for:
👉 MUDRA Loan (Shishu or Kishor category) through your bank.

If you want, tell me:

• Loan amount needed

• Purpose (business type)

• City / rural area

I can guide you to the best micro loan option step by step 👍

MUDRA LOAN

Mudra stands for Micro Units Development and Refinance Agency Ltd. — a financial institution in India set up to support funding for small and micro enterprises by providing easier access to credit. India Brand Equity Foundation+1

The primary government scheme associated with it is the MUDRA Yojana (PMMY) — launched on 8 April 2015 — aimed at “funding the unfunded” by extending credit to small non-corporate, non-farm enterprises to help grow business, generate employment and promote financial inclusion. India Brand Equity Foundation

💰 Loan Amounts & Categories

Under PMMY, Mudra loans are structured in tiers based on the stage and size of the business:

Category Loan Amount Shishu Up to ₹50,000Kishore ₹50,001 to ₹5 lakh Tarun ₹5,00,001 to ₹10 lakhTarun Plus (newer extended tier)Up to ₹20 lakh (for eligible repeat borrowers)

🔹 These loans are collateral-free and target income-generating non-farm micro and small businesses (manufacturing, trading, services, retail, handicrafts, etc.). India Brand Equity Foundation

🧑‍💼 Who Can Apply? (Eligibility)

Loan eligibility under Mudra generally includes:

✅ Indian citizens aged 18-65 years
✅ Small business owners, shopkeepers, artisans, traders
✅ Proprietorship firms, partnerships, private companies (non-corporate small units)
✅ Self-help groups & entrepreneurs in manufacturing, services, trading sectors
(Newer guidelines may also include allied agricultural activities in some cases) India Brand Equity Foundation+1

📍 Loans are not for personal consumption but for business purposes only. www.codeforbanks.com

🏦 Where to Apply

Mudra loans are available through partner lending institutions, such as:

• Public Sector Banks

• Private Sector Banks

• Regional Rural Banks (RRBs)

• Small Finance Banks

• Micro Finance Institutions (MFIs)

• Non-Banking Financial Companies (NBFCs)

Applicants can apply offline at bank branches or online via official government portals like Udyamimitra (for UDYAM/MSME registrations and loan facilitation). India Brand Equity Foundation

📈 Features & Benefits

✔ Collateral-Free Loans: No security required up to ₹20 lakh. Bajaj FinServ Markets
✔ Flexible Use: Funds can be used for working capital, term loans and business growth. India Brand Equity Foundation
✔ Financial Inclusion: Helps bring unbanked and underbanked micro units into formal finance. India Brand Equity Foundation
✔ Employment & Growth: Boosts employment and entrepreneurship, especially in rural areas. India Brand Equity Foundation
✔ Competitive Interest Rates: Charged by lender at affordable rates vs. informal money lenders (exact rate depends on lender & category). Reddit
✔ Government Credit Support: Many loans are backed by a credit guarantee to encourage banks to lend. NPC's Blog

📋 Interest Rates & Fees (General)

• Interest rate: Determined by the lending institution — typically competitive but varies with loan type, borrower's profile and business risk. Reddit

• Processing fees: Often low or nil for smaller loans (e.g., Shishu). Reddit

• Repayment tenure: Flexible, generally up to 5–7 years depending on business cash flows. Mudra Loan India

Note: Actual rates and terms vary by bank/NBFC; applicants should confirm with the specific lender.

📊 Other Features

🔹 MUDRA Card

Similar to a credit/debit card on the RuPay platform — allows working capital access as needed from loan limits. NPC's Blog

🔹 Refinance Support

MUDRA also provides refinance to banks/MFIs/NBFCs to encourage lending in micro and small enterprise segments. Mudranidhi

🧠 Important Notes

• Loan approval depends on business plan and lender’s assessment — completing an application doesn’t guarantee disbursement. Mudra Finan Service

• Borrowers must use the loan only for business purposes (no personal use). Mudra Finan Service

• Fraudulent claims and misuse are monitored by authorities (recent cases of fake loan misuse have occurred). The Times of India

🧾 How to Apply (Summary)

1. Prepare business plan & documents (KYC, business address, project details).

2. Choose a lender (bank/NBFC/MFI).

3. Apply online or offline at the lender or through government MSME portals.

4. Wait for assessment & approval.

5. Loan disbursed once approved; utilize for business needs.

Flexible options tailored to your financial needs