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MUDRA Loan Interest Rate

The MUDRA Loan scheme, launched by the Government of India, has emerged as a vital financial tool for aspiring entrepreneurs and small business owners. With its primary aim of promoting micro and small enterprises, it offers much-needed financial support. With competitive interest rates, the MUDRA Loan scheme continues to empower small businesses, providing them with the financial support they need. Understanding the interest rate structure is essential for borrowers, as it directly affects the cost of borrowing and the overall feasibility of their business plans. This page helps you to get the right picture of  MUDRA Loan interest rates, how they work and their significance for small business owners.

Mudra Loan Interest Rate

About MUDRA Loan

MUDRA, which stands for Micro Units Development and Refinance Agency, was initiated to cater to the financing needs of micro and small enterprises. Under the MUDRA scheme, three types of loans are available:

  1. Shishu Loans: These loans cater to businesses in their initial stages and offer a loan amount of up to Rs.50,000.
  1. Kishor Loans: Designed for businesses that have outgrown the Shishu stage, Kishor Loans provide funds ranging from Rs.50,000 to Rs.5 lakhs.
  1. Tarun Loans: For well-established businesses needing further expansion, Tarun Loans provide financial assistance up to Rs.10 lakhs.

MUDRA Loan Interest Rates

MUDRA Loans are known for their low-interest rates, making them an attractive loan option for small business owners. The interest rates for MUDRA Loans are typically based on the Reserve Bank of India (RBI) directives. 

The interest rates for MUDRA Loans are often categorised as per the lending institution, such as banks, NBFCs (Non-Banking Financial Companies), and MFIs (Micro-Finance Institutions). These rates may vary slightly depending on the institution and the specific MUDRA Loan category.

MUDRA Loan Interest Rate Structure

  • Interest Rate on MUDRA Shishu Loans: The interest rates for Shishu Loans are usually the lowest among the three categories. They can start as low as 1% per month or even less. However, it’s essential to check with the lending institution for the specific rate applicable.
  • Interest Rate on MUDRA Kishor Loans: For Kishor Loans, interest rates may vary but are generally competitive. They can range from around 1% to 1.25% per month.
  • Interest Rate on MUDRA Tarun Loans: Tarun Loans tend to have slightly higher interest rates compared to Shishu and Kishor Loans. The rates can range from approximately 1.25% to 1.50% per month.

It’s important to note that MUDRA Loan interest rates are subject to change, and if you’re applying for one, verify the current rates with the banks you’re applying.

Interest Rate on MUDRA Loans for Women

For women applicants, the RBI has directed all the banks and lending institutions offering MUDRA loans to provide an interest rate reduction of 25bps.

MUDRA Loan Interest Rate Offered by Banks 

Bank Name Rate of Interest Loan Term
HDFC Bank As per bank policies Based on the bank’s decision
State Bank Of India (SBI) Linked to MCLR 3- 5 yrs 
UCO Bank Linked to Float Rate Up to 5 years
IDBI Bank Linked to base rate and rating Up to 5 years
Indian Overseas Bank As per bank policies Based on the bank’s decision
Bank of Baroda  

Linked to MCLR

Up to 7 years
Union Bank of India External Benchmarks Lending Rate (EBLR) + 1.25% Up to 7 years
Canara Bank CRP over RLLR – Starting from 1.05% 5-7 years
Central Bank As per bank policies Based on the bank’s decision
Allahabad Bank As per bank policies 1-5 yrs
Bank of India Related to MCLR 1-7 yrs
Bank of Maharashtra 9.25% p.a. Based on the bank’s decision
Vijaya Bank 9.65% p.a Based on the bank’s decision
Tamilnad Mercantile Bank 8.95% p.a onwards 1-7 yrs
Oriental Bank of Commerce As per bank policies Based on the bank’s decision

Features of MUDRA Loan Interest Rates

The competitive interest rates offered under the MUDRA Loan scheme are significant for various reasons:

Affordability: The low-interest rates make MUDRA Loans affordable for small business owners and budding entrepreneurs, allowing them to access much-needed funds without excessive financial burden.

Promotion of Entrepreneurship: Lower interest rates encourage entrepreneurship and the establishment of micro and small enterprises, contributing to economic growth and job creation.

Financial Inclusion: MUDRA Loans aim to bring financial services to those who were previously underserved by the formal banking sector. Reasonable interest rates promote financial inclusion.

Flexible Repayment: The competitive interest rates help borrowers to manage their loan repayments, ultimately ensuring a healthier credit history.

FAQs on MUDRA Loan Interest Rates

What is the typical interest rate range for MUDRA loans?

The interest rates for MUDRA loans can vary from one financial institution to another. They are often linked to the base rate or MCLR (Marginal Cost of Funds Lending Rate) of the lending bank or NBFC. On average, they may range from 8% to 12%.

Is there any interest subsidy or government support available for MUDRA loans?

The Government of India provides interest rate subsidies on MUDRA loans to encourage small business development. These subsidies can reduce the effective interest rate for eligible borrowers.

What factors affect the interest rate I receive on my MUDRA loan?

Several factors can influence the interest rate on your MUDRA loan, including your credit score, the lending institution's policies, the type of business or project, and the loan amount. Generally, borrowers with better credit profiles may access loans at lower interest rates.

How can I find the best MUDRA loan interest rates for my business?

To find the best interest rates, comparing loan offers from various banks and NBFCs is essential. Additionally, you can talk to MUDRA loan facilitation centres to understand the most favourable terms and options for your specific business needs.

What is the average credit score required to obtain an unsecured loan?

Lending institutions prefer credit scores in the range of 750 to 900.

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